Award of a contract co-financed using EU funds by a private entity
A private entity carrying out a project co-financed using EU funds makes use of public money, and therefore is required to comply with rules on fair competition and equal treatment of contractors. Accordance to government guidelines, to do this it should use market research or comply with competition requirements. And if it becomes a contracting authority, it must apply the Public Procurement Law.
The obligations of a private entity that lacks the status of a contracting authority in the meaning of the Public Procurement Law are laid down in the Guidance on Eligibility of Expenditures under the European Regional Development Fund, the European Social Fund, and the Cohesion Fund for 2014–2020. These obligations depend on the value of the awarded contract.
Contracts between PLN 20,000 and PLN 50,000: market research
With respect to expenditures of a net value between PLN 20,000 and PLN 50,000 inclusive, i.e. not counting VAT, the recipients have an obligation to conduct market research and publish a tender enquiry on their website or other universally accessible site designated for posting tender enquiries.
The aim of market research is to establish that a particular service, delivery, or construction work is performed at a price no higher than the market price. To document that this requirement is fulfilled, the recipient should submit a printout of the tender enquiry posted in the manner described above, together with the bids received, or confirmation that the tender enquiry was sent to a minimum of three potential contractors, if there are at least three potential contractors on the market, accompanied by the bids received.
In the case of contracts to which the market research procedure applies, an agreement does not have to be concluded with the contractor in writing. Proof that the expenditure has been incurred, in the form of an invoice, receipt, or other accounting document of equal evidentiary value, is sufficient.
Contracts above PLN 50,000: principle of fair competition
With respect to expenditures of a net value exceeding the PLN 50,000 threshold, recipients that are not required to apply the Public Procurement Law must conduct the proceedings according to the principle of fair competition.
One of the main requirements is publication of a tender enquiry on a site created by the Ministry of Development (Competitive Database). It must be worded in line with the requirements laid down in the Guidance, and in guidance notes published by the institution managing the operational programme under which the project is being realised, if the institution has drawn up such guidance notes.
In addition, the subject of the contract and the procedure for evaluating the criteria for admission to the procedure (if provided for) have to be described in accordance with the Guidance. Contracting entities are also required to draw up criteria for evaluation of bids in a manner guaranteeing fair competition and a level playing field for contractors, while complying with the detailed requirements laid down in the Guidance.
The contracting entity is required to document selection of the most advantageous bid, on the basis of the evaluation criteria specified in the tender enquiry, in a protocol. The agreement with the contractor and protocol of the proceedings for award of the contract must be in writing.
When does the Public Procurement Law apply?
A private entity obtaining co-financing has an obligation to apply the Public Procurement Law if the criteria laid down in Art. 3(1)(5) of the law, relating to the subject, value, and source of financing for the contract, are fulfilled.
This applies in cases where:
- More than 50% of the value of the awarded contract is financed using public funds or by entities described in Art. 3(1)(1)–(3a) of the law
- The value of the contract is equal to or greater than the amounts specified in regulations issued under Art. 11(8) of the law, and
- The contract pertains to civil engineering works described in Annex II to Directive 2014/24/EU, or building work for hospitals, facilities for sports, recreation and leisure, school and university buildings, and buildings used for administrative purposes, or services related to building work of that kind.
In these circumstances, all entities are required to apply the Public Procurement Law regardless of their legal form and ownership structure and the nature of their business.
All three criteria must be fulfilled
A particular private entity is subject to the Public Procurement Law only if all three of the above criteria are fulfilled (even though the phrase “all of the following circumstances apply” was replaced by the phrase “the following circumstances apply” in an amendment made in 2016).
The requirement that all of the criteria be fulfilled was affirmed in an opinion issued by the president of the Public Procurement Office. This conclusion is also supported by the structure of Art. 3(1)(5) of the law, which indicates that lawmakers intended this article to apply only to entities for which all of these circumstances exist at the same time, in relation to a single contract.
This means that a private entity that obtains co-financing does not have to apply the Public Procurement Law if only some of the criteria described above are fulfilled.
First: the source of financing for the contract
The first prerequisite mentions financing of more than 50% of the value of the awarded contract using public funds or by entities described in Art. 3(1)(1)–(3a) of the Public Procurement Law.
As defined in Art. 5(1)(2) of the Public Finance Act of 27 August 2009, referenced in Art. 2(9) of the Public Procurement Law, “public funds” include funds from the European Union budget and non-repayable aid granted by signatories to the European Free Trade Agreement (EFTA).
But there is no definition in Polish law of the term “financing of a public contract” as used in Art. 3(1)(5)(a) of the Public Procurement Law. According to the standpoint adopted by the president of the Public Procurement Office, published on the basis of the previous wording but still applicable, this prerequisite relates to situations where the contract is subsidised by an institution directly, i.e. non-repayable aid is granted covering a portion of the costs incurred in connection with realisation of the contract.
Therefore, a private entity fulfils this criterion if more than 50% of the costs of performance (the price) of the contract are financed with non-repayable subsidies from the EU.
The value of a public contract is determined as a net value, i.e. not including VAT.
Second: the value of the contract
According to the second prerequisite, the Public Procurement Law applies to contracts financed from public funds of a value at least equal to the amounts specified in the Regulation of the Minister of Development and Finance of 22 December 2017 on Values of Public Contracts and Competitions, which determine whether the EU Publication Office has to be notified of calls (as these are “provisions issued under Art. 11(8) of the law”).
With respect to contracts for construction works, this amount is given as the PLN equivalent of EUR 5,548,000. This amount is converted into PLN at the rate of EUR 1 = PLN 4.3117 in line with the relevant regulation of 28 December 2017.
Third: the subject of the contract
Under the third prerequisite, the contract must pertain to civil engineering works described in Annex II to Directive 2014/24/EU, i.e. tenders of code CPV 45200000, or building work for hospitals, facilities for sports, recreation, and leisure, school and university buildings, and buildings used for administrative purposes, or services related to building work of that kind.
This means that a private entity is not required to apply the Public Procurement Law in the case of other types of building work and supplies and services, even if the other two prerequisites exist under Art. 3(1)(5) of the law. In such a case, the recipient must comply with the requirements specified in the Guidance, depending on the value of the awarded contract.
Katarzyna Śliwak, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners
