The purpose for stating the projected execution costs in the rules for a contest is for contestants to be aware of the contracting authority’s financial capabilities. Contestants should take this value into account when preparing their entries, or their entry will not be considered by the contest jury, the National Appeal Chamber held in its ruling of 10 January 2022 (KIO 3624/21).
Change in contest rules
In a contest for development of an architectural concept for a public project, the contracting authority announced contest rules in which, in accordance with statutory requirements, it established the maximum planned total cost of the work to be carried out on the basis of contest entries. But before the deadline for submitting contest entries, the contracting authority reduced the original amount, and informed all interested parties accordingly. Ultimately, three entries were submitted to the contracting authority, one of which received the highest scores on each of the evaluation criteria, thus ranking first. However, before announcing the results of the competition, the contracting authority called on the contractor to clarify its cost estimate, as the contestant’s cost estimate exceeded the maximum planned total cost of carrying out the works indicated in the contest rules. In response, the contestant modified its prices, explaining that the values in the competition entry mistakenly included data from the original version of the contest rules. The explanation was accepted by the contracting authority, which then announced the results of the contest and invited the contestant to negotiate under the single-source procurement procedure.
But not everyone shared the contracting authority’s enthusiasm. The second-place contestant decided to appeal against the selection of the most advantageous work to the National Appeal Chamber. The appellant argued that both the Polish Public Procurement Law and the contest rules clearly required entries to indicate the maximum planned cost of the works carried out on the basis of the competition entry. And as the winning contestant had indicated a maximum planned total cost inconsistent with the contest rules, in an amount exceeding the maximum value specified in the rules, the contracting authority had to find that the entry did not comply with the rules for the contest and should not be considered. The appellant added that no provision of law authorised the contracting authority to cure the errors in the contest entry, as the procedure for clarifying an entry cannot modify the entry.
The wording of the contest rules
Contest rules are considered to be the equivalent of terms of reference prepared and used in tender procedures. As in the case of tender procedures, contracting authorities are bound by the contest rules, and ignoring points of the contest rules is not legitimate. Thus, the contracting authority cannot arbitrarily interpret the contest rules, giving them different meanings than those implied by the regulations. As the National Appeal Chamber rightly pointed out, this is particularly reprehensible if it occurs after submission of contest entries and relates to the designated criteria for evaluation by the contest jury.
An essential element of the contest rules is the need to indicate the maximum planned total cost of carrying out the works based of the contest entry. The Public Procurement Law mentions this institution three times. Art. 333(2)(4) states that the contracting authority must specify this value in the contest rules. Under Art. 347(2), the contracting authority must clearly and unequivocally specify the criteria for evaluating contest entries, taking into account the maximum planned total cost of carrying out works based on the entry. And Art. 351 indicates that participants in a contest must submit their entries with information about these costs. In the chamber’s view, it follows from these provisions that setting the maximum planned total cost of performing the works is not merely informative, but should be binding for both the contracting authority and the contestants.
What is the purpose of setting the maximum planned total cost of works?
As the chamber pointed out, the purpose of indicating these values in the contest rules is to inform the contestants of the contracting authority’s financial capabilities, i.e. the amount it plans to allocate for execution of the winning contest entry. Thus, this information provides guidance for contest participants in preparing their work, using proprietary solutions that will not result in exceeding this value, as a winning entry exceeding the financial capacity of the contracting authority would be of no use to it. Additionally, information about the maximum planned total cost of the work allows:
- Contestants to design a building with specific features most closely meeting the requirements of the contracting authority
- Contestants to hold the costs of implementing the project to the limits imposed by the budget allocated to it
- The contracting authority to obtain works that, within the performance costs, would be at a similar level and thus objectively comparable.
For these reasons, the contracting authority should be bound by the amount it specifies, at least during the contest phase. As the chamber pointed out, “The contracting authority must be aware that contest participants will use solutions in their entries which, if translated into specific works, will not significantly depart from the amount indicated in the contest rules. In the same way, the contest jury will also be bound by the value set by the contracting authority. Therefore, it will not be permissible to select a contest entry that significantly exceeds the contracting authority’s framework arrangements for the financial scope of work at the performance stage.” Also, the impossibility of making changes in the maximum planned total cost of execution of the works means that the contracting authority should not make any arbitrary interpretation of the contest rules communicated to the contestants, especially after submission of contest entries. As a result, both the contracting authority and the contestants should be bound by the wording of the contest rules, and each of them must act within the limits and framework of this document, also trusting that in the subsequent stages of the contest, the other parties will respect the same guidelines.
However, the situation will be different at the stage of awarding a public procurement contract, as then, in the chamber’s opinion, the contracting authority will not be bound by its own arrangements as to the maximum planned value of work to be performed. As the chamber explained, “It is obvious that after conducting a contest, as part of the negotiations, introducing changes and recommendations to the work in the course of the post-contest proceedings, as well as the financial conditions of the contracting authority itself, the amount of the costs may vary. However, this change is not possible after entries have been submitted, before the contest jury selects the best entry.” The chamber partly based its position on a commentary to the Public Procurement Law indicating that the framework nature of the quoted costs may change at the stage of the public procurement procedure, e.g. due to a significant increase in prices of materials, or due to the schedule or the nature of contractual risks specified by the contracting authority. However, this is allowed only at the stage of the public procurement procedure, subsequent to the stage of submission of contest entries.
Incorrect clarification of contest entry
Pursuant to Art. 348 of the Public Procurement Law, through the contracting authority, the contest jury may request an entrant to clarify its entry if that would be helpful for evaluation of the entry. However, the legal literature is unanimous that such clarifications may not lead to modification of the contest entry, unless the modification is trivial or due to an obvious mistake. Consequently, it is not permissible for a contest entrant and the contracting authority to negotiate on the merits of the solutions proposed in the work, especially if the participant has proposed substitute or alternative solutions with the aim of lowering the planned total costs of work. A reduction of the planned costs is allowed only after submission of the work and before selection of the best work, but such change may be made only if replacement or alternative solutions are proposed. A contrario, without these factors, a change in costs is not possible.
In view of the above, the chamber concluded that the contracting authority had infringed Art. 348 of the Public Procurement Law, as the change in costs made by the contestant could not be regarded as a minor change or correction of an obvious mistake. In particular, the chamber noted that the contracting authority could not have found that it was dealing with an obvious mistake if it had not obtained an explanation from the contestant. The mistake could not be obvious, since it was not due to any objective circumstances and was not possible to correct without consulting the contractor.
The contest entry should not be considered
If a contest entry does not comply with the Public Procurement Law or the contest rules, it should not be evaluated by the contracting authority (Public Procurement Law Art. 345(2)). According to the chamber, it is irrelevant whether the contracting authority recited these provisions in the contest notice or the contest rules, or omitted them. Indeed, it must be recognised that these provisions are mandatory, and therefore must be applied whenever one of the grounds stated there is present. In the chamber’s opinion, such grounds include that the contest entries were not assessed in accordance with the contest rules, and the estimated costs of execution exceeded the contracting authority’s financial capabilities. This is how to treat an entry that does not include information about the planned total cost of performing the work or whose value exceeds the amount indicated in the contest rules.
For these reasons, the National Appeal Chamber upheld the appellant’s arguments, invalidating the contest adjudication procedure and ordering a reassessment of the entries in accordance with the criteria set out in the contest notice and rules, with the exception of the winning contestant’s work, which turned out not to meet the requirements of the contest.
Cyprian Herl, Infrastructure, Transport, Public Procurement & PPP Practice, Wardyński & Partners