When establishing the conditions for participating in a contract award procedure, contracting authorities often face the dilemma of how to reflect the specific subject matter of the procurement without infringing the principle of proportionality. This task is even harder when the procurement involves specialised medical equipment, where improper servicing could put patients’ life or health at risk. Do such circumstances justify limiting the number of bidders seeking a contract? Yes, the National Appeal Chamber held in its ruling of 29 January 2021 (case no. KIO 3489/20).
Contractor turns to the National Appeal Chamber
An oncological hospital in Poland was seeking a contractor to provide servicing, repair and maintenance of medical equipment. With a view to the nature of the procurement, the contracting authority included in the terms of reference a special condition for participation in the procedure that a bidder seeking the contract must have at its disposal at least three persons holding current certificates or other documents issued by the producer of the equipment or an authorised representative. The contracting authority also included as a criterion for evaluation of offers that the contractor holds authorisation from the manufacturer of the devices to perform service work. A contractor holding such authorisation would receive 20 points for that item, and without it would receive 0 points.
One of the prospective bidders objected to these provisions in the terms of reference, and sought review of the terms of reference by the National Appeal Chamber (KIO). The appellant, which did not hold the required certificate, argued that no provision of law conditioned the servicing of medical devices on prior possession of documents issued by the manufacturer or its authorised representatives. By imposing such a requirement, the contracting authority essentially ceded the role of organiser of the tender to the manufacturer of the equipment, who could thus decide who could file an offer and who could not. Moreover, in the appellant’s view, whether a contractor held the manufacturer’s authorisation was irrelevant to the contractor’s actual capacity to perform the contract, as there are entities on the market who can ensure proper performance of the contract even though they do not hold certificates issued by the manufacturer of the equipment being serviced.
Contracting authority’s response
The contracting authority rejected the contractor’s view, arguing that its equipment was expensive and complicated, which was sufficient to require that the contractor providing servicing of the equipment had specialised knowledge on the construction and operation of the equipment. The contracting authority also argued that the quality and manner of performance of the service was directly connected with the correct and safe functioning of medical devices, while improper servicing could pose a threat to the health or even the life of patients or medical personnel. Thus in the contracting authority’s view, correct performance of the contract could be ensured only by a contractor holding certificates from the manufacturer of the devices in question.
Contracting authority may set a condition reflecting the special nature of the procurement
Addressing the appellant’s allegations, the chamber reasoned that if the professional qualifications and experience of the persons designated to perform the contract could have a significant impact on the quality of contract performance, it was justified to specify such requirements with respect to the contractor’s personnel. After all, any condition for participation in a tender to some greater or lesser degree reduces competition, because it is aimed at restricting the tender to entities capable of performing the contract. To justify this position, the chamber answered three questions:
- Was the degree of restriction of competition justified by the contracting authority’s needs?
- Was the condition for participation in the tender imposed by the contracting authority proportional?
- Did the condition have a significant impact on potential competition?
First, the chamber found that the restriction of competition was duly justified by the indicated needs of the contracting authority. The chamber pointed out that the subject of the procurement was the servicing of specialised medical equipment, of high quality, where the risk of improper operation could impact the life and health of patients and the safety of medical staff. As a cancer hospital, the contracting authority regularly diagnosed serious illnesses, and correct diagnosis influenced the selection of the most appropriate treatment methods, which was often a life-or-death matter for the patient. Consequently, the chamber found, “To ensure correct servicing of the equipment, it is essential that the servicing be performed by persons with the relevant experience and training at the appropriate level. This level can only be ensured by the manufacturer of the equipment or its authorised representative.”
Second, in the chamber’s view, the condition imposed by the contracting authority was proportional to the subject matter of the procurement, because it reasonably required contractors to ensure the availability of duly qualified service personnel, possessing qualifications confirmed by the manufacturer. The chamber found in this respect that while the legal regulations do not specify the qualifications that must held by persons servicing equipment, this does not prevent the contracting authority from setting minimum expectations in this respect, by imposing additional requirements appropriate to the devices it has purchased and uses. The chamber also stated, “Because specific manufacturers apply various structural and functional solutions in their devices, and introduce continual improvements known only to these entities, only persons having access to this unique knowledge, and thus training by the manufacturer of the equipment, are capable of carrying out such servicing tasks.” It is equally important that the knowledge held by such persons be up-to-date, and manufacturers organise periodic training with new information on the construction of the given device and modifications to particular models on the market.
Third, the chamber rejected the appellant’s arguments that the condition imposed by the contracting authority infringed the principle of equal treatment of contractors and fair competition. In the chamber’s view, this was a condition that could be fulfilled by the contractor itself or also potentially by entities lending the capacity of their staff under Art. 22a of the former Public Procurement Law (Art. 118 of the new law). The chamber also disagreed with the appellant’s claim that only two entities, closely affiliated with the manufacturer of the equipment, could meet the requirements imposed by the contracting authority in this case. This position was rebutted by the evidence in the procedure demonstrating that the manufacturer issues certificates to various contractors, not necessarily affiliated with the manufacturer, who successfully enter tenders organised by other contracting authorities from the healthcare sector.
Consequently, the chamber found that the condition for participation in the tender was not impermissible: “The contracting authority has a right to demand that the servicing of medical devices be entrusted to persons who in addition to the qualifications provided for in the regulations also possess the necessary knowledge and experience in servicing activities, confirmed by the manufacturer of the apparatus or its authorised representative.”
The criterion for assessment of offers did not refer to the attributes of the contractor
The chamber also rejected the appellant’s allegation that the criterion for assessment of offers referred to the attributes, or subjective characteristics, of the contractors. In the chamber’s opinion, the criterion in question was objective and strictly connected with the subject of the procurement, because it referred to the servicing activities which the contractor would perform in executing the procurement. The criterion was also undoubtedly qualitative, because servicing of devices by authorised personnel guarantees that the service is conducted under the supervision or with the qualitative approval of the manufacturer.
Apart from the nature of the criterion for assessment of offers, the National Appeal Chamber pointed out that it constituted only an expression of the contracting authority’s preference, but was not a condition that necessarily had to be fulfilled when seeking award of the public contract. As the chamber held, “With such specialised equipment, and given the risk incurred in connection with improper operation of the equipment, through this criterion the contracting authority values, and rates more highly, servicing provided by an entity holding servicing authorisation from the manufacturer.”
Cyprian Herl, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners