The railway company X carrying out modernization work co-financed with the EU funds has put delivery of elements for building a traction system out to tender.
In the tendering proceedings, the two contractors A and B put in their bids.
The price offered by B was by 30% lower than the price offered by A. In the opinion of contractor A, the price offered by B was grossly low. The ordering party called on B to give an adequate explanation in order to examine accusations made by A. However, having analysed the explanations of B, the ordering party recognized that the price offered was not grossly low.
As a consequence, the ordering party X chose the bid of B as the most advantageous.
How in the situation presented can the contractor A question the result of the tender?
The answer is given by:
Piotr R. Graczyk
Public procurement procedure is regulated by provisions of the Act of 29 January 2004 Public Procurement Law [PPL].
By virtue of article 89 section 1 subsection 4 of the PPL, an ordering party rejects a bid when, inter alia, it contains a grossly low price compared to the object of a contract.
The Act does not define the concept of a grossly low price but in judicature of the National Appeals Chamber [NAC] it is assumed that “the price grossly low compared to the object of a contract will be the price differing from the real value of such object, and the difference will not be justified by objective reasons allowing a given contractor to carry out such contract without financial losses for a price lower than the market price. So a grossly low price is an unrealistic price disproportionate to the scope and costs of work making up a given object of a contract aimed at carrying out the contract below real costs thereof and in this respect it is not a market price, i.e. generally does not exist on the market where prices are determined by the general economic situation prevailing in a given trade and its business environment, technological and organizational progress and presence and functioning of fair competition of entities rationally operating.” (cf judgment of NAC of 4 July 2013, file ref KIO 1441/13).
Since in factual circumstances as described above, the ordering party X had already chosen the bid of B as the most advantageous, the contractor A – if the price is considered to be really grossly low – as an entity entitled under article 179 section 1 of PPL could lodge an appeal against the ordering party’s decision to choose the bid of contractor B and failure to reject the bid made by B in spite of the fact that it contained a grossly low price.
Moreover, it should be pointed out that the ordering party is obligated under article 7 section 1 of PPL to prepare and follow the public procurement procedure in the way guaranteeing fair competition and equal treatment of contractors.
Undoubtedly, the public procurement procedure can be described as a market confrontation of goods or services offered by entrepreneurs, and so it should be assessed also in the light of the law on combating unfair competition.
A grossly low price offered by one of the tenderers is aimed at gaining a competitive advantage by artificial reduction in price in relation to the real market value and can be assessed as an act of unfair competition as described in article 15 section 1 subsection 1 of the Act on combating unfair competition [ACUC] (“making access to the market difficult for other entrepreneurs by selling goods or services at a price below the cost of production or provision thereof or reselling them at a price below the cost of purchase in order to eliminate other entrepreneurs”). Unless conditions of article 15 section 1 subsection 1 of ACUC are not met, such behaviour should be assessed paying special attention to the general clause contained in article 3 section 1 of ACUC which provides that an act of unfair competition is an act against the law or decency if it jeopardizes or violates the interest of another entrepreneur or customer.
The behaviour of contractor B referred to above can be assessed as an act of unfair competition giving grounds for declaring the tender null and void.
Therefore, in an appeal to the National Appeals Chamber, A might accuse the ordering party X of having violated provisions of article 90 section 3 of PPL as well as article 7 sections 1 and 3 in junction with article 89 section 1 subsection 4 of PPL and petition for invalidation of the act of choosing the most advantageous bid, repeat examination of the bids submitted and rejection of the bid submitted by the company B.
However, it should be noted that a sine qua non for lodging an appeal on account of violation of article 89 subsection 1 of the PPL is that the value of a contract exceeds the amounts specified in the regulations issued under article 11 section 8 of PPL (i.e. in the Regulation of the Prime Minister on the value of contracts and tenders on which the obligation to circulate announcements to the Publications Office of the European Union is dependent). Otherwise, an appeal may be lodged only against the acts provided for in article 180 section 2 of the PPL.