May a contractor whose offer is rejected appeal to the National Appeal Chamber?
A contractor filing an appeal must duly demonstrate that it has standing to appeal under Art. 179(1) of the Polish Public Procurement Law. There is an endless debate in the case law and the legal literature over which entities are entitled to file an appeal in a procedure for award of a public contract. The National Appeal Chamber spoke out in this dispute in its ruling of 23 October 2019 (case no. KIO 2031/19), responding to the question whether a contractor whose bid has been rejected still has a legal interest in filing an appeal.
In this case, the contracting authority rejected a bid that was inconsistent with the terms of reference for the procurement. The contractor did not appeal from rejection of its bid, and the contracting authority proceeded to select the bid of another contractor as the most advantageous offer. The contractor whose bid was rejected then decided to challenge the contracting authority’s decision on selection of the most advantageous offer, and filed an appeal with the National Appeal Chamber (KIO). The appellant alleged that it had a legal interest in appealing under Art. 179(1) of the Public Procurement Law, because if the appeal led to invalidation of the contract award procedure, it could once again apply for the contract in a new procedure.
Right to appeal—legal interest and injury
Under Art. 179(1) of the Public Procurement Law, appeals are available to economic operators and participants in a design contest, as well as other persons, if they have or had an interest in being awarded the contract and suffered or could suffer harm as a result of violation of the act by the contracting authority. Thus in conducting its preliminary formal screening of an appeal, the National Appeal Chamber must examine the legal interest of the appellant and the possibility that it could suffer harm as a result of selection of the most advantageous offer submitted by another contractor. But can a contractor that is no longer a participant in the procedure demonstrate a legal interest in filing an appeal?
The chamber firmly took the position that a contractor whose bid has been rejected cannot demonstrate an adequate interest in appealing under Art. 179(1) of the act: “The appellant was erroneous in arguing that if the appeal were upheld, including the demand to invalidate the procedure, the condition of an interest in being awarded the contract would be fulfilled. An appeal should serve to protect the contractor’s interests in the given procedure, and thus cannot be regarded as a means serving solely to invalidate the procedure.” Consequently, the contractor must demonstrate a legal interest in the specific, ongoing contract award procedure, and cannot base its appeal on a possible future procedure. A contrary interpretation would greatly expand the set of entities entitled to file an appeal and seriously prolong the process of awarding the contract.
The second condition for the permissibility of filing an appeal is harm on the part of the appellant. In light of the facts in this case, KIO stated: “Firstly it must be pointed out that as a result of filing a bid inconsistent with the terms of reference, the appellant lost the possibility of winning this contract. This means that in order to seek the contract, it should have filed a different offer, which means that its own errors brought about the situation in which the contracting authority could find a competing offer to be the most advantageous.” In this case, the appellant did not suffer objective harm as a result of selection of the most advantageous offer, because this decision by the contracting authority resulted from the contractor’s own neglect. In the chamber’s view, a contractor filing an appeal must demonstrate a causal connection between selection of the most advantageous offer and the appellant’s loss of the contract in question.
Excluded with legal finality
The Court of Justice of the European Union has addressed similar factual situations, including under Art. 1(3) of the Procurement Remedies Directive for the public sector (Council Directive 89/665/EEC), which states: “Member States shall ensure that the review procedures are available, under detailed rules which the Member States may establish, at least to any person having or having had an interest in obtaining a particular contract and who has been or risks being harmed by an alleged infringement.” That provision corresponds to Art. 179(1) of the Polish Public Procurement Law and indicates the grounds for appeal in procurement cases.
Based on that provision, in C-355/15, Bietergemeinschaft Technische Gebäudebetreuung, the Court of Justice ruled, “Article 1(3) of Directive 89/665 must be interpreted as not precluding a tenderer who has been excluded from a public procurement procedure by a decision of the contracting authority which has become final from being refused access to a review of the decision awarding the public contract concerned and of the conclusion of the contract where only that unsuccessful tenderer and the successful tenderer submitted bids and the unsuccessful tenderer maintains that the successful tenderer’s bid should also have been rejected.”
This holding was cited in C-131/16, Archus sp. z o.o., but there the court stressed that in that case, “the decision to exclude that tenderer had … been confirmed by a decision that had the force of res judicata before the court hearing the review of the contract award decision gave its decision, so that that tenderer had to be regarded as definitively excluded from the public procurement procedure at issue.”
The possibility of seeking review is a major factor ensuring compliance with the principle of fair competition under Art. 7 of the Public Procurement Law. Contractors who believe that the contracting authority has violated the act must duly demonstrate both their standing to appeal and the harm they have suffered as a result of the alleged infringement. In case no. KIO 2031/19, discussed above, the National Appeal Chamber denied the appellant the right to file an appeal, stating: “Under both national and European regulations, a contractor whose offer was ultimately rejected has no interest in being awarded a public contract, and could not suffer harm as a result of infringement of the provisions of the Public Procurement Law alleged in the appeal, involving the contracting authority’s assessment of another offer.”
Cyprian Herl, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners