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Innovation in public procurement

Following Directive 2014/24/EU, the bill to amend the Public Procurement Law seeks to promote innovation in public contracts.

Without a doubt, one of the most significant changes to be introduced in the amended Public Procurement Law is the new procedure known as the “innovation partnership.” But there are also notable changes in the negotiated procurement procedures—competitive dialogue and the competitive procedure with negotiation. The bill introduces new solutions in place of the previous rigid framework agreements. The changes should encourage contracting authorities to trust the know-how of contractors offering new and atypical—i.e. innovative—solutions.

Negotiated procedures—competitive procedure with negotiation, competitive dialogue

The bill modifies and consolidates the conditions for using the competitive procedure with negotiation and competitive dialogue. This change should clearly expand the possibilities for applying negotiated procedures, for example when the contracting authority seeks innovative solutions. When the changes enter into force, the contracting authority will be able to choose the competitive procedure with negotiation or the competitive dialogue procedure in any of the following circumstances:

  • In a procurement previously conducted under the open procedure or restricted procedure, all of the offers were rejected for non-compliance with the act or the tender specifications, because of abnormally low price or costs, or because they were submitted by excluded contractors, or the contracting authority invalidated the tender because all of the offers exceeded the amount earmarked for the contract, and the original conditions of the procurement have not been materially modified.
  • The contract value is below the EU thresholds.
  • The needs of the contracting authority cannot be met without adaptation of solutions readily available on the market.
  • The works, supplies or services include design or innovative solutions.
  • The contract cannot be awarded without prior negotiations because of specific circumstances related to the nature, complexity, or legal and financial make-up, or because of the risks attaching to the works, supplies or services.
  • The technical specifications cannot be established with sufficient precision by the contracting authority with reference to a standard, European Technical Assessment, common technical specification or technical reference.

On one hand the new regulations expand the group of potential contractors, and on the other hand they give the contracting authority tools for limiting this group in order to select the most advantageous offer in a manner that is convenient but also furthers the principles of public procurement.

Selection and reduction

If the number of indicative offers or applications is greater than the number of contractors invited to submit offers, the contracting authority will make a selection of contractors based on objective, non-discriminatory selection criteria established in advance and indicated in the contract notice.

Nonetheless, the existing regulations also require that contractors be selected for invitation to submit offers in an objective and non-discriminatory fashion, and in practice contracting authorities state in the contract notice the criteria under which the contractors will be narrowed down. The change in this respect is rather a codification of the well-established practice.

The bill also provides for the possibility of reducing the number of offers by dividing the negotiations into specific stages. In the reduction phase, the contracting authority will limit the number of offers by applying some or all of the criteria for evaluation of offers. This procedure is permissible only if the contracting authority has provided for it in the contract notice. It also applies as relevant to competitive dialogue, where the reduction phase involves a reduction in the number of solutions proposed by the participants in the dialogue.

The permissibility of modifying the contract in the case of competitive dialogue should also be noted. The bill admits the possibility of negotiating the terms of the contract in order to adjust the obligations arising out of the offer after selection of the most advantageous offer. However, the permissible changes are limited and cannot involve essential elements of the offer or result in a change in the needs and requirements specified in the notice. Moreover, the changes must not result in violation of principles of fair competition.

Innovation partnership

Obviously the crowning achievement of the new law in terms of support for innovation is the introduction of a new procedure for award of public contracts: the innovation partnership. It opens up access to implementation of public projects for enterprises from the R&D sector.

This procedure could be used to meet the contracting authority’s needs for innovative goods, services or works—i.e. new or significantly improved goods, services or processes (including manufacturing and construction processes, as well as new marketing methods or organisational methods applied in enterprise, work organisation or external relations).

This procedure for awarding contracts is based on the competitive procedure with negotiation. The contracting authority would be required to verify the partner’s capacity to develop and implement the innovative products, as the partnership covers not only the R&D process but also purchase of the items once they have been developed and produced.

Depending on its needs, the contracting authority could also selected several offers and enter into contracts with several partners. The contract performance process reflects the specific nature of R&D activity. The partnership is divided into stages corresponding to the specific stages of the R&D process. The contracting authority may also set interim milestones. Completion of the individual stages or meeting the interim milestones will then be the basis for payment of the partner’s fee and continuation of the work.

Establishing the basis for public entities to take up activity in the R&D sector is clearly a major step in an innovative direction. Contracting authorities will be able to fund and manage R&D projects so long as they fall within the scope of their public tasks.

This approach may seem abstract at this point, but notably it is already functioning in Europe. The European Commission has established three partnerships, in the areas of commodity supplies, sustainable agriculture, and active, healthy aging. From the perspective of public tasks, these are vital fields for national development, but private enterprises are not eager to invest in them. It may be anticipated that in the Polish public procurement system, these are the types of fields where contracts may be awarded in the form of innovation partnerships.

Serom Kim, Infrastructure, Transport, and Public Procurement & Public-Private Partnership practices, Wardyński & Partners