Public procurement: appeals will be more effective

The concept for a new public procurement law suggests changes to ensure greater effectiveness of appeal proceedings and make right of appeal realistic. There will be a specialist court to review the cheaper appeal.

Consultations have now begun on the basic principles for a concept of a new Public Procurement Law. The concept was published on 6 June 2018. The consultations will last 30 days, after which the basic principles for the new act will be prepared. The ministry has an ambitious plan to have the basic principles ready in September 2019.

The Public Procurement Law, which has been amended repeatedly, certainly needs to be looked at afresh, particularly in the context of the changing economic reality. The current act is not suitable for the increasing innovativeness of the Polish economy. It also does not solve the problem of the very low share, for a number of years, of SMEs in the tender market. The strategic goals of the completely new and entirely redrafted bill, aimed at resolving a full range of issues, are highly diverse.

This text is intended to focus solely on solutions with regard to legal remedies, particularly as I worked with the Public Procurement Law Association on a report on the functioning of legal remedies in EU countries. The findings of the report were presented to the Public Procurement Office and other institutions. There are a range of proposals in the basic principles for the new law. I fully support these proposals and consider them undeniably justified in light of research conducted by the Public Procurement Law Association.

Above all, the new law is aimed at strengthening the position of the National Appeals Chamber by regulating its status and structure, and the way in which it is organised internally. Members of the National Appeals Chamber will be able to adopt resolutions defining areas of adjudication that are binding for adjudicating panels and ensure that judgments are consistent. It will also restore the principle of a collegial panel of three as the basic composition appropriate for review of a case. Hearings will also now be recorded.

It is good that the problem of inadequate regulation of evidentiary proceedings in a case before the National Appeals Chamber has been acknowledged. In conditions in which proceedings are condensed, evidentiary proceedings are superficial and handled too quickly. The proposed introduction of control of presentation of evidence in an appeal is a useful solution, especially if evidence that proves necessary at a later stage can be presented subsequently. At the moment, the parties to appeal proceedings use the short duration of the proceedings to cause as much surprise as possible, intentionally delaying evidentiary motions to hamper the adverse party in formulating a material response to the evidence. The authors of the concept have also noticed the problem of enforceability of National Appeals Chamber judgments. Contractors need to be given instruments whereby contracting authorities are forced to perform the actions ordered by the National Appeals Chamber.

With regard to complaint proceedings, the proposed extension of the time limit for filing a complaint from 7 to 14 days, reducing the complaint filing fee, and plans to create a public procurement court would be favourable developments.

The proposals regarding situations where conclusion of an agreement is prohibited, and the issue of compensation for contractors who incur loss due to unlawful action of a contracting authority would not be beneficial.

With respect to prohibited conclusion of an agreement, the grounds for overturning prohibition of conclusion of an agreement, which are currently provided for in Art. 183(2) of the Public Procurement Law, would be broadened. The prerequisite for overturning prohibition of conclusion of an agreement would be abuse of the right to file an appeal solely to avoid signing a public procurement agreement.

This proposal, together with the statement of reasons citing statistics, is an attempt to regulate by law the facts in a particular case. This relates to the much publicised tender for automation and traffic control equipment for railway line number 7, which is run by PKP PLK S.A. The contractor disagreed with the outcome of the tender and repeatedly filed appeals which were not paid for, in order to delay the moment of conclusion of the agreement. In the meantime the contracting authority attempted to obtain approval to conclude the agreement, which was eventually granted.

According to the law at the moment, the National Appeals Chamber may overturn a prohibition of conclusion of an agreement at the request of the contracting authority if the negative consequences for the public interest might exceed the benefits of protecting interests likely to be harmed due to actions of the contracting authority during public procurement proceedings.

An appeal filed following a judgment dismissing an appeal filed by the same contractor means that the benefits of protecting the contractor cannot in such a case exceed the adverse impact on the public interest. If a contracting authority requests that prohibition of conclusion of an agreement be overturned in order to conclude an agreement having complied with National Appeals Chamber instructions in a judgment regarding an appeal, under current laws it can provide effective proof of grounds for granting that request. If National Appeals Chamber ruling statistics clearly show that the situation in which consent was given is unusual, this does not mean that the National Appeals Chamber is applying the law incorrectly. It certainly is not grounds for amending the law on the basis of a case. The law cannot be used to exclude attempts to abuse the law in practice, while art. 183 section 2 of the Public Procurement Act reflects the appeal directive (directive 2007/66/EC). This directive allows, in exceptional cases, a contractor’s right to protect its own interests to be limited.

The other issue is the approach taken in the concept to compensation for damage inflicted on a contractor by the contracting authority. Compensation of a fixed amount is proposed, awarded when a complaint against a National Appeals Chamber judgment is upheld of 1% of the value of the bid, but no more than PLN 100 000. This money is intended to enable contractors to finance the process of seeking compensation further during court proceedings.

Meeting the needs of contractors when a court finds that they were denied a tender contract unfairly is of course a positive step. In the report “Proposals for changes to public procurement law with regard to legal remedies”, which I co-authored, the Public Procurement Law Association points out that when harm is inflicted in the form of loss of an agreement, first a penalty should be imposed in the form of invalidation of the agreement. This would be a real danger to contracting authorities forcing them to consider their actions. In addition, acknowledging that continuity of an agreement takes precedence, and an obligation to pay compensation will lead to twofold payment for a public contract: for the contractor that performs the agreement and for the contractor that was denied the contract unfairly. As the aim of laws on legal remedies is to protect contractors, the amendments proposed in this regard do not go far enough.

The concept does not relate in any way to the subject of the actions of a contracting authority that causes harm. According to Court of Justice of the European Union (CJEU) case law, compensatory claims in public contracts must be unrelated to grounds for culpability on the part of the contracting authority. Liability of a contracting authority should arise in connection with its breach of procedural rules, regardless of whether there is culpability for the breach causing harm.

The position of the Public Procurement Law Association was presented during the ongoing consultations and I hope that it is considered. I encourage market players to take an active part in consultations regarding the concept. One of the ways of doing this is via the interactive questionnaire posted by the Public Procurement Law Association on its website.

Anna Prigan, legal adviser, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners