Grounds for exclusion in the proposed new Public Procurement Law: Closer to the directive | In Principle

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Grounds for exclusion in the proposed new Public Procurement Law: Closer to the directive

The draft of the new Public Procurement Law, released by the Ministry of Entrepreneurship and Technology on 24 January 2019, proposes changes in the grounds for exclusion of contractors and institution for “self-cleaning,” bringing the Polish regulations closer to Directive 2014/24/EU.

The catalogue of grounds for exclusion of a contractor from proceedings for award of a public contract under the current Public Procurement Law was introduced by the amendment of 22 June 2016, implementing Art. 57 of the new Classic Procurement Directive (2014/24/EU) defining the grounds for exclusion. However, the grounds for exclusion provided for in the current Art. 24 (1) and (5) PPL differ to a certain extent from the grounds indicated in the directive, which raises practical problems for contractors, especially when filling in Part III of the European Single Procurement Document. Changes to the exclusion grounds in the draft of the new law simplify the qualitative selection of contractors, limiting the catalogue of mandatory exclusion grounds and adjusting their substance to the equivalents from the directive. The proposed changes should allow a wider range of contractors to participate in public procurement procedures.

Some mandatory exclusions will become optional

In the current Public Procurement Law, some of the premises listed in Art. 57(4) of the Classic Directive, which defines the catalogue of optional premises for exclusion, are made obligatory. This was justified by the view that the circumstances involved always have a negative impact on the proper functioning of the public procurement system, which leads to distortion of fair competition in the procedure and may illegally influence its outcome. The draft proposes changes to bring the wording and catalogue of mandatory and optional premises into line with those set out in the directive, which should be assessed positively. This will make it easier for contractors to fill in the ESPD, furthering the rationale set out in the directive. Attributing an optional character to most of the premises will leave the contracting authorities to decide on their use, and they will be able to include them in the contract notice or contract documents (which should include the ESPD, based on the newly added definition in the draft act).

The premises for exclusion indicated below are to become optional:

  • Final conviction for offences against the environment regulated in Art. 181–188 of the Criminal Code and offences against workers’ rights regulated by Art. 218–221 of the Criminal Code (now Art. 24(1)(13)–(14) PPL)
  • Bid-rigging (currently Art. 24(1)(20) PPL). Going beyond this premise in the directive, the draft clarifies that an agreement between contractors aimed at distorting competition will exist, for example, if members of the same corporate group submit separate bids, partial bids or requests to participate in the procedure. The contractors will be able to rebut this presumption if they can show that they prepared offers or requests to participate independently of each other.
  • Distortion of competition resulting from prior involvement of the contractor in the preparation of the procurement, in particular by advising on preliminary market consultations by the contracting authority. The institution of preliminary market consultations, which is the subject of the proposed Art. 94–97 of the new law, is known as “technical dialogue” under the current law. On the other hand, the terminology proposed in the draft coincides with the name of this institution adopted in Art. 40 of the Classic Directive. According to the explanatory memorandum for the draft, the purpose of clearly defining the situations where it is possible to exclude a contractor engaged in market consultations is to introduce the principle that exclusion can only take place if the distortion of competition caused by such involvement cannot be eliminated in any other way. However, the clarification of this situation in the draft does not introduce much that is new, as it has already been provided for in the present Art. 24(1)(19) PPL. Moreover, under the present Art. 24(10) PPL, before excluding the contractor, the contracting authority must provide the contractor an opportunity to prove that its participation in preparation of the procurement procedure did not distort competition.
  • Misleading the contracting authority, deliberately or negligently, when presenting information contained in the qualitative documents (current Art. 24(1)(16) PPL). The introduction of an additional requirement that such contractor’s activity must have a significant impact on decisions taken by the contracting authority during the procedure is new. While in case of negligence on the part of the contractor (which now must be gross negligence), the need to prove such an influence is indicated, deliberate misleading of the contracting authority by the contractor appears to be sufficient to justify the exclusion of the contractor. On the other hand, it is difficult to imagine that such an action would not influence the contracting authority’s decisions in the procedure.
  • Misleading the contracting authority as a result of recklessness or negligence (current Art. 24(1)(17) PPL) and unlawful influence or attempted influence of the contractor on the contracting authority’s activities or acquisition of confidential information (current Art. 24(1)(18) PPL)—both grounds are to be covered by a single point.

In addition, the current optional ground from Art. 24(5)(3) PPL is to be replaced by a reference to the occurrence of a conflict of interest. The change results from the use of this concept by the drafters, modelled on the EU directive, to determine cases where it is necessary to exclude persons performing activities in the contract award procedure on the part of the contracting authority. The situations indicated in the proposed Art. 61 of the new law where there is a conflict of interest generally correspond to the cases set out in Art. 17 of the current law, but some of them are specified in more detail. A conflict of interest will arise both when the impartiality of persons performing activities on the contracting authority’s side is endangered as well as when it can only be perceived as endangered by virtue of their interest in a specific outcome of the proceedings.

Reference to crimes defined in Polish acts still misses the point

One of the reasons contractors have trouble filling in the European Single Procurement Document in Poland is the reference in the Public Procurement Law to crimes as defined in Polish criminal law provisions, for which a legally binding conviction results in the exclusion of the contractor. Part III of the ESPD lists the offences set out in Art. 57 of the Classic Directive, with only a general reference to the corresponding national provisions. To help Polish contractors identify which offences under Polish criminal law correspond to the offences indicated in the ESPD fields, the Public Procurement Office has prepared guidelines in its ESPD manual. However, this does not help foreign contractors who have difficulties identifying offences regulated in their state’s legal framework corresponding to those mentioned in the directive. Referring in the Public Procurement Law to a catalogue of crimes defined in the Polish Criminal Code and other acts makes it difficult for foreign contractors to submit an initial statement in the ESPD, and after selection of their offer, to submit appropriate documents confirming their lack of a criminal record.

Moreover, the current reference to Polish criminal law prevents exclusion of a contractor convicted of analogous offences under the law in force in its home country. This violates the principle of equal treatment of contractors.

There were hopes that in the work on the new law, references to Polish criminal laws would disappear, ensuring the universality of this ground for exclusion and coverage of foreign contractors. The proposed regulation only partially meets these expectations. References to Polish laws providing for liability for offences are retained, while referring only in part of the grounds for exclusion to the laws in force at the place of residence or registered office of the contractor. As a result, the proposed Art. 122 still differentiates between Polish and foreign contractors, because such economically serious crimes as money laundering or corruption will be a basis for exclusion only if the conviction for them is based on Polish law.

Self-cleaning: more is not better

According to the current Art. 24(8) PPL, in the majority of cases where the contractor is subject to exclusion, it may present evidence that the measures taken the contractor are sufficient to prove its reliability. In particular, the contractor may indicate that it has repaired the damage caused by a criminal or fiscal offence or provided monetary compensation for the harm. The contractor may provide a comprehensive explanation of the facts and demonstrate cooperation with law enforcement authorities and the adoption of specific technical, organisational and personnel measures appropriate to prevent further criminal or fiscal offences or misconduct on the part of the contractor. This wording, introduced by the 2016 amendment, derives from Art. 57(6) of the Classic Directive.

When regulating the institution of the contractor’s “self-cleaning,” the drafters of the proposed new act went one step further. Not only is the normative content from Art. 57(6) of the directive repeated, but part of recital 102 of the directive is transposed into the draft, indicating examples of technical, organisational and HR measures the contractor should undertake to prove its reliability. Such measures include breaking any ties with persons or entities responsible for the contractor’s improper conduct, reorganising staff, implementing a reporting and control system, setting up an internal audit structure to monitor compliance with rules, internal regulations or standards, and introducing internal rules on liability and damages for non-compliance, internal regulations or standards.

Although it may seem that indicating in the act specific measures to be taken by contractors will be helpful for them, there is a concern that these circumstances will be perceived by contracting authorities as minimum actions that must be taken by contractors. Formalistic verification of measures taken by contractors may limit their ability to use this institution, which certainly runs counter to the principle of proportionality, which is essential for the application of the grounds for exclusion. In particular, it is worth reconsidering the measure requiring breaking of any ties with persons or entities responsible for the contractor’s incorrect behaviour. For example, in the case of a final conviction of a management board member for an offence listed in the grounds for exclusion, will the only possibility of self-cleaning be that person’s discharge or resignation? These doubts call into question whether it is really necessary to transpose the interpretive guidelines contained in the preamble to the directive into national legislation. The list of samples of measures to cure infringements in the preamble of the directive, the role of which is to establish the spirit in which the operative provisions of the directive should be interpreted, certainly has a different purpose and resonance than indicating the same measures in the body of the act.

Katarzyna Śliwak, attorney-at-law, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners