Public procurement in Poland: An incomplete revolution | In Principle

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Public procurement in Poland: An incomplete revolution

Poland did not manage to implement the EU’s new procurement directives on schedule, but contracting authorities are required to conduct proceedings in full compliance with EU law.

“In Principle”: The deadline for implementation of the new procurement directives into national law passed in April, but the old act is still in force in Poland. Why is that?

Mirella Lechna: Legislative work has not been completed yet on the government’s proposed Act Amending the Public Procurement Law and Certain Other Acts (Sejm print no. 366), designed to implement the new Classic Directive (Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC) and the new Utilities Directive (Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC).

Both of the new directives were adopted on 26 February 2014 and published on 28 March 2014. They entered into force following publication in the EU Official Journal, but the deadline for implementing them in the legal systems of the member states was set at 18 April 2016. The repeal of the prior procurement directives also occurred on that date.

This means that the 2004 directives ceased to be in force from 18 April 2016. The existing Public Procurement Law in Poland formally remains in force, but it can no longer be applied where inconsistent with the 2014 directives.

What does this mean for participants in the public procurement market?

This situation unnecessarily complicates application of the Public Procurement Law and thus also the award of public contracts. This is because contracting authorities are required to conduct contract procedures in full compliance with EU law, and contractors seeking award of public contracts have the right to enjoy the advantages flowing from the new directives.

The Polish reality when it comes to application of the Public Procurement Law is known for excessive formalism. Thus the situation where some rules are supposed to be applied without an express legal basis under the act currently in force in Poland, but formulated universally in a European legal act, is hard to imagine.

Nonetheless, this obligation arises under fundamental principles of the functioning of EU law in the legal systems of the member states. The Court of Justice held long ago, including in the Simmenthal case (C-106/77) in 1978, that if there is a true conflict between a rule of Community law and a rule of national law, the Community law should be applied directly, without the need to wait for implementation. In other cases, such as Fratelli Costanzo SpA (C-103/88) in 1989 and Ciola (C-224/97) in 1999, the Court of Justice held that it is not only courts that must refrain from applying national regulations inconsistent with Community regulations, but also administrative bodies, which clearly imposes an obligation on contracting authorities in this respect. So even though the 2014 procurement directives have not been implemented into Polish law yet, where their provisions are unconditional and sufficiently precise, they must be applied nonetheless.

Can contracts still be awarded relying exclusively on the current form of the Public Procurement Law?

This is not a legal option. Such a procedure would be defective. Failure to comply with the principle of the primacy of Community law would be particularly serious in the case of contracts financed with EU funds, where violation of procurement law would result in financial sanctions. Besides, there is no doubt about issue. The president of the Public Procurement Office has even published guidelines on how to apply the Public Procurement Law during the period up to adoption and entry into force of the amended act. The guidelines confirm that in the case of procurements above the EU threshold values, the principle of direct effect of the directives must be applied. But in practice, applying and taking advantage of this solution could be problematic for participants in the public procurement market.

What new solutions are introduced by the directives?

Before the directives were adopted, detailed studies were conducted into the functioning of the European public procurement system. Following those studies, the new directives provide for simplified procurement procedures. They introduce a “light regime” for certain types of contracts, e.g. for services that had been classified as non-priority, while the new regulations eliminate the distinction between priority services and non-priority services.

The negotiation procedure will be applied more broadly, and also has been made more flexible. The directives also introduce solutions making it easier for SMEs to access the procurement market. This involves the documents that bidders must file, evaluation of the contractual capacity of SMEs, and a requirement to allocate contracts under the principle of “divide or justify.”

The directives also address in detail the possibility of modifying a procurement contract, permitting replacement of the contractor in certain circumstances. They introduce a mechanism for direct payments to subcontractors. A different system for evaluation of offers has been introduced, foregrounding the criterion of the “economically most advantageous tender.” The directives also include provisions on strategic use of public procurement, which will enable other state policies to be pursued while performing public contracts.

In terms of qualification of contractors, Directive 2014/24/EU focuses on the capacity to perform the contract. This is a departure from the previous approach, which permitted contracting authorities to apply more restrictive exclusion criteria. This is a fundamental change, particularly in terms of Polish law, which is known for its highly restriction position on this issue (as illustrated for example by the Forposta SA case, C-465/11). The grounds for exclusion of contractors have been revised, resulting in new rules not found in Polish law before.

It should also be pointed out that the directive expressly introduces a “self-cleaning defence” mechanism. Using this, a contractor can show that even though grounds for exclusion do exist, the measures taken by the contractor ensure its capacity to perform the contract. This can protect the contractor from exclusion.

These aspects alone are enough to show that procurement procedures will taken on a new character, and the approach to qualification and selection of bidders should be more practical and flexible. This whole approach is not typical for the Polish public procurement system.

Will the Polish Public Procurement Law come into full compliance with the new European law?

That’s a very difficult question. The Public Procurement Office had projected that despite the delay, the amending act would be adopted before the end of April, but that became unrealistic.

Two years ago it appeared from the initiative of the government committee, the Ministry of Economy and the Public Procurement Office that the new rules would be implemented smoothly, and it would be more than just a legislative change but would also introduce a new quality into public procurement in the spirit of the reforms at the European level. But since then the process of amending the Public Procurement Law has gone most chaotically. There were numerous competing drafts, one of which had provisions mechanically pasted from the directive, which was clearly not the right approach. The provisions expressed in the peculiar language of the directives, verbatim, could not function effectively and harmoniously in the Polish legal system.

So the time allowed for transposition of the directive was wasted. Consequently, instead of a totally new and modern public procurement act, we have only an act amending the 2004 law.

This approach ultimately results solely from the lack of time to enact the intended complete overhaul of the Public Procurement Law. Thus it can be assumed that the amending act currently in the works is not the ultimate target, but will have to undergo further revisions.

On top of this, Poland is also required to implement the new Concessions Directive (Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts). Work on that act is only at the initial phase.

Mirella Lechna is a legal adviser and partner at Wardyński & Partners, and head of the firm’s Infrastructure, Transport, and Public Procurement & Public-Private Partnership practices.