Contracting authority need not award points for borrowed resources | In Principle

The contracting authority does not violate Art. 26(2b) of the Public Procurement Law by not awarding a contractor points for borrowed resources, because fulfilling the conditions to qualify for participation in a procurement proceeding relying on the potential of a third party is different from the stage of selection of a shortlist of contractors, for which the conditions may be defined in the manner adopted by the contracting authority.

Art. 26(2b), permitting access to public contracts by contractors who do not meet all of the conditions for participation in the contract award proceeding themselves but rely on the resources of third parties, has been a part of Poland’s Public Procurement Law for over 5 years. From the beginning this section was regarded as an imperfect approximation of Art. 47(2) of Directive 2004/18/EC on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (known as the “Classic Directive”). In consequence, at a certain moment after Art. 26(2b) of the Public Procurement Law entered into force, the case law and practice of applying this regulation became inconsistent. Now, particularly after 2013, the view has become well-established that Art. 26(2b) is of an exceptional nature, and should not be interpreted to allow a situation in which a third party lends its resources solely so that a contractor can meet the pro forma conditions for participation in the tender (National Appeal Chamber rulings of 26 February 2013 (KIO 297/13 and KIO 300/13), 8 May 2013 (KIO 953/13) and 5 September 2013 (KIO 2030/13)).

Nonetheless, the view is still sometimes presented, also by counsel (see KIO 548/15), that a contracting authority which refuses to award points for borrowed resources in a two-stage proceeding is in violation of the Public Procurement Law, including Art. 26(2b). But this view results from a mistaken understanding of the meaning and purpose of this provision.

First and foremost, Art. 26(2b) is inseparably bound up with the obligation of contractors to demonstrate fulfilment of the conditions for participation in the proceeding, as an elaboration of the general rules concerning those conditions, i.e. Art. 22(1), 25(1) and 26(1)–(2) of the Public Procurement Law. These provisions serve to secure the interests of the contracting authority, as contractors must demonstrate to the contracting authority that they meet the fundamental economic and technical requirements, i.e. that they can at least ensure correct performance of the contract. It follows from this that the conditions for participation in the proceeding are characteristics and properties of the contractor expressing the minimal requirements that ensure proper performance of the contract (KIO 1495/14).

Meanwhile, under Art. 57(3), if the number of contractors who meet the conditions for participation in the proceeding is greater than the number specified in the contract announcement, the contracting authority must use objective and non-discriminatory criteria to decide which of the contractors to invite to submit preliminary offers.

It should be pointed out that through an amendment dated 12 October 2012, Art. 57 was amended to remove the element of the shortlisting process involving the condition of the highest valuation of fulfilment of the conditions for participation in the proceeding.

The provisions in question now leave no doubt that fulfilment of the conditions for participation in the proceeding (and the possibility of drawing on the potential of third parties to fulfil these conditions) is different from the stage of prequalification in a two-stage tender, which must be specified in the manner adopted by the contracting authority (KIO 2975/13).

For these reasons, it should be recognised that Art. 48(2) of the Public Procurement Law mentions two separate elements of a contract announcement, namely:

• The conditions for participation in the proceeding and a description of how fulfilment of these conditions will be evaluated and the weight of these conditions (point 6)
• A description of the objective and non-discriminatory manner in which contractors will be selected to be invited to submit offers, if the number of contractors meeting the conditions for participation in the proceeding is greater than the number specified in the contract announcement (point 8a).

The two-stage procedure for awarding a contract is therefore composed of two separate processes (although possibly occurring at the same time):

• Evaluation of fulfilment of the conditions for participation in the proceeding according to the conditions specified under Art. 22(1) of the Polish act (Art. 44(1) of the Classic Directive)
• Selection by the contracting authority of which contractors, among those fulfilling the conditions for participation in the proceeding, it will invite to submit offers, if it decides not to invite all of the contractors fulfilling these conditions pursuant to Art. 57(3) of the Polish act (Art. 44(3) of the Classic Directive) (see Sue Arrowsmith, The Law of Public and Utility Procurement, Volume 1: Regulations in the EU and UK (3^rd ed. 2014), pp. 684 and following).

Neither the Public Procurement Law nor the Classic Directive specifies how the contracting authority should select contractors for the second stage of the proceeding—they only require that the manner be objective and non-discriminatory. Suggestions in this respect come from the case law and the commentaries, particularly under EU law. It is thus indicated that in the process of selection of qualified contractors, the contracting authority should be guided by criteria involving the contractors’ economic, financial and technical capabilities (id.) In Commission v Italy (Case C-360/89), the Court of Justice stated that the contracting authority should make this evaluation on the basis of the information provided by the contractors for the purpose of demonstrating fulfilment of the conditions for participation in the proceeding. A similar position was taken by the European Commission in the Guide to the Community Rules on Public Supply Contracts (1997), p. 45; the Guide to the Community Rules on Public Works Contracts (1997), p. 52; and the Guide to the Community Rules on Public Procurement of Services (1997), p. 48. However, as it should be clearly stressed, these actions by the contracting authority must not be conflated. The first stage—qualification—involves an evaluation of fulfilment of the conditions for participating in the proceeding, while the second stage—selection—consists of the contracting authority’s choice of contractors for further participation in the proceeding, on the basis of criteria adopted by the contracting authority.

For this reason, any attempt to allege violation of Art. 26(2b) by contracting authorities for their refusal to award points for the experience of third parties at the stage of shortlisting of contractors will be wide of the mark. This is because the contracting authority is required to apply Art. 26(2b) only for the purposes of evaluating fulfilment of the conditions for participation in the proceeding, i.e. qualification. This provision is relevant only to the qualification stage—not the selection stage.

Here it should be stressed that the current wording of the Public Procurement Law does not permit lending of resources in the form of knowledge and experience to be equated with subcontracting. The knowhow of another entity truly enhances the reliability of a contractor only if the third party will actually participate in performance of the contract in the same scope in which it has offered to lend its resources (Magdalena Grabarczyk, “Dostateczna wiedza i doświadczenie jako warunek ubiegania się o zamówienie publiczne” (“Adequate Knowledge and Experience as a Condition for Seeking a Public Contract”), PZP 2014 No. 1).

The negative phenomenon of “reference trading,” extensively discussed in the media, which leads to distortions in interpretation of the Public Procurement Law, also cannot be avoided. This phenomenon is manifest in the attitude that what should be rewarded in procurement proceedings is not the contractor’s real capacity to perform the contract as much as its skill at forming cooperation with numerous entities in order to submit the greatest amount of experience in the proceeding.

As it has been pointed out, essentially the purpose of Art. 26(2b) is to increase the competitiveness of proceedings for award of public contracts by permitting contractors to seek contracts when they by themselves do not possess sufficient potential to demonstrate fulfilment of the conditions for participation in the proceeding, but can draw on the potential of their commercial partners when performing the contract (Informator UZP No. 11/2011, pp. 22 and following).

But the purpose is not to increase the chances of such a contractor for selection for the next stage of the proceeding by allowing it to present the experience of others to gain a higher position in the ranking which is in this sense illusory because it does not translate into actual competencies to properly perform the contract.

On this issue, the application of the Public Procurement Law requires a weighing of the need to ensure the highest competitiveness of the procedure and protection of the interests of the contracting authority and the broader public interest.

Mirella Lechna, Infrastructure & Transport and Public Procurement & PPP practices, Wardyński & Partners