Can a bid be selected when it is no longer binding?
If a contractor does not agree to extension of the binding period of its offer when requested by the contracting authority, the bid is rejected. However, the effects of expiration of the binding period are unclear when the contractor fails to extend the period at its own initiative. The current wording of the Public Procurement Law does not specify whether the contractor’s bid remains valid after the binding period expires.
Under Art. 85(2) of the Public Procurement Law, a contractor may extend the binding period of its offer at its own initiative or at the request of the contracting authority. (One time only, at least three days before the end of the binding period of bids, the contracting authority may request the contractors to consent to extension by a specific period of no longer than 60 days.)
It is clear that the binding period of an offer does not have to be extended if the offer was selected during the binding period, but the public contract as such was concluded after the end of the binding period. This possibility was clearly allowed by the Constitutional Tribunal in its order of 24 February 2010 (Case SK 22/08). It is also undisputed that if the contractor refuses to extend the binding period of its bid when requested by the contracting authority, the bid shall be rejected under Art. 89(1)(7a).
The consequences of expiration of the binding period of a bid during the course of the public procurement proceeding has not been resolved, however. The doubts concern a situation where:
- The contracting authority has obtained the contractor’s consent to extend the binding period of the bid, but has not selected the offer during the extended period, or
- The contracting authority has not exercised the possibility of requesting the contractor’s consent to an extension under Art. 85(2).
The possibility of selecting the offer of a contractor which has not extended the binding period of its offer on its own initiative generates controversy. The Court of Justice of the European Union has taken a position on this issue, but Poland’s Public Procurement Office has disagreed with that position. The subsequent rulings from the National Appeal Chamber on this issue have been inconsistent.
Court of Justice ruling in Saferoad, C-35/17
Pursuant to requests for a preliminary ruling by the National Appeal Chamber, the Court of Justice issued an order in Saferoad Grawil sp. z o.o. v GDDKiA (Case C-35/17) on 13 July 2017. The case involved a proceeding in which the contracting authority had requested the bidders to extend the binding period of their offers by 60 days. When this period expired, the proceeding had not yet been concluded. The National Appeal Chamber had doubts whether in that situation the contractors had a duty to extend the binding period of their offers once again, this time on their initiative.
The court took the position that recognition of such an obligation on the part of the contractor, when it is not provided for in the Public Procurement Law, the contract announcement, or the terms of reference, would violate the principles of equal treatment and transparency. These principles do not permit exclusion from a public tender of a contractor for failing to carry out an obligation not expressly stated in the tender documentation or national law, even if such an obligation could be inferred from interpretation of the act and the documentation, and from efforts by administrative authorities or the administrative courts to fill the gaps in such documentation.
Public Procurement Office position
After issuance of this order by the Court of Justice, the Public Procurement Office also took a position on the matter. According to the office, the order by the Court of Justice does not apply in the Polish legal system, as the grounds for rejection of offers were expressly provided for in the Public Procurement Law. The office cited Art. 89(1)(7a) of the Public Procurement Law, which provides for rejection of the offer and cross-references Art. 85(2). Art. 89(1)(7a) provides that the contracting authority shall reject the bid if “the contractor has not provided the consent referred to in Art. 85(2) to extend the binding period of the offer.” Art. 85(2) refers to extension of the binding period of the offer both at the contractor’s own initiative and at the contracting authority’s request. In the view of the Public Procurement Office, failure to extend the binding period of the offer in either instance should be deemed tantamount to the contractor’s refusal to participate further in the procedure for award of the public contract. If the contractor does not extend the binding period of the offer at its own initiative, this should be interpreted, in the words of the act, as failure to consent to an extension.
The opinion also points out that under Art. 14(1) of the Public Procurement Law, provisions of the Civil Code apply to actions taken by the contracting authority and contractors in the procedure for award of a public contract, unless otherwise provided in the Public Procurement Law. And under Art. 66 §1 of the Civil Code, for an offer to be regarded as existing, it must be binding; otherwise, the offer lapses.
However, this opinion by the Public Procurement Office has not led to consolidation of the decisions by the National Appeal Chamber.
Being bound by offer as an element of declaration of will
A portion of the rulings by the National Appeal Chamber rely on the view expressed by the Public Procurement Office that reading Art. 14 of the Public Procurement Law in conjunction with Art. 66 of the Civil Code leads to the conclusion that selection of the most advantageous offer must occur at a time when the offer is binding. This indicates the importance of Civil Code Art. 66, under which the state of being bound by an offer is a constructive element of the declaration of will aimed at conclusion of a public contract. Expiration of the binding period of an offer results in expiration of the offer, and thus the offer ceases to be an expression of will binding on the offeror, expressing its readiness to conclude the contract under the terms specified in the offer (National Appeal Chamber ruling of 27 August 2014, Case KIO 1669/14).
Equal treatment of bidders
Another argument supporting the position that an offer can be selected only during the period when it is binding is the need to eliminate situations where at the time of selection of the most advantageous offer, only certain contractors are bound by an offer. In other words, the validity of the bid bond would be extended only for certain bidders. Under the principle of equal treatment of contractors, it is impermissible to have a situation in which some contractors would have to conclude the contract under pain of forfeiting their bid bond, while other contractors would only have the possibility of concluding the contract (National Appeal Chamber ruling of 23 October 2017, Case KIO 2097/17). Contractors not bound by an offer would then be placed in a more favourable situation, because their refusal to conclude the contract would not result in forfeiting their bid bond.
If the contractor is not bound by its offer, it has no interest in the procurement
It is recognised that the state of being bound by an offer justifies the contractor’s legal interest in being awarded the contract, which is required for a finding of standing to appeal under Art. 179 of the Public Procurement Law. It appears that a contractor that is not bound by an offer as of the date of filing an appeal has no legal interest in winning the contract, and consequently cannot suffer a loss as a result of the contracting authority’s infringement of the Public Procurement Law. If such a contractor does file an appeal, and as a result the offers are re-evaluated, the contracting authority will not be able to select the appellant’s offer and conclude a public contract with that contractor that would be safe from challenge and invalidation.
Ban on expansive interpretation
Others take the view, which I also support, that the contractor need not extend the binding period of its offer for the contracting authority to be able to select that offer. These views rely on the prohibition against expansive interpretation and application of sanctions provisions (National Appeal Chamber ruling of 11 July 2017, Case KIO 1305/17). Art. 89(1)(7a) of the Public Procurement Law expressly states that an offer must be rejected if “the contractor has not provided the consent referred to in Art. 85(2) to extend the binding period of the offer.” It is thus correct to take the view that an offer is not subject to rejection in the event of a failure by the contractor to extend the binding period of the offer at the contractor’s own initiative. The ground for rejection of the offer is the lack of the contractor’s consent to extension of the binding period of the offer, not the mere fact that the offer is no longer binding.
Possibility or obligation to conclude contract?
Expiration of the binding period of an offer does not render the offer invalid, but only inconsistent with the act. Nor does it cause the offer to lose the quality of firmness enabling the contracting authority to bring about conclusion of the contract through mere acceptance of the offer (e.g. Warsaw Regional Court judgment of 16 July 2014, Case XXIII Ga 924/14). It therefore does not mean that the offer is ineffective, only that there is no obligation on the part of the contractor to conclude the contract.
Amendment to resolve doubts
The draft of the new Public Procurement Law provides that in the event of expiration of the binding period of an offer, the contracting authority shall summon the contractor whose offer was the highest rated to consent in writing to selection of its offer. If the contractor does not provide such consent, the contracting authority shall make the same request to the next-highest ranking contractor. This would resolve the current doubts as to the consequences of failure to extend the binding period of the offer at the contractor’s own initiative. Expiration of the binding period of an offer will not constitute grounds to reject the offer of the highest-rated contractor, if the contractor provides consent in writing to selection of its offer despite expiration of the binding period of the offer.
Katarzyna Śliwak, attorney-at-law, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners