Doing Business with Poland^{Footnote 1} – Public Procurement

At the end of 2015, the Polish Public Procurement market was worth $39.4 billion, accounting for 6.5% of Poland’s Gross Domestic Product. Given that every year the value of the market exceeds $34 billion, experts view the sector as a stable one with a positive outlook for the future. According to the overall statistics, around 142,000 public procurement orders were placed in Poland in 2015.

The Polish Public Procurement market is closely linked with European Union (EU) funds. For the financial framework for the years 2014-2020, Poland will receive around EUR 82 billion from the Cohesion Fund. Around EUR 27 billion has been assigned to the Infrastructure and Environment Programme to support the development of infrastructure, transport networks, the energy sector and the environmental protection measures. Nearly 40% of the funds have been put at the disposal of the local governments. The Polish Public
Procurement market is expected to experience rapid growth in the years to come.

Price as the deciding criterion

A long criticized feature of the Polish Public Procurement market is that in most cases the lowest price offer is the winning bid, which often poses problems once a project is launched. Under a recent amendment (2016) to the Public Procurement Act, the “lowest price” criterion cannot account for more than 60% of the weight. Therefore “the most advantageous bid” must be judged by the criteria other than the price. Reducing the weight of the price criterion eliminates bidders that offer an abnormally low price. It is expected that underlining the importance of quality in the Polish public procurement market is a good direction which will contribute to the development of the market.

Main actors

The main actors of the Polish Public Procurement system can be divided into four main groups:  legislators, contracting authorities, bidders / contractors and supervisory bodies.

Legislators

The legislative power in the Polish legal system is vested in Parliament, which is divided into two houses – the Sejm (the lower house) and the Senat (the upper house). Parliament has the exclusive competence to pass generally applicable acts (ustawy), yet minor and technical issues may be governed by regulations (rozporządzenia), issued by the Council of Ministers, the Prime Minister or Ministers. As Polish law must be compatible with the law of the European Union (Treaties, Directives, EU Regulations and other laws), it is very important to recognize the role of the EU legislator in the process of making laws in Poland.

Contracting authorities

The contracting authorities are mainly public authorities, such as:

The Government and its subordinate bodies: this group includes almost all central administration bodies;

Local government units and their subordinate bodies as well as associations of those bodies. This group accounts for almost 2/3 of all contracting authorities in Poland. Local governments are divided into:

i. 16 voivodeships (województwa), responsible for, e.g.: education, environmental protection and transport infrastructure of supralocal importance;
ii. 380 poviats (powiaty), responsible for, e.g.: managing certain hospitals, theatres, libraries and some types of public roads;
iii. 2478 municipalities (gminy), responsible for all the tasks not within the exclusive competence of the two types of local government units set out above, i.e. most schools, public roads, basic sports infrastructure etc.

Other entities, such as courts, universities, the Social Security Institution, the National Healthcare Fund (the entity responsible for financing the public healthcare system) and other bodies and agencies classified in the broad public sector category. As a rule, commercial companies controlled by the State Treasury are also obliged to comply with the public procurement procedures.

Bidders

Any individual, corporation or an entity not having a legal personality can submit bids and apply for a public  sector contract in the contract award procedure, provided that it has the capacity to perform the contract. This also applies to foreign investors.

Some bidders may be excluded from the bidding process by law. This applies e.g. to entities whose liquidation is pending or those insolvent, having overdue tax payments or managed by persons sentenced for certain offences (bribery, tax offence).

Bidders may jointly bid for a public contract, e.g. as a consortium or civil-law partnership. It is also possible to rely on subcontractors for the purpose of carrying out the contract; the law provides for some specific rules on subcontracting.

Supervisory bodies

The main public body responsible for supervising the Public Procurement market in Poland is the Governor of the Public Procurement Office. The Governor drafts regulatory instruments relating to public procurement, ensures compliance with the rules of the procurement system, in particular supervises the contract award process and audits the procurement procedures.

The other relevant body is the National Chamber of Appeal (NCA), competent to review appeals filed in the contract award procedure.

Public procurement procedure

The public procurement procedures, governed by the Public Procurement Act of 29th January 2004 apply to a vast majority of public sector orders. However, some contracts are excluded from public procurement. This applies mainly to:

a) contracts whose value does not exceed the PLN equivalent of EUR 30,000 net;
b) contracts for delivery or services solely for the purpose of research or experiments;
c) certain contracts of the National Bank of Poland and the National Development Bank (Bank Gospodarstwa Krajowego);
d) contracts labelled as “confidential” or “strictly confidential”.

Public procurement services are divided into priority and non-priority services. This division is of importance due to some less formalized process of contracting nonpriority services.

The procedure can be simplified if the value of the contract does not exceed certain thresholds set in the EU directives. In the majority of cases the threshold is EUR 135,000 for a contract for goods or services and EUR 5,225,000 for construction works. For utilities contracts and contracts in the fields of defence and security the thresholds are EUR 418,000 and EUR 5,225,000 respectively.

Main rules

The contracting party is required to conduct the process in a non-discriminatory way and to provide grounds for fair competition. In general, the process is open to the public; the basic information is published in the Public Procurement Bulletin and for contracts worth in excess of the thresholds set in the EU Directives in the Official Journal of the European Union.

The contracting authority sets out the goods/ services to be supplied under the contract in terms of their technical and quality features, in accordance with the relevant Polish or European standards and if the contract involves construction  works, provides the design documentation and the technical specification of the execution and handover of the project. The value of a contract is set based on the contractor’s total estimated fee, net of VAT.

The contracting authority is obliged to prepare the Terms of Reference (the “ToR”, Pol. Specyfikacja Istotnych Warunków Zamówienia, SIWZ), with the most important information about the contract, i.e. the name and address of the contracting authority, the specific contract award procedure, the goods/ services to be supplied, the eligibility conditions etc. In general, any bid must comply with the ToR. The bidder must set out gross prices in the bid, i.e. prices including VAT and excise tax, if applicable.

In most cases, the contracting authority is entitled (and sometimes obliged) to demand that the bidders pay a special deposit (Pol. wadium) to ensure the proper participation of the bidders in the process. The deposit is calculated with reference to the value of the contract. Furthermore, the contracting authority may request certain documents and certificates confirming that a given bidder is eligible to take part in the process.

Bidders and other parties who have an interest in winning a given contract or have suffered a loss as a result of the contracting authority’s violation of the PPA are entitled to legal remedies. The available legal remedies are an appeal filed with the National Chamber of Appeal and a court of appeal.

Types of procedures

The two main types of public procurement procedures are:

• an open tender - a procedure whereby any bidder may submit a tender in response to a public contract notice; open tenders accounted for 76% of the overall number of tenders in 2015;
• a restricted tender - a procedure in which a bidder may submit a request to participate in response to the publication of a contract notice and only the bidders invited by the contracting authority may submit their bids.

The other types of procedures apply only provided that certain requirements are met. These procedures are:

• negotiated procedure with publication of a contract notice - a procedure whereby, following the publication of a contract notice, the contracting authority invites bidders admitted to the procedure to submit preliminary tenders without quotations, holds negotiations with them, and finally invites them to submit tenders;
• competitive dialogue - a contract award procedure whereby, following publication of a contract notice, the contracting authority conducts a dialogue with the bidders of its choice and then invites them to submit tenders;
• negotiated procedure without prior publication of a contract notice - a contract award procedure whereby the contracting authority negotiates the terms and conditions of a public contract with the bidders of its choice and then invites them to submit tenders;
• single-source procurement - a procedure whereby the contracting authority awards a contract following negotiations with only one bidder;
• request for quotations - a procedure whereby the contracting authority addresses a request for quotations to the bidders of its choice and invites them to submit tenders;
• electronic auction - a contract award procedure whereby bidders use an online form to supply the required data through direct connection with the website to offer new prices that have been revised downwards (bids) which are then automatically ranked;
• innovative partnership - a procedure whereby in response to a public invitation to tender, the contracting authority invites bidders to submit preliminary offers, negotiates the terms and conditions and then invites bidders to submit offers for the development of innovative products, services or works which are not available on the market.

Defence and Utilities

There are several differences regarding the public procurement in the fields of defence and security. Apart from different contract value thresholds, contracts in these fields may be applied for by economic operators established in one of the EU or the European Economic Area member states, or a state with which the European Union or Poland has entered into an international agreement concerning these contracts. However, the contracting authority may decide in the contract notice that such contracts may also be awarded to economic operators from other countries. There are also several restrictions regarding, e.g. offences committed by individuals in their management capacity at the bidders and the protection of confidential information.

Different procedures also apply to the “utility contracts”. Utility contracts are contracts awarded to carry on one of the following activities:

• exploration for or extraction of natural gas, oil and their natural derivatives, brown coal, hard coal and other solid fuels;
• operation of airports or maritime or inland ports and their provision to carriers by air, sea or inland waterways;
• development of networks intended to provide services to the public in connection with the production, transport or  distribution of electricity, gas or heat, or the supply of electricity, gas or heat to such networks, or the operation of such networks;
• development of networks intended to provide services to the public in connection with the production or distribution of drinking water, or the supply of drinking water to such networks, or the operation of such networks;
• operation of networks providing services to the public in the field of transport by railway, automated systems, tramway, trolley bus or cable;
• operation of networks providing services to the public in the field of transport by bus;
• provision of postal services.

Utility contracts are conducted in the areas of particular importance from the view of the state policy. Therefore, certain peculiarities compared to the general procedures apply. The main differences regard the choice of the type of procedures, a special eligibility system for bidders and certain other requirements such as, e.g. the confidentiality of the documents and information processed during the contract award procedure. Furthermore, in the case of a supply contract, the contracting authority may reject a bid if the proportion of products originating in the European Union member states or states with which the European Community has concluded agreements on equal treatment of entrepreneurs is less than 50%, if this condition is set forth in the ToR.

Contact

Embassy of Canada in Poland
Tel.: (48 22) 584 3360
Email: wsaw-td@international.gc.ca
Website: www.canada.pl; www.tradecommissioner.gc.ca/pl