Digitalisation of procurement without signposting | In Principle

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Digitalisation of procurement without signposting

In anticipation of the new Public Procurement Law, the market is wandering in an uncharted wilderness of digitalisation, stumbling time and again over the ill-considered consequences of rulings. Public procurement needs a signpost: permanent and specific rules in line with the regulations.

Digitalisation of public procurement in Poland continues to cause problems for market participants. The existing regulations are terse in this respect and authoritative guidelines in many fields are either lacking or are only just forming, painfully putting contractors to the test and undermining their chances of winning contracts. The draft of the new Public Procurement Law currently under consideration devotes little space to the subject of digitalisation. Art. 79 of the draft provides that issues related to the digitalisation of the public procurement system should be introduced through an executive regulation governing not only the technical requirements for electronic means of communication, but also the method of preparing electronic documents or electronic copies of documents. In principle, this is not a bad plan. However, pushing aside issues of digitalisation at the stage of work on the new law automatically cuts off a broader systemic discussion of the subject. This discussion is also occurring among practitioners, but it boils down to regret, patching holes, and putting out fires.

Objectives of digitalisation

It should be stressed that the Classic Procurement Directive (2014/24/EU) prohibits unjustified obstacles to opening up public procurement to competition (Art. 42(2)).

It is also stated in the justification for the draft of the new Public Procurement Law that digitalisation of public procurement is aimed at improving its efficiency and transparency and SMEs’ access to procurement. Meanwhile, the practice of applying the current provisions on digital procurement is not achieving these objectives. In terms of digitalisation, the attitude of contracting authorities and the decisions handed down by the National Appeal Chamber (KIO) galvanise the market with surprising and inconsistent rulings, a few of which are worth mentioning.

  • Original/electronic copy

Non-recognition of a bid or application produced in writing and signed, and then signed electronically. In light of the ruling in KIO 2611/18, such a document was treated as a copy. In KIO 119/19, the chamber changed its viewpoint. What will be the fate of contractors who lost their bids as a result of these vacillations, time will tell.

  • SHA-1/SHA-2

Declaring an electronic signature verified with a withdrawn SHA-1 protocol invalid, notwithstanding the eIDAS Regulation (KIO 2428/18). Subsequently, in cases KIO 137/19 and KIO 176/19, this position was revised, and particular credit is due in this field to the Ministry of Digital Affairs, which published an official position on the SHA-1 algorithm. In this context, it would be advisable to add a provision in the draft act explicitly indicating that the correctness of an electronic signature should be verified with reference to the trusted list of suppliers. After all, Art. 22(6)(c) of Directive 2014/24/EU indicates the procedure to be followed by member states when they find that for the necessary level of security, electronic communication requires the use of an advanced electronic signature, and refers in this respect to a trusted list of suppliers.

  • Electronic bid bond

Art. 110(10) of the draft act speaks of the electronic form of the bid bond submitted in the form of a guarantee or surety, without indicating what is meant by “electronic form.” Linking the non-legal term “electronic form” with the requirement that the original be handed over to the contracting authority suggests however that this is a guarantee or surety which, in its original form, operates only in the form of an electronic file. However, the draft of the law does not take into account that separate provisions do not always require the use of a qualified electronic signature in electronic form, just as they may not require delivery of the original document to establish security for an obligation.

Therefore, it is now common to require that a bid bond document be issued in an electronic form in its original form, and it seems that banks have adapted their practice to market requirements. In principle, an electronic bank guarantee or an electronic insurance guarantee can now be obtained without hindrance. However, this did not occur without negative consequences for contractors of the banks’ failure to prepare for the contracting authority’s requirements (KIO 2426/18), i.e. the rejection of a bid secured by a bank guarantee which was originally issued in writing and then signed with a qualified electronic signature of a bank director.

On the other hand, the requirement that the bank guarantee be signed in its original form with a qualified electronic signature, even though the SWIFT electronic message form functions in banking practice, guaranteeing proper security of electronic communications, should be seen as a barrier to access to procurement. Such an approach to the issue of the form of a bid bond in a non-cash form may translate into a reduction in the number of valid bids in proceedings above the EU thresholds, where the bid bonds are so high that contractors obtain bank guarantees, including those issued by foreign banks. The requirements that have been imposed are disproportionate and excessive, and completely detached from the function of the bid bond. It should be pointed out that the Insurance and Reinsurance Activity Act does not require the beneficiary of a guarantee to hold the original letter of guarantee for the insurance guarantee to be effective.

  • Electronic power of attorney

The requirement that a power of attorney for representation in a public procurement procedure conducted in electronic form is to be issued in the primary form of an electronic original signed with a qualified electronic signature creates a barrier to access to procurement proceedings. Such a requirement means that the principal must have a qualified electronic signature even though it does not intend to represent the contractor in the proceedings. Moreover, the requirement to use the original power of attorney for purposes of representation in procurement proceedings is not stated in the law, but only derives from the practice shaped by decisions of the National Appeal Chamber. In the era of digital procurement, it is time to change this approach.

Awaiting a signpost

As we can see, contracting authorities take a highly formal approach to electronic communications and qualified electronic signatures. At a time when the new Public Procurement Law is being developed, I expect the proponents to provide clear guidance on how to approach the subject of digitalisation in order to achieve its objectives: improving the efficiency of proceedings in which as many valid bids as possible are submitted.

This issue should be the subject of particular attention during the legislative process. Electronic communications should be treated as a manifestation of technical progress and a means of facilitating the procurement process. This approach should be explicitly reflected in the new law, even if the techniques are covered by an executive regulation.

It also seems that the market cannot wait for the new law, as the errors in the approach to digitalisation described above mean real damage to specific contractors who are currently operating in the chaos of digital procurement. It is very good that defective rulings are effectively reviewed, but the wording of each ruling is an indication for the market and, at the same time, a bitter lesson for the participants in the particular proceeding. Not to mention that contracting authorities are also lost in the maze of reports from the market and do not adjust their practices on the basis of someone else’s case law. They also need clear guidelines, even before the new law is created.

Anna Prigan, attorney-at-law, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners