Can the same entity be the general contractor and a subcontractor in the same procurement?
The Public Procurement Law does not outright ban an entity from taking part in the same procurement proceeding as the general contractor and as a subcontractor for another bidder. But under certain circumstances this may be found to be impermissible and result in rejection of the offer.
Art. 82(1) of Poland’s Public Procurement Law provides that a bidder may submit only one offer in a public tender. This means that submission of more than one offer by one bidder will result in rejection of all of them (under Art. 89(1)(1) in connection with Art. 82(1)). This provision also refers to participation in a tender proceeding in the role of the general contractor as a partner in a general partnership and as a member of a consortium. But the situation is different for a subcontractor, because it does not submit its own offer in the proceeding.
The case law from the National Appeal Chamber has indicated that a situation in which one entity appears in the proceeding in different roles—as both the general contractor and a subcontractor—may raise doubts about the existence of true competition between the bidders. But it was also stressed that it does not follow from the regulations that this situation can be grounds for imposing negative consequences on either of the bidders.
The permissibility of the situation in which one entity submits an offer as the general contractor and also appears as a subcontractor in an offer by another contractor as a subcontractor bound to perform nearly the entire contract was the subject of an opinion issued by the vice president of the Public Procurement Office on 24 June 2015.
The vice president took the view that although the Public Procurement Law does not prohibit this configuration, its permissibility must always be analysed under the specific circumstances. This evaluation should be made in light of Civil Code Art. 58 and regulations on unfair competition. The guidelines concerning evaluation of offers set forth in the vice president’s opinion mainly refer to circumstances where the subcontractor is required to perform all or nearly all of the public contract. In cases where “standing in” for the true contractor is less obvious, the guidelines should be modified accordingly.
The first basis for finding it impermissible for a contractor to file a bid when it is also acting as a subcontractor for another bidder could be for the contractor’s action to be deemed invalid under Civil Code Art. 58 §1, which provides that an act in law is invalid if it is contrary to a statute or intended to circumvent a statute. Application of this provision in the context of a proceeding for award of a public contract is justified by the reference made in Public Procurement Law Art. 14, under which actions taken by the contracting authority and contractors in a procurement proceeding are governed by the Civil Code unless otherwise provided by the Public Procurement Law. Thus where performing an act in law using legally permissible institutions provided for by the Public Procurement Law (specifically the institution of subcontracting) brings about a legal situation the same as or very similar to an act prohibited by the regulations—i.e. filing more than one offer—the act in law should be deemed invalid under Civil Code Art. 58 §1. In that case the contractor’s bid will be subject to rejection under Art. 89(1)(8) of the Public Procurement Law, which provides that the contracting authority shall reject a bid if it is invalid under other regulations. The same sanction should be applied to the bid by the other contractor in which the same entity appears as a subcontractor, assuming that the contractor was aware that its subcontractor also intended to submit a bid as the general contractor.
In his opinion, the vice president of the Public Procurement Office indicated unfair-competition regulations as the second basis for rejecting offers involving the same entity as general contractor and subcontractor—particularly bid-rigging. Thus efforts to ensure that a public contract is awarded to a specific contractor are penalised as an act of unfair competition. Then it is necessary to prove that this situation results from an understanding between the two bidders seeking to have the contract awarded under specific terms or limiting or eliminating competition on the market (the definition of bid-rigging set forth in Art. 6(1)(7) of the Competition and Consumer Protection Act of 16 February 2007). But proving the existence of bid-rigging is not easy, because typically such arrangements are entered into in secrecy. Thus bid-rigging is often proved by reliance on indirect or circumstantial evidence.
It should be pointed out, by the way, that the doubts surrounding appearing in the same proceeding as the general contractor and as a subcontractor do not apply by analogy to combining the function of general contractor and an entity lending its capacity to another bidder. These two cases are distinctly different. (We discussed the possibility of lending capacity to several bids on the portal, here.)
In the opinion of the vice president of the Public Procurement Office, significant changes in the Polish Public Procurement Law on the issue of ensuring the competitiveness of contract award procedures where the same entity acts in different capacities in the same proceeding may be required by the EU’s new procurement directives, which the member states are required to implement by 18 April 2016. Specifically, under Art. 58(4) of Directive 2014/24/EU, “A contracting authority may assume that an economic operator does not possess the required professional abilities where the contracting authority has established that the economic operator has conflicting interests which may negatively affect the performance of the contract.”
Hanna Drynkorn, Infrastructure, Transport, and Public Procurement & Public-Private Partnership practices, Wardyński & Partners
