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Acts of unfair competition in public procurement

APR

Compliance with the rules of unfair competition plays an important role in the public procurement procedure, both from the point of view of a contracting party and a contractor.

Significant aspects related to the issue of acts of unfair competition in the tender procedure will be presented on the basis of the current jurisprudence of the National Appeals Chamber.

An obligation to organise the tender procedure taking into account the principles of unfair competition

Article 7 of the Act on Public Procurement Law imposes on the contracting authority an obligation to prepare and conduct contract award procedures in a manner ensuring fair competition and equal treatment of contractors as well as in accordance with the principles of proportionality and transparency.

Contracting authority is in violation of the principles of unfair competition if the description of the subject of the contract is formulated in such a way that its conditions will be met by only one contractor, unless it is justified by real and necessary needs of the contracting authority that may not be satisfied in any other way.

It is not permissible that the contracting authority describes the subject of the contract significantly limiting the competition while the manner of performing the contract, other than described in the Specification of the Essential Terms of the Contract, would allow to achieve the same effect and, at the same time a greater number of contractors would gain access to the contract (cf. judgment of the National Appeals Chamber of 11 December 2017, file reference number KIO 2478/17).

Submission of an offer as an act of unfair competition

When preparing an offer for the public contract it should be borne in mind that in certain cases it may be considered to be an act of unfair competition, which, as a consequence, may be rejected by the contracting authority.

In addition to reasons for rejecting the offer such as non-compliance with the Act or the Specification of the Essential Terms of the Contract, art. 89(1) of the Act stipulates that the contracting authority rejects the contractor’s offer if its submission constitutes an act of unfair competition within the meaning of the provisions of the Act on combating unfair competition.

This is the case if the content or the manner of submitting an offer is contrary to the law or good practices or leads to a threat or violation of the interests of another entrepreneur or client. When deciding whether a specific offer may be qualified as an act of unfair competition, a reference should be made to the provisions of the Act on combating unfair competition.

What is important, acts of unfair competition may take the form of actions stipulated in specific provisions of the Act on combating unfair competition or result from the fulfilment of the general clause which is Art. 3 of that Act.

In general, circumstances such as price manipulation or manipulation of criteria for assessing the offer which are the basis for selection of a given contractor and clearly indicate unfair behaviour causing elimination of other entrepreneurs from the market (see judgment of the National Appeals Chamber of 23 January 2018, file reference no KIO 49/18).

It should be underlined that the contracting authority is obliged to reject any offer the submission of which constitutes an act of unfair competition, regardless of whether it affects the outcome of the public procurement procedure (see judgment of the National Appeals Chamber of 14 March 2017, file reference number KIO 373/17). Therefore, offers which could not be selected as the most advantageous ones will be rejected and the contracting authority must indicate which act of unfair competition we are dealing with and what it consists of in the circumstances of a given case (cf. the judgment of the National Appeals Chamber of 13 March 2017, file reference number 340/17).

The most common acts of unfair competition include:

  • offering grossly low price or even price dumping, i.e. offering goods or services below the cost of their manufacturing or purchase price,
  • indicating unrealistic guarantee periods or product shelf-life dates only to receive more points in one of the categories evaluated by the contracting authority,
  • providing false or misleading information about the offered goods or services
  • tender collusion to limit competition.

Next articles from the cycle “Acts of unfair competition in public procurement” will discuss acts of unfair competition which are the most common basis for rejection of a contractor’s offer based on art. 89(1)(3) of the Act on Public Procurement Law: