Bid may be rejected for being too low
If a price offer submitted by a contractor is grossly low, the contracting authority is first required to demand an explanation from the contractor. If the suspicion of underbidding is confirmed, the bid must then be rejected.
Art. 89 of the Polish Public Procurement Law provides eight separate grounds under which the contracting authority is required to reject a bid. Art. 89(4) provides that one basis for mandatory rejection is a “grossly low price offer” in relation to the subject of the procurement. Neither the Polish act nor the EU directives define the concept of “grossly low price.” It may be assumed, however, that significant price differences between different bids, or between bids and the estimated value of the procurement, may be grounds for suspicion that a bid is grossly low, and thus grounds for the contracting authority to take further measures to confirm the suspicions.
While the contracting authority can and should consider these points of reference, it should not stop there. It is also required to take into consideration the totality of the circumstances affecting the given contractor. Moreover, it is the overall offer that must be “grossly low,” not individual elements of the offer. Only in the case where the procurement concerns services or supplies that are periodically recurring, or procurements granted in parts, should the price refer to the value reflecting the scope of the procurement.
Treating grossly low bids as grounds for rejection is designed to eliminate unreliable bidders who will not be in a position to carry out the procurement properly. It is not really intended to serve as a means to protect competition, since unfair competition is a separate basis for rejecting a bid under Art. 89(3).
If the contracting authority suspects that a bid is “grossly low,” under Art. 90 (1) – (4) of the Public Procurement Law it should first call on the contractor to submit an explanation within a designated time. The burden of proof in this respect rests solely on the contractor. Then the contracting authority is required to consider the explanation individually, weighing all of the circumstances raised by the contractor with respect to both the subject of the procurement and the subjective characteristics of the contractor itself. If the contractor fails to submit an adequate explanation within the stated time, the bid will be rejected. The contractor will always have a right to file an appeal against the rejection of the bid, which may then be followed by a challenge in administrative court.