Talking tough on tenders

 The Ministry of Regional Development drew up the latest amendment to the PPL in mid-December. This took place in somewhat of a hurry, in order to make the PPL compliant with EU directives on time, which the previous Sejm failed to do in its last term.

The main objective of the amendment is to simplify the tender procedures and make the absorption of European funds more effective. Recently, the Ministry claimed that the value of signed agreements for financing projects, on the basis of which recipients will complete their projects, amounts to 51 percent of all the funds given to Poland for 2004-2006. However, the value of the money actually paid out is a mere 4.4 percent of the total budget. This discrepancy is largely caused by long-lasting tender procedures, especially in the case of huge infrastructure investments.

Crucial changes

One of the most important changes is increasing the value of those procurements that fall under the law, from EUR 6,000 (zł.23,177) to EUR 60,000 (zł.231,770). In practice, this means that if, for example, an overhaul of a school building is valued at less than EUR 60,000, a tender does not have to be organized. At the same time, the amendment requires that an institution organizing tenders worth between EUR R3,000 (zł.11,589) and EUR 60,000 should work out its internal regulations, launch a commission and publish details about the tender.

"The procurement law is very complicated. The same procedures apply to procurements worth tens of thousands of złoty and millions of złoty," says Tomasz Nowakowski, an Undersecretary of State in the Ministry of Regional Development and one of the authors of the amendment. "Also, a small company often cannot afford to have a specialist dealing with the tender proceedings. Thus, we decided to introduce a few modifications that would facilitate the proceedings of the procurement law."

Fall in line

Nowakowski explains that the amendments are to encourage small- and medium-sized companies to apply for EU funds. At the same time, procurements under EUR 60,000 will not be left out of supervision. "Procurements worth from EUR 3,000 to EUR 60,000 will have to be put in a central informative directory on the website of the Public Procurement Office. After choosing one company in its procurement, the offerer will have to reveal the winner and the criteria be applied."

To simplify the procedures even further, another regulation is to be introduced saying that in connection with procurements worth more than EUR 60,000, but not exceeding EUR 154,000 (zł.594,882), a basic procedure will be applied that will be fully in line with EU directives.

Devil in the details

Another amendment that had been expected by entrepreneurs is the imposition of a duty on offerers to call for bidders to complete or correct documents for a tender if any errors are discovered. So far many good offers are disqualified due to simple, formal oversights.

"Very often it is the formally correct offers that win, and not the one that is actually best prepared and content related," admits Nowakowski.

"We have faced such situations and we were helpless. For example, a company was excluded from a tender due to a lack of a seal on a signature on a page," says the head of the offer preparation department at Mostostal Warszawa, Paweł Cieszkowski.

In order to facilitate investments, the new amendment also says that complaints concerning the statements of arbitrators should be processed within one month, not three as had been the case previously.

 "Those changes are definitely positive. They will shorten the time of considering the complaints on the arbitrators' decisions and it will allow the bidders to correct errors on the offerer's request, so that minor mistakes are not the reason for rejecting the offers. These changes definitely simplify and shorten tender procedures," says Jerzy Werle, the general director of Warbud SA, one of Poland's biggest construction companies.

Tough tenders

The Polish public procurement legislation dates back to 1994 when the first Act on Public Procurement was adopted. The Act was amended a couple of times in the following years, mainly to clarify its rules and definitions, broaden the scope of applications and make the procurement process more transparent. Although its authors talk about it in terms of a success, and the procurement sector became one of the driving forces of the Polish economy, the common opinion of the law's effectiveness is negative.

Corruption is regarded as inherent in the procurement sector (although those involved are not very eager to talk about the details), and entrepreneurs mention a number of absurd situations. Cieszkowski from Mostostal, who is very much convinced that the offerer has the power to decide on who is going to take part in a tender and that a great part of procurements is manipulated, draws attention to the mechanisms delaying the investments:

"Bidding companies, as in the case of tenders in connection with the Warsaw metro, that realize that they have no chance to win a tender can block an investment endlessly."

Such actions operate within the law and, according to the regulations, bidders can look into each others' offers after they are opened. This creates scope for lawyers hunting for mistakes in other offers and if any doubts surface a legal team can immediately dash off a complaint to arbitrators. The problem is that processing the claims takes time, which blocks the signing of a contract with the winner.

The long and winding road

Jerzy Werle of Warbud also highlights the problem of never-ending tenders: "The procedure of putting in claims blocks investment for many months." He also complains that in public tenders the offers and the contracts are denominated in euro. "The offerer does not guarantee any protection to the bidder against currency fluctuations," he says.

Foreign bidders can also have a hard time in Polish tenders. Often they must present documents that they don't have in their own countries e.g. construction workers often have to prove their Polish construction qualifications. Werle claims that the Polish estimation system is also unfamiliar for many foreign firms.

It seems that Polish Procurement Law is being formed and improved in practice. From the very beginning it has raised controversy among entrepreneurs, and after 10 years it is still not working efficiently, but the latest amendment should go some way towards smoothing the rocky road for firms in the tender process.