Economic operator’s change in a contract awarded in a public procurement procedure

One of the basic principles of the public procurement law is that “Contracts shall be awarded solely to economic operators selected in accordance with the provisions of this Act”. This principle is provided for in the Public Procurement Law of 29 January 2004, as amended, Art. 7.3 (the “PPL”) and epitomizes the essence, as we intuitively perceive it, of public procurement – namely the fact that the order should be carried out by an individually designated best economic operator, selected to comply with the requirements of both a specific contracting entity and the given undertaking. This principle translates also into the possibility of changing economic operators in contracts awarded in a public procurement procedure, including assignment of any rights, obligations, receivables and liabilities resulting from such contracts.

In the judgment of 21 October 2016, case ref. KIO 1893/16, the Polish National Appeal Chamber (the “NAC”) stated explicitly that: “The principle of awarding a contract to the economic operator selected in accordance with the binding law, as specified in the Public Procurement Law of 29 January 2004, Art. 7.3 (consolidated text: Journal of Laws [Dz.U.] of 2015 item 2164 as amended), taking into account (…) the rationality of binding laws, refers to the ban on assignment of rights or purchase of debts in favour of or by entities which do not participate in the public procurement procedure.” This thesis had already appeared several times in the NAC judicature, including among others in judgments in cases ref. KIO 330/16, 2816/15 and 2660/14. However, it should be examined in a more general context.

Until the amendment of 22 June 2016 to the Public Procurement Law and some other laws, any “essential” changes in contractual provisions with respect to tenders submitted by selected economic operators are forbidden, unless the contracting entity provided for the possibility of such changes in the contract notice or terms of reference and specified the conditions of such changes. This rule, presented in Art. 144.1 of the PPL, was supplemented with the rule provided for in paragraph 2: “Any changes made to a contract in violation of Paragraph 1 shall be invalidated.” Therefore, the PPL before the amendment of June 2016 was introduced, allowed for any non-essential changes, and neither the essential nor non-essential changes were defined.

The change of the economic operator – that is a change in parties – obviously cannot be assumed as insignificant,  however, in some instances it could be non-essential. For example this was the case when the economic operator was changed due to universal succession, like economic operator’s transformation within the meaning specified in the Code of Commercial Companies, or sale of the economic operator’s enterprise in whole due to which a new entity would become its owner.  In these case the nature of the change was rather formal than practical, as the requirements of selecting the entity as the economic operator were still fulfilled. In other words, the contents remained the same and only the form changed.

Additionally, in the case of selling the enterprise, as it is provided for in the Polish Civil Code, Art. 554, the first sentence: “The acquirer of an enterprise or an agricultural farm shall be liable jointly and severally with the transferor for the obligations of the latter connected with the running of the enterprise or the agricultural farm except for the case where, at the time of the acquisition, the acquirer did not know about those obligations in spite of due diligence on his or its part.” This means that the selected economic operator is not exempted from the debt, but that an additional entity is jointly and severally liable for the debt. Thus, this change is indeed a change in parties but its nature does not conflict with the PPL, Art. 7.3 (vide: https://www.uzp.gov.pl/baza-wiedzy/interpretacja-przepisow/opinie-dotyczace-ustawy-pzp/umowa-w-sprawie-zamowienia-publicznego/dopuszczalnosc-zmiany-wykonawcy-zamowienia-publicznego, rev.: 08.05.2017).

Currently, after the amendment of 22 June 2017 to the PPL entered into force, the contents of the law provide explicitly for the acceptable change of the economic operator in the contract awarded in public procurement procedure. The current version provides as follows: “Any changes to the concluded contract or framework contract with respect to a tender on the basis of which an economic operator was selected are forbidden, unless one of the following circumstances occur (…) where the economic operator awarded with the contract is to be replaced by a new economic operator:

under contractual provisions referred to in sub-paragraph 1,

due to merger, division, transformation, bankruptcy, reorganisation or purchase of the economic operator of his or its enterprise, provided that the new economic operator fulfils the procedure participation conditions, there are no grounds for excluding the operator from the procedure and no other essential changes to the contract are caused,

due to takeover by the contracting entity of the economic operator’s liabilities towards his or its subcontractors.”

Hence, the previously indicated instances of economic operator change caused by transformation or transfer of ownership of the enterprise – which should be deemed as non-essential – are now explicitly included in Art. 144.1.4 of the PPL and their admissibility and compliance with law is clearly confirmed.

Non-essential changes are still allowed – including the “non-essential” change of the economic operator. Moreover, the essential changes are clearly determined in Art. 144.1.5 of the PPL: “Any changes to the concluded contract or framework contract with respect to a tender on the basis of which an economic operator was selected are forbidden, unless one of the following circumstances occur (…) changes, regardless of their value, are not essential as defined in paragraph 1e”. However, the cited paragraph 1e in point 2.d provides that: “A change to the concluded contract or framework contract is deemed essential if (…) it consists in replacing the economic operator awarded with the contract with a new economic operator in instances different than enumerated in paragraph 1.4”. Hence, it can be deduced that any change to the economic operator other than the one referred to in Art. 144.1.4 of the PPL constitutes an essential change, therefore, is inadmissible in accordance with Art. 144.1.5 of the PPL.

It is worth noticing that in the original version of Art. 144 of the PPL, allowed were only those changes to the contract which were explicitly provided for in the contract notice or terms of reference, whereas the changes “non-essential” in their nature were not generally and unconditionally allowed. The word “essential” was not used at all to describe acceptable changes. Therefore, still in the judgment of the Polish Supreme Court of 13 June 2004, case ref. V CK 97/03, it was generally determined that the lack of possibility to change the economic operator after concluding the contract (where the change had not been provided for in the contract notice or the terms of reference) resulted from the very nature of public procurement.

To conclude, it should be noted that Art. 1.145 of the amendment of 22 June 2016 to the PPL (which includes the new wording of Art.144 of the PPL) entered into force already in July 2016, however, in accordance with its Art. 19.1: “The previously binding provisions shall apply to all public procurement contracts concluded prior to entry into force of this law [the amendment – author’s note]”. Nevertheless, in instances explicitly provided for in Art. 19.3 “Allowed are  changes to public procurement contracts concluded prior to entry into force of this law [the amendment – author’s note] or concluded as a result of the public procurement procedure initiated prior to entry into force of this law [the amendment – author’s note]”.

Klaudia Albercka-Toczko, legal adviser apprentice