In today's "Tuesday Mornings for the Construction Industry" alert, we continue our discussion of the amended Public Procurement Law. As we noted in our previous article, the legislature has made a number of changes to the previously applicable regulations.
One such change is the introduction of regulations regulating public procurement contracts. This is intended to balance the positions of the parties, thus offsetting the contracting authority's stronger position . Previous regulations allowed contracting authorities to unilaterally shape contractual provisions, which often defined the parties' obligations in a disproportionate and restrictive manner, including shifting responsibility for most risks to the contractor, stipulating numerous contractual penalties, and failing to account for possible economic changes during the contractual relationship that would increase the contractor's costs of completing the contract. As a result, some contractors chose not to bid for public contracts or quote higher prices than they could actually bear, as these prices reflected the costs of the risks transferred by the contracting authority. Ultimately, shaping the contracting authority's position through unilaterally favorable contractual provisions significantly impacted the efficiency of public spending.
Pursuant to the content of the Justification of the draft Act (Parliamentary Paper No. 3624, 8th term), the amendment in this respect was also aimed at obliging the contracting authority to cooperate with the contractor in the performance of the subject of the contract, by directly articulating such an obligation in the provisions of the Act and increasing the transparency of concluded contracts.
The first of the legislature's objectives is primarily intended to be achieved by introducing prohibited contractual clauses (so-called abusive clauses) , which, within the meaning of the Act, include: (i) stipulating the contractor's liability for delay, provided that this is not justified by the circumstances or the scope of the contract; (ii) charging contractual penalties for the contractor's conduct not directly or indirectly related to the subject matter of the contract or its proper performance; (iii) stipulating the contractor's liability for circumstances for which the ordering party is solely responsible; and (iv) the possibility for the ordering party to limit the scope of the contract without specifying a minimum value or amount of the parties' performance. Additionally, the regulations define as mandatory contractual provisions, such as changes in remuneration, partial payments, advance payments, and the establishment of maximum performance security amounts.
Given the mandatory nature of the provisions introducing the discussed changes, it should be assumed that they should be beneficial to the contractor's interests . Significant restrictions have been imposed on the contracting authority in the formulation of contractual provisions, which should eliminate the contracting authority's dominant position, including the treatment of its interests as paramount. When formulating the provisions of public procurement contracts, their civil law nature cannot be overlooked, and therefore, such contracts should comply with the general principles applicable to contractual relationships concluded in business transactions outside the scope of public procurement, including balancing the interests of both parties.
The principle of balancing the positions of the contracting authority and the contractor, as expressed in the amended provisions of the Act, is undoubtedly implemented by the requirement for the parties to cooperate in the performance of the concluded contract (Article 431 of the Public Procurement Law). Cooperation between the parties to a contract is not new in Polish law and is regulated by civil law. Previously, the provisions of the Act indicated the direct application of the provisions of the Civil Code to matters not regulated by the Public Procurement Law. However, the introduction of a provision through the amendment that explicitly requires cooperation should be considered the establishment of a new principle in public procurement. A literal interpretation of this provision indicates its imperative nature, meaning that the parties cannot exclude the obligation to cooperate in a contract. Any contractual provisions that exclude, even indirectly, this obligation should be considered invalid.
Due to the vague wording of Article 431 of the Public Procurement Law, the scope of cooperation between the contracting authority and the contractor will require clarification case -by-case basis. The scope of the contracting authority's obligation to cooperate will be determined by the scope of services to which the contractor is obligated . At the same time, the scope of such an obligation will vary depending on the subject of the concluded contract. It will certainly be broader in construction contracts (where the contracting authority should begin cooperation at the initial stage of performance) than in the sphere of services or supplies, where such scope will undoubtedly be narrower due to the subject of the services resulting from the type of contract.
The principle of balancing the contracting parties in public procurement matters, introduced by the legislator, should certainly be approved, primarily because it obliges the contracting authority to also consider the contractor's interests when formulating contractual provisions. Furthermore, if this regulation is actually implemented, the contractor will not be forced to pursue legal action to evade the contracting authority's inappropriate demands, including unjustified contractual penalties, because such action by the contracting authority will be excluded at the contract signing stage as contrary to applicable law.
Next week, as part of the amendment to the Public Procurement Law, we will present to you the topic of out-of-court resolution of disputes arising in public procurement cases.
For those of you interested in the stages of the government's bill on the protection of the rights of purchasers of residential premises or single-family homes and on the Developer Guarantee Fund , we would like to inform you that the bill has been adopted by the extraordinary subcommittee appointed to consider this specific bill. Today, March 30, the Infrastructure Committee is scheduled to consider the subcommittee's report. We will certainly keep you informed of the outcome of this meeting.
This alert is for informational purposes only and does not constitute legal advice.
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