Subcontracting and reliance on third-party resources

Independent performance of a complex procurement by a single contractor is not always possible. In order to meet the conditions for participation in the procurement procedure, a contractor may involve subcontractors or rely on the capacity of third parties.

Under Art. 26(2b) of Poland’s Public Procurement Law, a contractor may rely on the knowledge, experience, technical potential, personnel capable of performing the contract, or financial abilities of other entities, regardless of the legal nature of their relations. This rule, implementing provisions of the EU’s procurement directives—the Classic Directive (2004/18/EC) and the Utilities Directive (2004/17/EC)—was designed to increase competitiveness by opening up the market for public contracts to smaller contractors and reducing the cost of seeking contract awards.

This approach does not require capital or organisational ties between the contractor and the other entity which has committed its resources, but nonetheless enables the contractor to rely on resources of another operator in order to perform the contract.

An entity lending its capacity is not always a subcontractor

It should be stressed that a third party may commit its resources without taking part in performance of the contract. This is the most important feature distinguishing this institution from subcontracting, in which performance of a portion of the contract is entrusted to the subcontractor (Art. 36a), implying that the operator presented as a subcontractor must actually perform that portion of the contract.

In a decision issued on 9 July 2010 (Case No. KIO 1265/10), the National Appeals Chamber held that Art. 26(2b) “in no way supports the view that the third party in that situation will be required to personally perform all of part of the contract for the general contractor as a subcontractor. … Commitment of knowledge and experience in this respect may thus occur through actual subcontracting, or by the possibility of sharing the experience acquired by the enterprise when the contract is being performed through consultation or advice, as in that form there is also the practical possibility of drawing on the knowledge and experience of the other entity when performing the contract.”

In the more recent ruling of 6 June 2013 (Case No. KIO 1201/13), the National Appeals Chamber held, “Commitment by another entity of its resources of knowledge and experience must be combined with the requirement that such entity participate in performance of the contract, but that participation may take any form: not only subcontracting, but also advice, consultation or other form of substantive support.”

Various forms of participation in performance of the contract

A commitment of resources under Art. 26(2b) of the Public Procurement Law may take the form of subcontracting, but does not have to. Among the resources that may be shared with the contractor, there are many that do not require the third party to participate in performing the contract. In such situation the third party will not be a subcontractor, but its resources will enable the contractor to meet the conditions for participating in the procedure and properly perform the contract if its offer is chosen.

The cooperation with the third party may take such form as advice, consultation or training, or—as indicated in the ruling of the National Appeals Chamber of 23 July 2010 (Case Nos. KIO 1448/10, 1450/10 and 1451/10)—any form of providing knowhow, e.g. technical schemata for equipment, documentation of technological processes, servicing documentation, computer programming, integrated circuits, or quality management systems. But considering that the commitment of resources must be real, in some instances subcontracting is the only feasible form for sharing the capability to perform a public contract.

Proof of access to resources

Reliance on the resources of a third party requires the contractor to prove to the contracting authority that it will have the resources at its disposal necessary to perform the contract. To this end, it may present a written commitment by third parties that they will make the necessary resources available to the contractor for the period needed to perform the contract (Public Procurement Law Art. 26(2b)). Such written commitment is indicated in the law only as an example. The availability of the resources of a third party could thus be demonstrated in some other way as well, e.g. by presenting a contract between the contractor and the third party.

The freedom to use the resources of another entity to meet the conditions for participating in the procedure is limited by the requirement to prove that the contractor will have real access to the resources. The documents demonstrating the commitment to provide the resources are evaluated on a case-by-case basis, in light of the nature of the specific procurement. It is stressed, however, that the document demonstrating the third party’s commitment of its resources must expressly and unequivocally show the third party’s intention to provide the appropriate resources to the contractor, identified precisely by type and quantity, and not in a general manner such as a statement that it will provide to the contractor “the resources necessary to perform the contract.”

Contracting authority’s limitation on subcontracting does not apply to a commitment of resources

The clear distinction between a commitment of resources of a third party and subcontracting was also stressed in the amendment in force since 24 December 2013. Under Public Procurement Law Art. 36a(3), a reservation of personal performance of the contract is not effective in an area in which the contractor relies on the resources of another entity, under the rules set forth in Art. 26(2b), in order to demonstrate fulfilment of the conditions referred to in Art. 22(1). Therefore, although the contracting authority may limit the permissible scope of subcontracting in the terms of reference, it may not thereby limit the ability to rely on the resources of third parties to show fulfilment of the conditions for participating in the procedure.

In other words, a requirement by the contracting authority in the terms of reference under Art. 36a(1) that the contractor personally perform key portions of a contract for construction works or services, or work involving siting and installation under a supply contract, will not apply with respect to an entity committing its resources under the rules set forth in Art. 26(2b).

Hanna Drynkorn, Infrastructure & Transport and Public Procurement & Public-Private Partnership practices, Wardyński & Partners