A bid bond is an institution that derives from the provisions of the Civil Code. The awarding entities are entitled to demand a deposit in order to secure the offer submitted by contractors. The tender guarantee is nothing more than a sum of money that the contractor is obliged to pay to the contracting authority or whose payment is to be secured in the event of certain circumstances.
The article was written in cooperation with the Partner Kancelaria Sadkowski i Wspólnicy. The following article has been prepared for you by legal advisor Michał Szczęsny
The Act of September 11, 2019, Public Procurement Law (hereinafter referred to as the “PPL Act”) contains a closed catalog of cases in which the contracting authority is entitled to retain the bid bond. This issue is regulated by Art. 98 sec. 6 of the Public Procurement Law, according to which:
The contracting authority seizes the bid bond with interest, and in the case of the bid bond provided in the form of a guarantee or surety, as referred to in Art. 97 sec. 7 points 2-4, occurs to the guarantor or surety, respectively, with a demand for the payment of a deposit, if:
1) the economic operator in response to the call referred to in Art. 107 paragraph. 2 or art. 128 sec. 1, for reasons attributable to him, did not submit the subjective evidence or the evidence in question confirming the circumstances referred to in art. 57 or article. 106 sec. 1, the declaration referred to in Art. 125 sec. 1, other documents or statements or did not agree to correct the error referred to in art. 223 paragraph. 2 point 3, which resulted in the inability to select the offer submitted by the contractor as the most advantageous;
2) the contractor whose offer has been selected:
- a) refused to sign a public procurement contract on the terms specified in the offer,
- b) has not brought the required security on due performance of the contract;
3) the conclusion of a public procurement contract has become impossible for reasons attributable to the contractor whose offer has been selected.
Above the provision therefore includes all cases where the contracting authority is both entitled and obliged to keep the bid bond.
One of the most common reasons for the seizure of a bid bond is the failure of the subject or subject contractors to submit evidence, the declaration referred to in Art. 125 section 1 of the Public Procurement Law, or other documents or statements, in response to the call under Art. 107 paragraph. 2 or art. 128 sec. 1 of the Public Procurement Law, as long as it makes it impossible to select the offer submitted by the contractor as the most advantageous.
Therefore, the question arises whether the contracting authority is entitled to retain the bid bond in each case of failure to submit subjective evidence by the contractor – whether this provision should be read literally or purposefully. Can the awarding entity retain the bid security if the economic operator whose tender received the highest scores only inadvertently fails to submit one of the subjective evidence, or the submitted documents show that the economic operator does not meet the conditions for participation in the procedure or there are grounds for exclusion from the procedure? .
The dominant jurisprudence of the National Appeal Chamber indicates the need for a purposeful, not literal approach to the provision cited above. KIO pays special attention to the fact that the role of the above-mentioned of the provision was to avoid a situation where contractors try to manipulate the result of the procedure, i.e. in particular in a situation where the contractor with the highest score deliberately tries to eliminate himself from the procedure, so that there would be a possibility to choose the offer of a competitor whose offer is for a higher price (and with whom you are in bid rigging).
“The purpose for which this provision was introduced into the Act, i.e. to prevent collusion by contractors, should be taken into account first of all. When examining the legitimacy of keeping the bid bond, the court cannot lose sight of the purpose of the sanction and the tenderer’s culpability. Failure to complete the documentation on time does not immediately mean the loss of the bid security. The contracting authority has the right to keep the bid bond with interest, if the contractor fails to submit the required documents or statements, and not in the event that the information is provided in an incorrect form (by fax instead of in writing), and the original document is delivered after a slight expiry of the deadline. The existence of the risk of contractors’ collusion – which the regulation is supposed to counteract – could be said in the case of complete passivity of the contractor, if he intentionally and intentionally did not comply with the summons “- judgment of the National Appeals Chamber of January 20, 2021, KIO 3300/20.
As a consequence, the contracting authority should not retain the bid bond if the contractor fails to complete the relevant documents due to simple errors, omissions or oversight.
This provision is a sanction for dishonest contractors, but it cannot be used as a penalty for contractors committing any mistakes and as a source of income for the contracting authority (as in the judgment of the National Appeals Chamber of June 1, 2021, KIO 1206/21). Considering the full electronicisation of public procurement procedures, it should be noted that an error as to the form of the submitted document, i.e., for example, failure to provide a digital representation of a given document with an appropriate electronic signature, does not result in the retention of the bid security.
What if the contracting authority keeps the bid bond despite the lack of authorization in this regard? It would seem that the solution is an appeal to the National Chamber of Appeals, but this entity cannot oblige the contracting authority to return the bid security, because KIO only considers the appeal if a given allegation affects the result of the procedure, but this is not the case even in the case of unjustified retention of the bid bond. . In such a case, it would be recommended to take civil proceedings.
Finally, both the contracting authority and the contractor must remember that the bid bond may only be retained during the tender period. This is due to the fact that the institution of a bid bond is inextricably linked with the timing of an offer, but that is a topic for another article.
If you are interested in detailed information regarding the above-mentioned issue, please do not hesitate to contact us.
Michał Szczęsny, Legal Advisor
The Public Procurement Law Department of the Sadkowski i Wspólnicy Law Firm
Michał Szczęsny, attorney-at-law at the District Chamber of Attorneys at Law in Katowice. Specialist in the field of public procurement law and civil law. He has been involved in public procurement from the beginning of his professional career. He gained professional experience advising both ordering parties and contractors. He was responsible for the control of public procurement procedures financed from EU funds as part of the conducted audits, and he also actively participated in legal services in the implementation of infrastructure projects. He also has experience in representing clients before common courts and the National Appeals Chamber. Author of legal publications.