Article 46(4a) of the Public Procurement Law of 29 January 2004 (Journal of Laws of 2010 no. 113 item 759, consolidated text, as subsequently amended) (“PPL”) has generated controversies since the very moment it became effective. Under the said provision, the contracting authority is entitled to retain the bid security with interest if the contractor—having been called upon to submit missing documents or statements confirming that it fulfils the conditions for participation in the proceedings or that the services, supplies, construction works offered by it meet the contracting authority’s requirements—fails to submit the requested documents, statements, or powers of attorney, unless the contractor can prove that its failure to do so is due to reasons which are not attributable to it.
The restrictive provision, which was intended to prevent collusion among contractors, proved to be the contractors’ nightmare, as they would lose the bid security in the event of incorrect/incomplete submission of missing documents, and a source of significant problems for contracting authorities, which were accused of “cashing in” on the contractors’ formal mistakes and inaccuracies.
Given the highly restrictive nature of the provision, hearing an appeal against a judgement dismissing an action for refund of a bid security forfeited under Article 46(4a) of PPL, the Regional Court in Gdańsk put a question of law to the Constitutional Tribunal regarding constitutionality of a regulation providing for the forfeit of the bid security submitted by contractors whose bids contained mistakes or were incomplete, and which deficiencies the contractors were unable to remedy. By its ruling of 9 May 2012 (Case File No. P 47/11), the Constitutional Tribunal discontinued the proceedings on the grounds that rendering judgement was impermissible and held that the doubts stemming from the unclear grounds for retaining the bid security laid down under Article 46(4a) of PPL may be resolved by reference to the principles developed by the National Appeal Chamber (“KIO”) and common courts of law, with no need for the Constitutional Tribunal to hand down its judgement. The justification to the Constitutional Tribunal’s ruling contains a review of the case-law applicable to the interpretation of Article 46(4a) of PPL.
The KIO case-law is dominated by the view that Article 46(4a) of PPL is restrictive and exceptional due to the severe financial sanctions which may be imposed under it on the contractor. This means that it needs to be construed strictly thus excluding extensive interpretation of the grounds for retention of the bid security. At the same time, KIO has consistently taken the view that the automatic obligation to retain the bid security cannot be derived from failure to submit missing documents or remedy defects in documents (KIO judgement of 20 July 2011, KIO 1444/11). One should also note the interpretation of the Supreme Court which, in its judgement of 7 July 2011 (Case File No. II CSK 675/10), held that Article 46(4a) of PPL should be construed strictly taking into account the purpose of the very provision and intention of this regulation.
The Supreme Court held that the contracting authority has a right to retain the bid security with interest if there is a risk of collusion among the contractors, that is when the contractor remains completely passive and purposefully fails to comply with the contracting authority’s request. Taking the view that the bid security is subject to being forfeit always in a situation when the contractor fails to comply with the contracting authority’s request would—according to the Supreme Court—create room for abuse by the contracting authority.
At the moment the prevalent view seems to be that if the contractor submits documents at the contracting authority’s request which in the contractor’s opinion confirm that the conditions for participation in the proceedings have been met, retention of the bid security by the contracting authority is out of the question (KIO judgement of 19 November 2010, Case File No. KIO 2413/2010), unless the contractor has clearly submitted to the contracting authority a sham document to avoid the adverse effects imposed under Article 46(4a) of PPL (KIO judgement of 11 August 2011, KIO 1605/11, KIO/1616/11, KIO 1619/11, KIO1630/11).
The Constitutional Tribunal’s judgement which, given the type of that ruling, does not include a definite determination which of the many constructions of Article 46(4a) of PPL is the most accurate one, without any doubt indicates that one should avoid going to extremes that obliterates the sense and purpose of Article 46(4a) of PPL, and on the one hand conclude that a formally completed submission of any missing documents or remedying of any defects in the documents already submitted prevents bid security retention (a contrario: only the physical failure to provide missing documents entitles the contracting authority to retain the bid security) and on the other that it is only when missing documents are submitted or defects in the documents already submitted remedied in a way that meets the contracting authority’s requirements with respect to confirmation of the conditions for participation in the proceedings, including without limitation substantive requirements, that bid security retention is prevented (KIO judgement of 11 January 2011, KIO 2805/10, KIO 2810/10).