In the following article, we discuss crucial applicable problems concerning security in public tender. We mention to issues that have not been resolved uniformly over the years in KIO case law. We indicate which solutions should be utilized by the contractor to minimise the hazard of negative consequences in the tender.
Act Public procurement law was passed in January 2004. Since then, it has been amended respective times. The subsequent amendments to the Public Procurement Law introduced by the legislator have 1 objective: to simplify the tendering procedure and to increase access to the public procurement market. However, under public procurement law, it is possible to separate the categories of institutions characteristic of this branch of law, which have been included in the PZP Act from the very beginning and have remained unchanged until now. 1 specified institution is simply a bond. Although the issue of safety in public procurement is as old as the law itself, it inactive raises crucial applicable doubts.
As is known, the public procurement procedure is characterised by considerable formalism. Many errors made by the contractor in the course of the procedure can then be corrected by repeating, supplementing or clarifying the submitted document. However, the safety errors are peculiarly severe for the contractor. In principle, the Public Procurement Law does not supply for a procedure for repairing them. Where the safety has not been lodged or has been lodged incorrectly, the contracting authority shall reject the contractor's offer pursuant to Article 89(1)(7b) of the Public Procurement Act.
Obligation to lodge a security
Pursuant to the law, the transfer of the safety is the work of the contractor in all proceedings with a value above the alleged EU thresholds. In national proceedings (with a value below the EU thresholds), the request for a safety from economical operators was left to the contracting authority's decision. The Contracting Authority may besides waive the request for a safety in sectoral procurement (Article 138c(1), point (3) Act pzp). Ordering can't ask for a deposit from economical operators in free-hand procedures and in the procedure of asking for a price.
Tender bond — security
The Contracting Authority shall find the amount of the safety not exceeding 3 % of the contract value. In practice, in the vast majority of cases, contracting authorities accept a maximum or akin maximum bond. In the margins, it should be mentioned that contractors at the phase of the formulation of the tender do not know the value of the contract calculated by the contracting authority, which is only given erstwhile the tenders are opened. cognition of the amount of the deposit can so be utilized by economical operators to forecast the likely value of the contract. And although the amount which the contracting authority intends to allocate to the performance of the contract may be different from the value of the contract, these are usually akin values. In this state of affairs, the amount of the bond itself can tell the contractor much about the value of the contract accepted by the contracting authority.
Forms of bonds
Public procurement law provides that a safety may be lodged in:
money;
guarantees a bank or cooperative warrant of a savings and credit bank, but that the warrant of a bank is always a money guarantee;
bank guarantees;
insurance guarantees;
guaranteesawarded by entities referred to in Article 6b(5)(2) of the Act of 9 November 2000 on the creation of the Polish Agency for Enterprise improvement (Journal of Laws of 2018, items 110, 650, 1000 and 1669).
Deadline for the deposit
The safety should be lodged by the contractor at the latest within the time limit set for the submission of tenders. However, no provision of law prohibits the contractor from prior depositing and the contractor can so lodge a safety even before the deadline for submission of tenders. It should besides be noted that where a safety is lodged in the form of a bank warrant or guarantee, the date of issue of that paper may be a date earlier than the time limit for submission of tenders. You gotta remember that the date on which the safety was lodged will be considered to be the date on which the bank warrant or warrant was lodged with the contracting authority in the manner specified in the specifications of the essential terms of the contract and not the issue of the safety document.. Importantly, if the contractor is always entitled to advance deposit, the contracting authority may not effectively require the economical operators to lodge a safety before the expiry of the time limit for submission of tenders. Where a specification of the essential terms of the contract would require a safety to be lodged before the time limit for the submission of tenders, specified a provision should be regarded as non-binding economical operators as contrary to the mandatory regulation of law (i.e. contrary to Article 45(3) of the Law).
Addition of the bond
In the procurement procedure documents submitted by the contractor shall in rule be supplemented by a security. The standard set out in Article 26(3) of the Law provides that where the contractor has not made the required declarations or documents, or where the statements or papers made by the contractor contain errors, the contracting authority shall invitation the contractor to complete the security. So it's reasonable to ask, whether the safety as well as the statements and papers deposited by the contractor is supplemented under Article 26(3) of the Act.
First of all, it should be noted that no provision of the Public Procurement Law prohibits the contracting authority from calling the contractor to supplement the bond, as no provision prohibits the contractor from submitting to the contracting authority a supplemented bond. However, it is claimed that The Public Procurement Law Act does not contain a provision which would expressly licence the completion of the bond. In particular, the anticipation of replenishing the safety is not provided for in Article 26(3) of the Act above, which is the basis for the contractor to supplement the documents.In this state of affairs the view that the bond is not replenished is clearly preserved.
As stated by the National Appeal Chamber in its judgement of 6 December 2017, ref. KIO2466/17: recipe Article 89(1)(7)b Act pzp, does not let the invalidation of the defective warrant paper submitted. If the provision of Article 26(3) of the Law of the General Court were to apply here, then, as in Article 89(1)(2) of the Law of the General Court, the legislator should have included the wording ‘subject to Article 26(3) of the Law’, which he did not do. Thus, assuming the rationality of the legislature, the home took the view that even in a changed legal reality, the safety paper shall not be supplemented. Similarly, in the judgement of of 6 June 2017, act No KIO 1046/17, National Chamber The appeal raised thatthe provision of Article 89(1)(7)b of the Act does not licence the invalidation of the defective warrant paper lodged.
As can be seen from the above, the safety paper is not to be supplemented. Where the safety paper submitted by the contractor is incorrect or not submitted within the time limit, the contractor's tender shall be rejected pursuant to Article 89(1)(7b) of the act. Even if the contractor complies with all the conditions for participation in the procedure laid down by the contracting authority and is not excluded and its tender is the most favourable in accordance with the criteria adopted for the evaluation of tenders, the contractor's tender will be rejected by the contracting authority anyway due to the safety irregularities.
The absence of the anticipation to supplement the safety paper causes the contractor's bid to be rejected on the basis of Article 89(1)(7b) of the act pzp besides in case the contractor actually secures his deposit offer within the time limit for submission of tenders (e.g. buy out bank or insurance guarantees), But he won't be joining the bid document. The correct and timely issue of the safety paper cannot be completed by the contractor.
Explanation of the safety content
Next, it must be analysed whether the safety paper can be explained by the contractor in the course of the procurement procedure. In the Public Procurement Law, the institution of explanations appears twice. According to Article 26 paragraph 4 of the Public Procurement Act, the contracting authority shall, within the time limit set by it, request clarifications on the statements or papers referred to in Article 25(1). By contrast, according to the wording of Article 87(1) of the Public Procurement Act, in the course of the examination and evaluation of tenders, the contracting authority may request economical operators to clarify the content of the tenders submitted.
Cited above Article 26 paragraph 4 of the Act pzp relates to papers referred to in Article 25(1) of the Public Procurement Act, i.e. papers and statements submitted by the contractor to confirm the fulfilment of the conditions for participation in the procedure, the absence of grounds for exclusion and confirming that the object of the contract offered complies with the requirements laid down in the law. The safety paper does not belong to any of the abovementioned categories of papers and is so not a paper referred to in Article 25(1) of the Act. W Consequently, the safety paper is not explained under Article 26(4) of the Law.
As regards the explanations submitted pursuant to Article 87(1) of the act, they may only concern the content of the tender of the stricto meaning, namely, in peculiar the tender form and, possibly, another substantive documents, which may be considered as the content of the offer of the strictto meaning. In the case law of the National Appeal Chamber, the view is that the safety paper does not constitute the content of the offer. Thus, the warrant paper (guarantee, guarantee) cannot be explained by the contractor on the basis of Article 87(1) of the Act.
For example, in the judgement of 30 November 2016, KIO 2179/16 The Chamber concluded that: in the case of a safety lodged in the form of a guarantee, it is effectively lodged when, at the latest, the contracting authority receives the applicable paper and, inter alia, the terms of payment of the security, the warrant must give the contracting authority the same level of safety as the sum of cash paid into its bank account. Now. when the tenders are opened, the contracting authority must be satisfied that, in the event that there are grounds for retaining the security, the warrant amount will be paid in full. In addition, the warrant is simply a paper which is neither supplemented nor explained pursuant to Article 26(3) and (4) of the Law or Article 87(1) of the Law. Whereas the explanation of the paper itself, although acceptable, cannot be expanded, but alternatively should be carried out strictly.
The view that a safety paper may be the subject of an explanation of the contractor pursuant to Article 87(1) of the Law is in the case law of the National Appeal Chamber. As an example, the judgement of the National Appeal Chamber of 10 May 2011, No. 883/11, in which the Chamber stated that – it should be noted only that if the contracting authority had any doubts about the individual protection resulting from the content of the warrant in question, it was able to exercise the power referred to in Article 87(1) Act pzp (call to explain the content of the offer). Failure to do so shall in no case have adverse effects on the contractor.
As already mentioned above, according to the majority views of the jurisprudence and practice of public procurement law, the safety cannot be explained either on the basis of Article 87(1) of the basic Regulation or on the basis of Article 26(4) of the basic Regulation.
In the opinion of Capital Legal, the absence of a call for the contractor to explain the safety paper cannot be an effective basis for the plea of appeal to the National Appeal Chamber. On the another hand, a competitor's call for clarification of the safety paper may be raised as a plea in appeal to KIO. The questions concerning the mention to KIO are discussed in another articles published in the cognition base. The subject substance of the appeal to KIO is written on the blog “KIO appeal – to which you can appeal‘. We compose about the deadline for the appeal to KIO in the article entitled “Time limit for appeal to KIO – besides late for appeal‘.
The guarantor's message will not fix the defective bond
Another crucial issue related to the deficiency of the anticipation of clarifying the safety paper is the question of the recovery of the safety by a declaration made by the guarantor after the expiry of the time limit for the submission of tenders, i.e. after submitting the safety paper to the contracting authority. It is frequently the case that the contractor is aware that the safety paper obtained by him and submitted subsequently with the offer to the contracting authority is incorrect. In specified a situation, the contractor tries to liquidate the safety by obtaining the utilized declaration from the entity that issued the defective document. It should be noted that according to the views expressed in the case law, if the safety paper is incorrect, it cannot be validated by a subsequent declaration by the guarantor or guarantor. As the National Appeal Chamber stated in its judgement of 13 January 2017, No. KIO 2489/16: no uncertainty the defective warrant paper is simply a paper which cannot be supplemented by Article 26(3) of the Law or interpreted in its key elements by statements, which, according to KIO, besides concerns the statements of the guarantor bank.
Deposit by the consortium
Another crucial applicable problem related to the introduction of the bond shall be updated where a tender is submitted jointly by more than 1 contractor. Pursuant to Article 23(1) of the Act, economical operators may jointly apply for contracts. In specified a case, economical operators shall be obliged to appoint a proxy to represent them in the procurement procedure or to represent them in the procurement procedure and to conclude a public contract.
In practice, contractors jointly applying for a contract shall establish a consortium in which 1 of the contractors serves as the leader of the consortium. The consortium leader is besides a typical of the consortium to represent both the leader and the consortium members in the procurement procedure. In specified a case, the safety provided by the consortium in the form of a bank warrant or warrant shall be issued reasonably mostly exclusively to the leader of the consortium. The another economical operators applying jointly for a contract shall not be mentioned in the guarantee.
Against this background an highly crucial applicable question arises – whether the safety can only be issued as the leader of the consortium, or the safety is valid only if all members of the consortium are mentioned in the defective guarantee?
Over the years, the issue of a bond as the leader of a consortium in the case law of the National Appeals Chamber has been abrogated two equal and opposing views.
According to the first, the defective warrant can only be exposed to the leader of the consortium, so the members of the consortium request not be mentioned in it.
In order to confirm the above, it is argued that, in accordance with Article 23(3) of the Public Procurement Act, the provisions on the contractor shall apply mutatis mutandis to economical operators jointly applying for the award of contracts. In addition, according to Article 141 of the Act, the economical operator referred to in Article 23(1) (executors jointly applying for a contract) shall be jointly liable for the performance of the contract and for the provision of a safety for the appropriate performance of the contract. It follows, therefore, that the economical operators jointly applying for the award of the contract are liable as debtors of the joint undertakings for acts or omissions caused by any of the economical operators. Consequently, a payment request based on a defective paper issued only on 1 of the contractors jointly applying for a contract (e.g. the leader of a consortium) will be effective.
According to the second view, a defective warrant should be issued on all economical operators jointly applying for a contract (i.e. on all consortium members). The defective warrant issued only to 1 of the economical operators jointly applying for the contract is incorrect. The submission of specified a warrant shall consequence in the rejection of the offer made by the consortium.
Supporters of this view point out that Article 141 of the Public Procurement Act establishes solidarity between the members of the consortium, but it relates to the implementation phase (execution of the contract) alternatively than to the procurement stage. According to the general view of civilian law, joint and respective liability cannot be presumed, it must be clear from the regulation of law. No provision of the Public Procurement Law introduces the rule of joint and respective liability of consortium members to the contracting authority at the phase of the public procurement procedure. In particular, specified a provision is not Article 23(3) of the Law, which is simply a mention to the application of the rules and not a stand-alone basis for joint liability. As stated by the territory Court in Warsaw in its judgement of 10 September 2015 No XXIII Ga 1041/15, the transfer of the safety is correct if it gives the contracting authority the chance to effectively implement its claims in the event of circumstances justifying the retention of the security, due to the fact that it fulfils its safeguarding role. Where only 1 of the economical operators jointly applying for a contract is covered by a bank guarantee, the guarantor will be able to waive the payment of the warrant sum where the reasons justifying the retention of the bond be on the another side of the contractor. It cannot so be considered that the common offer has been decently secured by a security.
Although the issue under discussion has not been conclusively prejudged to date, in practice, the first of the views cited above is by far the majority, according to which a defective warrant can be issued only for 1 associate of the consortium.
The ultimate Court judgement of 15 February 2018, No. IV CSK 87/17 issued as a consequence of an appeal by the president of the Public Procurement Office, is peculiarly applicable in this context. The ultimate Court took the view that, from the point of view of the correctness of the deposit, it is not essential to indicate in its content the names (company) of all economical operators jointly applying for the contract. As a result, it must now be concluded that the defective guarantee, which only mentions 1 associate of the consortium in its content, is correct and that the submission of specified defective warrant cannot consequence in the rejection of the consortium offer.
However, it should be noted that this constitution remains valid unless the contracting authority has expressly stated in the specifications of essential contract conditions that the defective warrant should list all consortium members. In specified a case, the warrant should comply with the requirements of the contracting authority and mention in its content to all entities jointly applying for a contract.
Content of the defective guarantee
Another crucial issue from the point of view of the public tender is the minimum content of the defective guarantee. The Contracting Authority shall be entitled to hold the safety only in the circumstantial cases referred to in Article 46(4a) and (5) of the Act. Consequently, the safety lodged in the procurement procedure should be secured by all these cases. This is peculiarly crucial in relation to the safety lodged in the form of a bank guarantee, insurance warrant or guarantees. The question is, whether the safety paper should be mentioned in a literal manner in accordance with Article 46(4a) and (5) of the Public Procurement Act, in all cases where the contracting authority is entitled to usage the warrant (guarantee), or if it is adequate to mention to the abovementioned provisions without mentioning their content. In this respect, the jurisprudence of KIO is inactive not uniform.
In the judgement of 10 August 2016, No KIO 1363/16, The Board concluded that: the defective warrant is abstract and self-contained, i.e. independent of the existence, scope and validity of another obligation, including the underlying liability. This means that the liability of the guarantor and the powers of the beneficiary is solely determined by the content of the defective guarantee, which should be formulated in a precise, clear and interpreted manner. The content of the defective warrant must cover all the factors mentioned in Article 46(4a) and (5).For the effective safeguarding of possible claims by the contracting authority, it shall clearly indicate the contractor or economical operators jointly applying for the contract.
Thus, the National Appeal Chamber took a position according to which the safety paper should contain a literal mention to the grounds for the retention of the safety referred to in Article 46(4a) and (5) of the Public Procurement Law.
A completely different assessment of the minimum content of the defective guarantee stated the territory Court in Wrocław in its judgement of 11 July 2013, No. X Ga 189/13, taking the view thatthere is no request to quote the applicable provisions of the Public Procurement Law in the defective guarantee, it is permissible to mention to their numbers, but it is besides possible to mention to another paper in which the conditions for the retention of the safety are indicated, e.g. an appropriate fragment of the SIWZ. However, this mention must be clear, clear and without doubt.
In view of the crucial disunity of the case-law’s views as regards the minimum content of the safety document, special caution should be advised in this respect. The excessively narrow content of the defective warrant may origin the safety to not be considered effective by the contracting authority and consequently the contractor's offer will be rejected. On the another hand, the same effect may be the introduction of additional provisions and unnecessary reservations into the guarantee. In the opinion of Capital Legal, erstwhile obtaining a defective warrant in a public tender, it should be sought to include a literal repetition of Article 46(4a) and (5) of the Law.
Capital Legal Comment
The transfer of the safety is undoubtedly 1 of the most crucial activities to be performed by the contractor in the procurement procedure. As a general rule, the Public Procurement Law does not supply for a procedure for the contractor to liquidate the errors made erstwhile entering the bond. If the safety has been lodged incorrectly, the contractor's offer shall be rejected. At the same time, there are inactive many applicable doubts about the bonds, and the case law of the National Appeal Chamber is frequently not uniform.
You're moving for bid and you've got a safety problem?
If you submit an offer in a tender and have a legal problem related to the deposit, delight read our article. If, after reading the article, you inactive have doubts about the bond in the tender – delight contact our Chancellery. 1 of the main specialisations of the Capital Legal Law Office is public procurement law. We aid contractors compete effectively in public tenders.
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