2002

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Report on the Functioning of the Public Procurement System in 2002
Public Procurement Office
Warsaw, May 2003

Table of Contents

Introduction
Public Procurement Law (as at 31 December 2002)

Publication of the consolidated text of the Act
Amendments to the Public Procurement Act
Amendment bills referred to the Sejm

a) Government bill
b) Senate bills

Executive provisions issued

Public contracts in the proceedings of Parliament and Government

Proceedings of the State Control Committee
Public Tendering in the "Anti-Corruption Strategy"
Preparation of a control system for contracts implemented with EU funding

Public procurement market

Procuring entities and tenderers
Value of the public procurement market

a) Public contracts above EUR 30,000
b) Public contracts above EUR 500,000

Functioning of the market

a) Types of procedure
b) Criteria for the evaluation of tenders
c) The price
d) Competitiveness of award procedures

Works Market

a) Value and number works contracts
b) Tenders

Public procurement market in the opinion of small and medium-sized enterprises
Services for entities operating in the public procurement market

The role of the Public Procurement Office in the procurement market

Organisation of the Public Procurement Office
The Board of the Public Procurement Office
Publication of notices in the Public Procurement Bulletin
Administrative decisions issued by the Chairman of the PPO

a) Use of a procedure other than unlimited tendering
b) Entering into a contract for a term exceeding 3 years
c) Other decisions
d) Re-examination of a case; complaints to NSA

Activities in support of participants of the public procurement market

a) Long-term education/consulting programmes
b) International programmes
c) Training and publishing activities

Harmonisation of the Polish public procurement system with the EU system
Compliance control of the public procurement system

a) Control exercised by the Chairman of the Public Procurement Office
b) Co-operation of the Public Procurement Office with other control bodies

Appeal system and court control of public procurement procedures

Appeal procedure
Arbiters
Complaint to court

Conclusions and recommendations

Annex

I. Introduction

In modern economies, the state is a major player in the market. Public sector contracts contribute to the development of many firms and have a significant impact on the competitiveness of the economy. Thus correct management of state-funded purchases and the ability to seek public contracts is key to effective functioning of an important sector of the country's economy.

This report on the functioning of the public procurement system last year has been drawn up on the basis of information and data available from notices published in the Public Procurement Bulletin, documents concerning administrative decisions issued, and the results of analyses and studies of the public procurement market undertaken by the Chairman of the Office and by other central administration agencies.

Regulatory provisions were put into force in 2002, aimed, among other things, to adjust the Polish law to the EU regulatory framework. Further measures were also taken towards full harmonisation of the Polish law with the EU directives, and to prepare a control system for contracts funded from EU sources. Educational activities were initiated, which had not been undertaken in the previous years, targeted at tenderers and procuring entities, and aimed to improve the practical application of the public procurement law. The implementation of anti-corruption mechanisms started and a system of contract award control was tightened.

The previous year marked further development of the public procurement market. The amount of PLN 35 bn was spent in accordance with the procedures laid down in the Public Procurement Act, under contracts above EUR 30,000. Public works contracts have the largest share in the amount, accounting for more than 68%, followed by supplies at 19%, and services at 12%. Unlimited tendering was the predominant procedure, and by excluding the use of subject-based eligibility criteria for evaluation of tenders, the selection of the most advantageous tender has clearly become a more objective process. The visible tendency to formulate the conditions of participation in the process and to give greater significance to the tender price has resulted in the approximation of tender prices, which is indicative, among other things, of keener competition between tenderers. Improved access to contracts and more efficient organisation of the award process were also furthered by the relatively frequent practice of accepting tenders for lots.

The steady increase in the scale of the contracts awarded reflects an increasing role of public expenditure in the economy. Proper oversight of spending and ensuring effective access to the market for the widest possible group of tenderers are the prerequisites for correct functioning of the public procurement system.

II. Public Procurement Law (as at 31 December 2002)

1. Publication of the consolidated text of the Act

Pursuant to Article 16 (1) of the Act of 20 July 2000 on the publication of normative instruments and other legal instruments (Journal of Laws No. 62, item 718; and of 2001, No. 46, item 499), the consolidated text of the Public Procurement Act of 10 June 1995 (Journal of Laws No. 76, item 344) was published in the Annex to the Announcement of the Speaker of the Sejm of the Republic of Poland dated 25 April 2002.

2. Amendments to the Public Procurement Act

In 2002 the Public Procurement Act was amended three times. In one case the amended provisions entered into force in 2002, and of the other two, one entered into force on 25 January 2003 and the other will become effective as of 28 November 2003. In addition, in 2002 some changes entered into force as part of the amendments adopted in 2001.

In chronological order, the following amendments entered into force at the dates given below:

1 January 2002: the Act of 21 December 2001 amending the Act on the organisation and working procedures of the Council of Ministers and on the powers and responsibilities of ministers, the Act on the departments of government administration and the amendment of certain Acts (Journal of Laws No. 154, item 1800). Article 14 of the Act in question provides that supervision over the Chairman of the Public Procurement Office is exercised by the minister in charge of public administration.
10 January 2002: the Act of 26 July 2001 amending the Public Procurement Act except the provision on the obligation to place advertisements on the website, which obligation became effective from 10 October 2002.
10 May 2002: amendment of the Public Procurement Act by the Act of 27 July 2001 on foreign service (Journal of Laws of 2001, No. 128, item 1403). As a result of the amendment (Article 47), contracts of between EUR 3,000 and EUR 200,000, awarded for goods and services performed outside the country, as defined in applicable provisions on foreign service by foreign-based official establishments of the Republic of Poland, were exempted from the obligation to apply the provisions of the Public Procurement Act.
27 October 2002: amendment of the Public Procurement Act by the Act of 20 June 2002 on direct election of commune heads and town or city mayors (Journal of Laws of 20 July 2002, No. 113, item 984). In Article 5 (2) of the Public Procurement Act the words "commune board" were replaced by the words "commune head (town or city mayor)", thereby assigning the public procurement powers vested previously in the commune board to the persons holding the offices mentioned above.

Furthermore, two amendments were made to the Public Procurement Act, which have entered or will enter into force in 2003.

Article 45 of the Act of 28 October 2002 on the liability of collective entities for prohibited publishable acts (Journal of Laws of 2002 No. 197, item 1661) amended Article 19 (1) (6), stipulating that collective entities, against whom the court has issued an order prohibiting them from seeking public contracts under the provisions of the Act of 28 October 2002 on the liability of collective entities for prohibited punishable acts (Journal of Laws No. 197, item 1661) are excluded from the contract award process. This amendment will enter into force on 28 November 2003.

The Act of 22 November 2002 amending the Public Procurement Act (Journal of Laws of 2003, No. 2, item 16) introduced a new provision - Article 74a - under which "public procurement contracts are open and made available on the terms laid down in the provisions on access to public information". This amendment entered into force on 25 January 2003.

3. Amendment bills referred to the Sejm

a) Government bill

Under the "Corruption Combating Programme - Anti-Corruption Strategy" adopted by the Government, the Public Procurement Office started work on the amendment of the Public Procurement Act. In consequence, the draft Act amending the Public Procurement Act was drawn up, adopted by the Council of Ministers on 17 December 2002, and then referred to the Sejm (parliamentary paper No. 1281)¹.

The purpose of the amendment is to change imprecise or defective provisions, which impede the performance of public tasks by procuring entities and entrepreneurs' access the public procurement market, and lead to abuse of law, thus undermining confidence of the parties to the procedure in solutions adopted within the public procurement system. The most significant changes include the provisions that increase the openness of the procedures, constraining the abuse by the procuring entities of the freedom to demand the provision of supplementary tender documents, changes in the functioning of the arbitration system, and arrangements that facilitate the restructuring of enterprises required to apply the provisions on public procurement.

Particularly significant are the provisions designed to remove red tape from the public procurement process by abolishing the obligation to obtain administrative decisions in situations where goods are acquired, which are offered exclusively by monopolists, the introduction of flexible arrangements for the composition of the tender committee, and increasing to EUR 6,000 the threshold below which the Act does not apply.

b) Senate bills

Work was undertaken by the Senate on two draft Acts aimed to limit the application of its provisions.

In June 2002, the Science, Education and Sports Committee of the Senate started work on a draft Act expanding the range of exclusions from the provisions of the Public Procurement Act to include contracts awarded by research and development units, state schools of higher education, and units of the Polish Academy of Sciences involved in projects paid from sources other than public ones. Eventually the draft Act was rejected as being contrary to the laws of the European Union and was not submitted to the Sejm.

Work on another draft Act amending the Public Procurement Act was commenced by the Senate in November 2002. A resolution of the Senate on submission of the draft Act the Sejm was adopted on 3 February 2003.

The draft Act provides for expanding the list of situations in which the Act does not apply, namely:

exemption from the application of the provisions of the Act in awarding contracts for the preparation, production and co-production of theatrical, opera or operetta performances by theatre companies,
exemption from the application of the provisions of the Act in awarding contracts of up to EUR 130,000 by research and development units, state schools of higher education, and units of the Polish Academy of Sciences, except the provisions on equal treatment, the obligation of objective description of the object of the contract and national preferences.

4. Executive provisions issued

Last year 9 new executive provisions were issued, including 3 by the Council of Ministers and 6 by the Minister of Internal Affairs and Administration:

Ordinance of the Minister of Internal Affairs and Administration dated 24 June 2002 on the documents that a procuring entity may demand of a supplier or contractor in order to confirm compliance with the eligibility conditions for the participation in the public contract award process (Journal of Laws No. 91, item 817),
Ordinance of the Minister of Internal Affairs and Administration dated 16 July 2002 on public contract performance security (Dz. U. 2002 r. No. 115, item 1002),
Ordinance of the Council of Ministers dated 4 June 2002 on detailed rules for the appointment of members of a tender committee and its working procedures (Journal of Laws No. 82, item 743),
Ordinance of the Council of Ministers dated 29 October 2002 on the competition for creative design work (Journal of Laws No. 188, item 1574),
Ordinance of the Council of Ministers dated 16 April 2002 on public contracts awarded on special terms (Journal of Laws No. 55, item 475),
Ordinance of the Minister of Internal Affairs and Administration dated 14 June 2002 on the rules of procedure for the examination of appeals in cases concerning the award of public contracts (Journal of Laws No. 85, item 772),
Ordinance of the Minister of Internal Affairs and Administration dated 14 June 2002 on the amount and detailed rules for the charging of an appeal fee under a public contract award procedure. (Journal of Laws No. 85, item 773),
Ordinance of the Minister of Internal Affairs and Administration dated 14 June 2002 on the amount of remuneration for activities of arbiters (Journal of Laws No. 85, item 774),
Ordinance of the Minister of Internal Affairs and Administration dated 24 June 2002 on specimen public contract notices published in the Public Procurement Bulletin as well as additional information contained in advertisements (Journal of Laws No. 91, item 816).

Those executive provisions were issued following the entry into force of the provisions of the Act of 21 December 2001 amending the Act on the organisation and working procedures of the Council of Ministers and on the powers and responsibilities of ministers, the Act on the departments of government administration and the amendment of certain Acts, whereby the delegated powers to issue executive provisions laid down in the Public Procurement Act were altered. It was also decided that until new executive provisions are issued under the changed delegations, the existing provisions would apply until 30 June 2002 at the latest.

III. Public contracts in the proceedings of Parliament and Government

In addition to the amendments to the Act and to the executive provisions, public contracts were the subject of non-legislative proceedings of the Parliament and the Government.

1. Proceedings of the State Control Committee

The State Control Committee dealt twice with the issues of the Public Procurement Act. At a meeting of 10 September the Committee discussed the functioning of the anti-corruption legislation in public administration in the light of the results of audits by the Supreme Chamber of Control², and at the meetings held on 22 November and 2 December 2002 the Committee discussed the functioning of the Public Procurement Act in the context of corruption prevention measures³.

The issues of interest to the deputies included: the responsibility of members of the tender committee, the establishment of official forms of the Specification of Essential Terms of the Contract and the possibility of implementing electronic tendering. The need to increase the responsibility of the persons involved in the contract award process was indicated, as was the important role of educational activities and the implementation of new contract award instruments, due to their effect on the transparency and correctness of the procedures. The recommendations of the Committee were reflected in the training/consulting programmes for tenderers and procuring entities, launched by the PPO, and in the proposed legislative arrangements, which provide for an electronic formula of public tendering.

2. Public Tendering in the "Anti-Corruption Strategy"

On 17 September 2002 the Council of Ministers adopted the "Corruption Combating Programme, Anti-Corruption Strategy". The document provides for a series of measures in the public procurement area for the years 2002 - 2003, the implementation of which falls within the scope of responsibility of the Chairman of the PPO. Those scheduled for implementation in 2002 were fully completed:

the draft amendment of the Public Procurement Act was referred to the Sejm, taking into account all the target arrangements adopted in the "Strategy";
an analysis of the appeal system in public procurement cases was carried out and its results were used in the proposed legislative arrangements. The results of this approach include the proposal to introduce a method of appointing arbiters and developing a set the rules of registration and deregistration of arbiters from the list maintained by the Chairman of the PPO in a manner that ensures objectivism and prevents irregularities;
in line with the time schedule laid down in the World Bank proposal, a procedure was prepared for the selection of a contractor for the development of template tender dossier, template agreements and a procedural guide on the use of the template documents by the users;
an analysis and control unit was established at the Public Procurement Office (Analyses and Control Department), resulting in an increased number of system-based compliance checks relying on the results of analyses of irregularities disclosed within the public procurement system;
an agreement on co-operation and co-ordination of control measures was signed with the National Council of Regional Audit Chambers and the Supreme Chamber of Control⁴. The effect is the exchange of information on the identified infringements of the Public Procurement Act and co-ordination of control measures by the above-mentioned bodies;
the Arbiter Code of Ethics was prepared, which will provide a basis e.g. for work on the design of the arbitration provisions to be included in the new Public Procurement Act;
a programme of assistance and support to entrepreneurs participating in the public procurement market was prepared and then signed by the Chairman of the Public Procurement Office and the Minister of the Economy;
a programme of information and educational activities for the years 2003 - 2005 was developed, addressed to procuring entities and tenderers, in particular small and medium-sized enterprises seeking public contracts.

At the same time, work started on measures to be implemented in 2003. A more extensive description of the tasks completed is provided in a further part of this report.

3. Preparation of a control system for contracts implemented with EU funding

By decision of the Preparation Team of the Committee for European Integration dated 28 June 2002, the Public Procurement Office was designated as the central unit to perform ex-ante checks of tendering processes in a decentralized system of implementation of ISPA and Phare, and then the structural funds and the Cohesion Fund. On 25 October 2002, the PT/CEI obligated the Public Procurement Office, together with the Office of the Committee for European Integration, the Ministry of Finance and the Ministry of the Economy, Labour and Social Policy, to present a proposal for an ex-ante control system covering the area mentioned above.

Two documents were prepared as part of the work undertaken by the PPO, which describe the assumptions of the ex-ante control system:

"Ex-ante Control of Tendering Processes for EDIS under Phare and ISPA as well as the Structural Funds and the Cohesion Fund".
"Practical Guide to Public Procurement Procedures - Assumptions".

The first document outlines the public procurement ex-ante control system for EDIS under Phare and ISPA as well as the structural funds and the Cohesion Fund. The other presents the proposed contents of a detailed guide for procuring entities, which will contain practical instructions on the public contract award process. Both documents were adopted by the PT/CEI on 28 February 2003.

The proposed tendering process ex-ante control system for EDIS under Phare and ISPA will be based on the Polish Public Procurement Act, supplemented under Article 3c of the Act. That provision makes it possible to apply procedures other than the Polish procedures if such arrangement is envisaged by the international agreements, under which funding was granted. This enables the new system to incorporate detailed rules of conduct with regard to procedures that are not regulated by the Polish law (such as grant schemes). In such a case all arrangements will be based on the "Practical Guide to Phare, ISPA and SAPARD Contract Procedures" (PRAG) issued by the European Commission. In the case of the structural funds and the Cohesion Fund the Polish public procurement law will apply.

Currently the Polish public procurement system provides for two types of control, i.e. mutual control (mainly on the tenderer's side, involving the tenderer's right to object against the procuring entity's conduct by lodging a protest and an appeal to a panel of arbiters) and control exercised by the Chairman of the PPO (at each stage of the process). In the proposed system the model will be additionally supplemented by standardised control measures taken by the procuring entity, the procuring entity's supervisory unit and the PPO. In the new system, special emphasis is placed on the need for detailed internal procedures to be put in place both at the procuring entities' and at other institutions undertaking control measures.

IV. Public procurement market

1. Procuring entities and tenderers

The number of entities obligated to apply the Act is not easy do define. It is mainly attributable to the fact that the budgetary unit can be an individual institution, as well as a more complex organisational system. Similar difficulties may arise from classifying branches of the same legal person as potential procuring entities (e.g. ZUS, the Social Insurance Institution, is an incorporated organisational unit of the state sector, with 51 branches and 213 inspectorates), and from the lack of statistics on the entities that do not belong to the public finance sector (e.g. associations and foundations), but do receive public funds for certain activities. It is also worth noting that 2002 was a period of quite intensive reorganization of government offices, involving the liquidation and consolidation of units.

In order to have a rough idea of the number of such entities, the results of research carried out by independent centres dealing with public finance can be referred to, which indicate that after the 1999 administration reform there are about 4,050 entities and organizational units in the state sector, and about 51,000 in the local government sector⁵.

In accordance with Article 6b of the Act, the tenderer, i.e. the supplier or contractor can be a natural person, a legal person or an unincorporated body as well as such parties acting jointly. Hence the number of potential tenderers is open, but most contracts can be completed only by entities carrying on an economic activity. GUS (Central Statistical Office) estimates indicate that the number of active enterprises, i.e. those actually carrying on an economic activity exceeds 1,750,000.⁶More than 99% of all enterprises are SMEs, i.e. those employing less than 250 people.

In the early 2003, a survey was made on a representative group of small and medium-sized enterprises⁷, producing results, which may give an idea of the scale of interest of such entities in public contracts. They show that 79% of the enterprises surveyed did not complete any public contract in 2002, 19% participated in contracts as main contractor, and 4% as subcontractor. However, in evaluating those results it is necessary to take into consideration the distribution of the number of enterprises in the main sections of the economy. The largest number of enterprises operate in the Trade and Repair section (37% in 2000), which was reflected in the way the sample population was selected for the survey. Normally small traders are not entities capable of performing public contracts, which are predominated by public works.

Among the enterprises that declared they took part in public procurement processes 2002, a sizeable group of 17% consists of entities specialized in public contracts. Revenue from public contracts accounted for more than 70% of the income of those firms (see Chart 1 in the Annex).

Another indication of the number of entities interested and actively participating in public procurement procedures is the number of firms that were awarded contracts in 2002 exceding the value of EUR 500,000 - 1,220 entities performing 1,724 public contracts in excess of that value. Of those enterprises, the largest percentage of suppliers or contractors are based in the Mazowieckie (23.4%), Śląskie (11.9%) and Wielkopolskie (10.5%) provinces, and the smallest in the Opolskie (1%) and Lubuskie (2.1%) provinces. The small number of foreign firms is noteworthy (1.2%) (for full details see Table 1 in the Annex).

2. Value of the public procurement market

The public sector is the largest consumer of goods and services in Poland. Precise determination of the size of the market is difficult due to non-availability of a number statistical data. The most reliable estimate arises from an analysis of the following figures for 2001⁸:

current expenditure of state budgetary units for the purchase of services and materials - PLN 10,159.6 m
expenditure of budgetary establishments, auxiliary units, and from special resources of budgetary units for materials and services - PLN 1,717.4 m
purchase of materials and services from the budgets of local government units - PLN 15,688.9 m
investment expenditure from budgets of local government units - PLN 13,782.7 m.

Thus the expenditure totals PLN 41,348.6 m. The value reflects the size of the public procurement market only in part, but the classification of expenditure in accordance with the budget classification does not imply the obligation to follow the public procurement procedure . Neither does the amount include the expenditures of other entities that are required to apply the provisions of the Public Procurement Act.

a) Public contracts above EUR 30,000

The data contained in the Public Procurement Bulletin are the basic source of information on the size of the public procurement market. W 2002, the PPB listed the results of 40,512 procedures with a value above EUR 30,000. Based on the contents of those notices, the total amount contracted can be estimated at nearly PLN 35 bn. The amount, which accounts for more than 4.5 % of the GDP in 2002, can be treated as an approximate value of public contracts in excess of EUR 30,000¹⁰. Public works contracts represent the largest percentage of more than 68%, followed by supplies at 19% and services at 12%. The number of new procurement notices for works contracts is also the largest at 47.6%. Supply procurement notices accounted for 32% of all notices, and services for 20.4%. (see Chart 2 in the Annex)

Compared with the previous year, the procuring entities completed more procedures 35,794 in 2001 and 40,541 in 2002 respectively. The rising tendency has prevailed since the implementation of the Public Procurement Act, which is mainly attributable to the fact that the obligation to apply the Act is extended to new groups of entities.

The long-standing tendency of a shift in the structure of notices continued in 2002 - the percentage of public works notices was decreasing, while that of service and supply notices was increasing. On the other hand, the value structure of contracts has not changed for several years: tendering procedures under which the contract value does not exceed PLN 400,000 account for 67.2% (a drop by just under 1% against 2001), and contracts in excess of PLN 1 million accounted for slightly more than 13%. The types of services and supplies purchased under the procedures laid down by the Act are greatly diversified. Yet it is worth pointing out that, apart from works contracts, more than 10% of all procedures concerned medicines and medical articles.

Most procurement notices for tenders were published by commune and town/city administration, including municipal budgetary establishments and auxiliary units as well as municipal companies - nearly 43%. The other procuring entities were the central administration at 19% and autonomous public health care establishments at 12 %. Owing to a significant increase in the number of contracts awarded, in 2002 the sector providing medical and social services was included in system-based procurement compliance control exercised by the Chairman of the PPO. (see Chart 3 in the Annex).

Procurement contracts with the commune and municipal administration had the highest value, with a share of more 60% in the total amount, followed by central administration with more than 20%, autonomous public health care establishments with just over 6%. On the other hand, the structure of contracts is different among the groups of procuring entities concerned, depending on the nature of their operation and the public tasks performed. Commune/municipal and county (powiat) administration signed works contracts of the highest value (88% and 75% share, respectively, in the total amount of contracts awarded by entity concerned), while the health service and military units contracted mainly for supplies - 78% and 83% respectively (see Chart 4 in the Appendix).

b) Public contracts above EUR 500,000

In 2002, procuring entities awarded 1,723 contracts above EUR 500,000, the amount of public funds involved exceeding PLN 11 bn, i.e. nearly 30% of the amounts spent under contracts above EUR 30,000. The breakdown of the contracts was as follows:

up to PLN 5 m - 1,162 contracts,
between PLN 5 m and PLN 10 m - 347 contracts,
between PLN 10 m and PLN 50 m - 205 contracts,
above PLN 50 m - 8 contracts.

The above figures on the number and value of the largest contracts are an important basis for placing the contracts involving very heavy public expenditure under special supervision.

3. Functioning of the market

a) Types of procedure

In most cases involving the need to publish a notice in the Public Procurement Bulletin, the procuring entities opt for the unlimited tendering procedure. Notices for this type of tendering represent more than 98% of all procurement notices (39,816). An analysis of award notices also shows that the percentage of such procedures falling within this category is the largest - more than 84.7 %. Compared with previous years, the popularity of unlimited tendering increased by more than 2%¹¹, which was due to smaller interest in limited tendering - the regulatory framework concerning both the prerequisites for the adoption of this procedure and the method of its implementation changed significantly from 26 October 2001, when an amendment to the Act entered into force. Unlimited tendering is most frequently used by all groups of procuring entities, i.e. irrespective of the contract structure.

Interest in two-stage tendering is shown mainly by the procuring entities that award mostly works contracts - schools of higher education, commune and municipal administration, and substitute investors. This involves the need to have the entire project under this procedure, i.e. both design and execution. However, in none of the groups does the proportion of procurement notices for this type of procedure exceed 4%.

Data derived from award notices indicate a small number of procedures which did not involve tendering. The award notices for competitive negotiated procedures, price inquiry and single-source procurement procedures total 5,573 notices, representing 8.75 % of the overall number of award notices.

b) Criteria for the evaluation of tenders

The prohibition of the use of subject-specific eligibility criteria in the evaluation of tenders, adopted on 26 October 2001, did not result in the introduction by procuring entities of any new, previously non-existent criteria. However, the procuring entities used the criteria of terms of payment and warranty/maintenance conditions more frequently than before the change.

Criteria used for the evaluation of tenders

Criteria	Percentage of tendering proceduresinvolving the criterion
Criteria	2001	2002
Terms of payment	19%	24%
Technical evaluation (quality)	13%	11%
Warranty and maintenance conditions	16%	18%
Contract completion time	15%	13%

However, the change did not result in more frequent use of the criterion of quality or technical evaluation of the products and services offered, which might be the most discretionary criterion among those mentioned above.

Relatively many procuring entities decided to use the price as the sole criterion, with as many as 39% of the contracts to be awarded by selecting the lowest tender. For this reason the average weight of the price criterion was as high 81% in 2002. The average weight for the other criteria also indicates that the procuring entities prefer the lowest tenders.

Average weight of the criteria used

Criteria	Average weight of criteria in contract award
Terms of payment
Technical evaluation (quality)	13%
Warranty and maintenance conditions	25%
Contract completion time	13%
Terms of payment	12%

c) The price

The percentage of procedures under which the selected tender offered the lowest price increased by nearly 10% from 2001 (from 70% to 80%). In another 14% of cases the tenders selected were higher than the lowest one by not more than 10%. Only 1% of the procuring entities selected tenders more than 40% higher than the lowest one. This may testify to the fact that increasingly rational choices are made by the procuring entities, which acquire goods meeting their quality expectations at the lowest possible price.

Further approximation of the price levels offered in tenders was also reported, compared with 2001. The difference between the minimum price and the maximum price remained under 30%:

in 54% of the cases for works contracts (52% in 2001),
70% for supply contracts (60% in 2001),
40% for service contracts (30% in 2001).

Supply contracts are thus the least diversified category in terms of prices, unlike services, where the price depends on a greater number of factors. The increasing approximation of prices under all types of contracts seen each year may be indicative of keener competition between tenderers, being a favourable development in the procurement market (see Chart 5 in the Annex).

d) Competitiveness of award procedures

On average, 4.21 tenders were submitted under each award procedure¹². The largest number of tenders concerned works contracts - 5.08 tenders, while the corresponding figures for supply and service contracts were 3.66 and 4.36 tenders respectively. While the number of procedures with only 2 tenders is high, many still involve 5 and more tenders (55% for works contracts, 23% for supply contracts and 30% for service contracts). The record number of tenders submitted in a single procedure was 70. The percentage of procedures with no tender rejected increased from 62% in 2001 to 68% last year, which may suggest they were prepared more carefully. At the same time the number of award procedures under which 3 or more tenders were rejected decreased from 11% in 2001 to 8%.

It is worth noting the large number of award procedures cancelled due to the fact that less than 2 eligible tenders were received. This is also a circumstance which procuring entities often refer to when applying for a decision to approve a change of the type of procedure; nearly 50% in the case of decisions for the competitive negotiated procedure, and nearly 20% for the single-source procedure. The relatively high percentage of cancellations of the award procedure remains similar to the 2001 level of 23%.

The main reason for the cancellation of the procedure is the lack of two eligible tenders - reported in almost 90% of the cases - which is a reason beyond the procuring entity's control. More than 4% of the award procedures were cancelled due to the failure to meet the obligation to publish a notice in the Bulletin or the award procedure having a defect that prevented entering into a valid contract - which is attributable to the procuring entity's misconduct. Contrary to adverse opinions on the abuse of the regulation that permits the award process to be cancelled in a situation where the price of the most advantageous tender exceeds the amount the procuring entities may allocate to finance the contract, cancellation for this reason was reported only in 2.6% of the cases. Cancellation of the award procedure due to the emergence of an important circumstance making the completion of the contract inconsistent with the public interest was also exceptional (3.6%).

The data indicate that the absence of two valid tenders is the most common problem preventing the award of contract. The other grounds for cancellation are referred to in exceptional cases, which is the intention of the Act. Compared with the previous years, the percentage of award procedures based on such grounds dropped considerably - in 2001 is was 21% of all cancelled tendering procedures. The change has probably arisen from the that fact that award notices are now allowed with tenders divided into lots, where an exceptional situation may have arisen, concerning one task, and not the whole procedure. The 2002 data show the tasks cancelled and not the whole procedures.

4. Works market

Public works have been the most significant segment of the public procurement market for years. In 2002, more than 68% of the funds earmarked for public contracts were spent on public works¹³. The number of tender notices was also the greatest, more than 47%, but a declining tendency can be noticed in the share of award notices for works contracts compared with the previous years - in 2001 they represented more than 52% of all notices, and in 2000 more than 55%.

a) Value and number of works contracts ¹⁴

Last year 93.84% of public works contracts were awarded by tendering procedure (unlimited, restricted, and two-stage tendering) (in 2001 - 93.64%), representing 95.37% of the total expenditure on public works (in 2001 - 98.48%) (see Table 3 in the Annex).

Most contracts were awarded by unlimited tendering procedure - 93% of all contracts awarded and they represented 94% of all funds spent on public works. In 2001 the corresponding figures were 92% and 88% respectively, which indicates an increase in the value of procedures of the most competitive category.

The average value of a contract concluded as a result of tendering exceeded PLN 304,000. At the same time the average value of a contract in contracts above EUR 30,000 euro exceeded PLN 1 m. This means a large number of award notices for tendering with lower amounts.

Most of the contracts awarded fall within the range up to EUR 30,000 (65% of the total number of contracts), while the aggregate value of the contracts in that range reached only 10% of the total amount spent on works. Similar percentages of the number and value characterise contracts within the EUR 30,000 - 200,000 range (28% of the total number of tendering procedures), representing 25% of expenditure. Contracts above EUR 200,000 have the strongest effect on the expenditure volume structure; just under 8% of all contracts consume as much as 65% of total expenditure. According to the data available, such structure composition has prevailed for several years (see Table 4 in the Annex).

It is worth noting that the average value of a contract awarded under a two-stage tendering procedure exceeded PLN 900,000. The high values of contracts awarded by two-stage tendering procedure are also indicated by the sizeable percentage of value - 1.27% relative to the low share of the number of such procedures - 0.41%.

b) Tenders

On average, 3.56 valid tenders for works contracts were received under tendering procedures (in 2001 the average was 3.73). The largest number of tenders were submitted under restricted tendering procedures (4) and under unlimited tendering procedures (3.59), and the least under competitive negotiated procedures (2.68, close to the 2001 figure of 2.59).

In contracts of up to EUR 30,000 the largest percentage (49%, close to the 2001 figure of 48%) represented tendering procedures with only 2 tenders submitted. Definitely more tenders are submitted under tendering procedures of high value. Under 44% (in 2001- 51%) procedures above EUR 30.000 the number of tenders was at least 4.

Number of tenders under works procedures

Number of tenders	Percentage of tenders
	up to EUR 30,000	above EUR 30,000
2	49.00%	33.94%
3	25.06%	21.68%
4 and more	25.94%	44.38%
	100.00%	100.00%

Apart from the price, the most commonly applied criteria for evaluation of tenders were warranty conditions - 32% of the cases, and contract completion time - 19% of the contracts. Procuring entities also evaluated the terms of payment - under 8% of the tendering procedures, and the technical solutions and advantages of the tender - around 2%. Price as the sole criterion for the evaluation of tenders was selected by procuring entities in as many as 53% of the tendering procedures, while the average weight of this criterion for all procedures was 91%. As for the other criteria, their weights were much lower: 13% for warranty conditions; 14% for contract completion time; 14% for terms of payment; and 21% for the rarely used technical evaluation criterion.

Both in 2002 and in the previous years the prices of the tenders selected are lower in most cases than the value arising from the investor's estimate - in 89% of the cases in 2002, and in 90% in 2001. In not more than 1% of tendering procedures the tender price was equal to the estimated price. At the same time the prices of more than 91% of the tenders selected (in 2001 - 80%) were the lowest prices offered, which results from the design of the criteria for evaluation of tenders by procuring entities. Another 6% of the tenders selected were higher than the lowest tender by not more than 10%.

In designing the terms of a works contract, procuring entities may opt for lump-sum or estimate-based remuneration. An analysis of the surveys shows that both remuneration methods are equally popular.

5. Public procurement market in the opinion of small and medium-sized enterprises

Surveys held every six months by the Ministry of the Economy, Labour and Social Policy in co-operation with the PPO make it possible to identify the interest of those entities in the public procurement market and their opinion on the basic institutions of the law and the practice of awarding such contracts.

79% of the enterprises surveyed did not perform any public contract in 2002, 16% participated in the procedures as main contractor, and 5% as subcontractor. In evaluating those results, it is necessary to take into consideration the distribution of the number of enterprises in the main sections of the economy. The largest number of enterprises operate in the Trade and Repair section (37% in 2000), which was reflected in the way the sample population was selected for the survey. Normally small traders are not entities capable of performing public contracts, which are predominated by public works. This statement is confirmed by the data on the type of the contracts performed by the enterprises surveyed - the majority represented services, with nearly 47%, followed by supplies at 25%, and works at 28%.

In award procedures under EUR 30,000, most firms participated during the year in not more than 5 tendering procedures - more than 68% of the respondents; at the same time, in procedures involving higher values about 16% of the respondents submitted tenders in more than 20 procedures (7% in the case of tendering procedures under EUR 30,000).

A significant proportion of income derived by SMEs from public contracts are treated as an additional source of income. Income from public tendering procedures representing less than 10% of their total income is declared by nearly 38% of the respondents. At the same time, however, the survey shows that a group of firms can be identified (about 17%), which operate mainly in the public procurement area and declare income from such activities exceeding 70%.

When asked about the importance of public contracts in the activities of the firm, 49% of the respondents answered that public contracts did not affect their activities. At the same time, 33% stated that participation in tendering procedures improved the financial condition of the firm; more than 6% responded that it affected higher employment; 4% of the respondents noted that public contracts improved corporate quality management, and 2% that they necessitated the implementation of new technological solutions and new process methods.

As basic source of information on tendering procedures organised for SMEs, about 37% of the respondents indicated direct invitations from procuring entities. The other most common sources of information were press advertisements (more than 19% of the respondents), Internet at 15%, while 11% of the firms surveyed drew their knowledge of new award procedures from the Public Procurement Bulletin and an equal percentage from acquaintances, and only 7% of the enterprises learnt about the tendering procedure from a notice board at the procuring entity's office.

Small and medium-sized enterprises usually provided the deposit required under the public procurement procedure in cash - about 71% of the respondents, 17% of the firms in the form of insurance guarantee; 7% in the form of bank pledge or guarantee; just under 4% in the form of an avalised bill of exchange. The deposit in the form of confirmed cheques was provided by just over 1% of the enterprises.

Despite a poor market outlook firms sometimes prefer not to participate in public tendering procedures. As the main reason of such waiver of participation in the public procurement process, 27% of the respondents pointed out that in their opinion the procedure was rigged. Another reason was the belief that the provisions of the contract were disadvantageous to the firm, which accounted for more than 20% of the responses. Another apparent barrier was an excessively high deposit required by the procuring entity (according to more than 18% of the respondents); in addition more than 13% of the respondents were unable to collect all the tender documents, about 12% of the respondents claimed that the tender would have been too difficult to prepare, and only 2% of the entrepreneurs mentioned an excessive number of unclear items in the Specification of Essential Terms of the Contract. The other most common reasons of waiver of participation in the tendering procedure were the belief that it was rigged (34% of the responses) and that the Specification contained too many unclear items (more than 25% of the respondents). Disadvantageous provisions of the contract were also mentioned - 20%.

What appear to have caused most difficulties to firms were unclear rules for the evaluation of bids (nearly 28%), the requirements concerning the preparation of the set of documents required by the procuring entity (more than 24% of the responses), insufficient time allowed for the preparation of the tender (14%), and unclear description of the object of the contract (nearly 10%).

50% of the respondents believed that the conditions imposed by the procuring entities regarding the ability of the firm to execute the contract were too high and limited the access of firms to the public procurement market. On the other hand, 33% of the respondents found the requirements to be consistent with the scale and nature of the contract. The other respondents (17%) described the requirements as insufficient and hence leaving room for the selection of a contractor who would be unable to duly perform the contract.

What was seen to be the greatest obstacle by small and medium-sized enterprises operating in the public procurement market was a lack of financial support in providing the deposit and the contract performance security - about 31% of the responses. Another problem, equally important, indicated by 17%, was the lack of consulting assistance during participation on the procedure. Entrepreneurs also complaind about the lack of financial support in the preparation of the tender - 16%; 7% indicated the lack of training in the rules of seeking public contracts and the same percentage complained about the non-availability of plain-language guides on the subject.

While the Act provides for instruments that ensure openness of the procedure, slightly more than 17% of the respondents took the opportunity to inspect the tender dossier, and only 19% lodged a protest against the procuring entity's conduct. Where the firms lodged an appeal - 15% of the respondents - the appeals concerned mainly the selection of a tender that was not the most advantageous (over 29%), and nearly as many (22%) concerned the procuring party's decision to exclude a tenderer or reject a tender, 19% of the protests concerned the conditions imposed on tenderers, and 10% complained about the description of the object of the contract or about other provisions of the Specification of Essential Terms of the Contract.

Such a low percentage of firms seeking legal recourse seems to confirm the result of the survey examining the respondents' attitude to the protest/appeal system. As many as 57% of the respondents believe the system has no effect on the protection of the tenderer's interests, and 32% that it does not ensure sufficient protection.

The respondents voiced similar, negative opinions on the overall regulatory framework governing the public procurement market. In 50% of the cases it was stated that the regulations barely protect or do not protect the interests of entrepreneurs seeking a contract. Another 25% responded that they are not protected by the law at all. The remaining group (25%) of the respondents believe the law affords them full or sufficient protection.

It is noteworthy that tenderers express negative opinions on the public procurement law without participating in award procedures, and without seeking recourse available to them under the law.

6. Services for entities operating in the public procurement market

The market of consulting and training services related to public contracts has developed in response to demand both from procuring entities and from tenderers. The firms operating in the market are providers of broad-based consulting services, including representation of the customer before the Panel of Arbiters, as well as firms providing such services on an ad-hoc basis, mainly training. The diversity and fragmentation of the market prevent a full analysis of the quality of the services. However, the surveys carried out among tenderers are indicative of insufficient quality of training and consulting services. Given the additional lack of indicators that would allow professional consulting firms to be identified, tenderers use the assistance of firms picked at random.

The market for services to entities interested in public contacts also includes books and periodicals published by commercial publishing houses. In 2002 comments on the Public Procurement Act appeared, taking into account the 2001 amendments or supplements to the comments issued in the previous years, published by houses specialised in legal issues. Apart from this, several guides for procuring entities appeared, which describe contract award procedures in plain language. The periodicals included three monthlies dealing with public contracts, including one dedicated solely to this subject. This shows that there is still a need for publications that would serve tenderers as a practical guide in taking decisions connected wit the participation in public procurement procedures. The lack of interest from the academic community and modest achievements in related doctrine are also disturbing.

In 2002, in view of the entry into force of the obligation for procuring entities to place procurement notices on websites, about a dozen websites were established, which offer permanent services to procuring entities. In addition to notice browsers, the websites often display essential information on the public procurement law and experts' advice. The activity, while insufficiently developed, is the first clear signal showing that new electronic instruments can be used successfully in the public procurement system.

V. The role of the Public Procurement Office in the procurement market

1. Organisation of the Public Procurement Office

With a view to ensuring effective performance of tasks, the organizational structure of the Office was modified in 2002. On 19 July 2002, the Minister of Internal Affairs and Administration conferred a new Charter on the Public Procurement Office, and on 1 August 2002 the Chairman of the PPO conferred new Organisation By-laws on the Office. On this basis:

The Training and Publications Department was established, which undertakes educational projects and is responsible for the preparation and dissemination of publications addressed to participants on the public procurement market. Its responsibilities also include the management of long-term training and consulting programmes launched by the PPO for procuring entities and tenderers. The Public Procurement Bulletin Division was set up within the Department, the sole task of which is to handle the increasing number of procurement and award notices. Owing to the effort of the Division, around 80,000 notices have been handled, with nearly 50% of the notices being transmitted through electronic channels. The responsibilities of the Division will also include co-ordination tasks resulting from the obligation to publish procurement notices in the Official Journal of the European Communities.
The Analyses and Control Department was established. The analytical work completed in 2002 included an analysis of the functioning of the appeal (arbitration) system and studies into the tenderer's market and barriers preventing the access of small and medium-sized enterprises to public contracts. For the first time since the establishment of the PPO, several system-based audits of procedures managed by selected groups of procuring entities were carried out in addition to ad-hoc checks. The Department was also responsible for control of the disbursement of funds from EU aid, which will be spent from 2004 in accordance with the procedures of the Public Procurement Act.
The Bureau of Appeals was established, which is responsible for organisational and technical support to the operation of public procurement arbitration.
The Administrative Decisions Division was established within the Legal Department. The decision was prompted by a steady increase in the number of administrative decisions issued by the Chairman of the PPO, the drafts of which are prepared by the department.

2. The Board of the Public Procurement Office

In February 2002, new members were appointed to the Board of the Public Procurement Office, the consultative body of the Chairman of the PPO. It consists of 16 people, including representatives of the largest organisations grouping together tenderers, as well as representatives of central and local government administration, i.e. the largest groups of procuring entities. Furthermore, the members of the Board include experts in the field of public procurement and arbiters. Such a body of persons provides access to opinions on measures taken by the Office and on initiatives affecting the design of the public procurement system from all the stakeholders - participants of procedures.

In 2002, the Board met five times to deal with matters including:

report on the functioning of the public procurement system in 2001,
evaluation of amendments to the Public Procurement Act of 10 June 1994 implemented by the Acts amending the Public Procurement Act, dated 26 June 2001 and 10 July 2001,
executive instruments to the Public Procurement Act,
the Arbiter Code of Ethics,
the draft "Programme of Educational and Information Measures for Public Procurement for the Period 2003 - 2005",
the draft "Programme of Support to Small and Medium-sized Enterprises - Potential Participants of the Public Procurement Market for the Period 2003 - 2005",

3. Publication of notices in the Public Procurement Bulletin

Procuring entities are required to publish the following notices in the Public Procurement Bulletin:

procurement notices for tendering procedures above EUR 30,000 and, with the consent of the Chairman of the PPO, below this value. They provide basic information necessary for a decision to participate in a procedure. The procuring entity is required to specify the quantity and type of the services and supplies contracted, and for works the type, scope and location of the project, contract completion date, definition of the conditions to be met by suppliers and contractors;
contract award notices, irrespective of the result of the procedure, above EUR 30,000. They contain details such as the number of submitted tenders, including rejected tenders, the highest and lowest price offered in the tenders submitted, identification of the entity whose tender was selected and the price offered in the tender. Such notices are issued under the principle of openness in the award of public contracts.
contract forecasts for a calendar year, where the contract value exceeds, in the case of public works contracts, the equivalent of the amount of EUR 500,000, or where the total value for each category of supplies and services exceeds the equivalent of the amount of EUR 500,000¹⁵;

Notices are placed in the Bulletin free of charge to ensure equal and universal access to public contracts. The Bulletin is available on a paid basis in paper version at points of sale of official journals or by subscription, and free of charge on the PPO website.

Last year the circulation of the Bulletin reached 4,700 copies of each issue, and the number of regular subscribers - 3,630. 208 issues of the Bulletin appeared, in which 82,931 notices were placed, including:

40,541 procurement notices,
40 512 award notices,
1299 contract forecasts for a calendar year,
48 creative design work competition notices.

A list of firms is also published in the Bulletin, to which contracts were awarded in the previous calendar year of a value of above EUR 500,000. The notice for 2002 appeared in the Bulletin of 3 March 2003, No. 27, item 11260, and it listed 1,220 firms.

It should be noted that nearly 50% of the notices published last year were submitted to the Bulletin in electronic format.

4. Administrative decisions issued by the Chairman of the PPO

The public procurement system is decentralised, which means that decisions involving the contract award procedure are taken independently by procuring entities. Several circumstances are exceptions from the rule, where action is subject to prior approval by the Chairman of the PPO in the form of an administrative decision. Such decisions concern only those situations where, in the event of error, direct action by a procuring entity could significantly restrict tenderers' rights or affect the principle of equal treatment of the participants of procedures. Thus they are part of ex-ante control of actions taken by procuring entities and strengthen respect for the principles of the public procurement law.

In 2002, the Chairman issued 18,059 administrative decisions in the first instance and 756 decisions upon re-examination of the cases concerned (list of decisions issued in Table 5 in the Annex).

a) Use of a procedure other than unlimited tendering

The obligation to obtain a decision authorising the use of a procedure other than the basic one applies to procedures above EUR 200,000, and for single-source procurement above EUR 20,000. In 2002, the Office issued 14,791 decisions to change the procedure, which accounted for 82% of all decisions issued.

Two-stage tendering

248 decisions concerned the approval of the two-stage tendering procedure, including 241 approvals, 3 refusals and 4 cancellations. Most procuring entities applied for approval of this type of procedure in a situation where the object of the contract was to design and execute works (more than 50% of the applications) and where it was not possible to determine in detail the characteristics of the object of the contract so as to enable the most advantageous tender to be selected (more than 40% of the applications).

This is confirmed by the data on the type of contract - in most cases they concern works (more than 67% of the applications) and services, where specialist expertise is required of the contractor, mostly in purchases of software and consulting services. Derogation from the standard procedure of unlimited tendering in favour of two-stage tendering does not involve distortion of competition in the public procurement market. Both procedures ensure equal and unrestricted access to contracts for tenderers. For those reasons applications concerning the approval of the selected two-stage tendering procedure were almost always approved by the Chairman of the PPO.

Restricted tendering

The 2001 amendment changed the prerequisites for the use if this type of procedure and the way it is handled. Its design is similar to that of unlimited tendering with short-listing, which is perhaps the reason why it is relatively rarely used by procuring entities. There were 12 applications for this procedure and all were approved. The prevailing object of the contract was the supply of specialised equipment or the provision of specialised services. The applicants referred to the specialised nature of the contract, which naturally restricts the number of suppliers or contractors capable of performing it.

Competitive negotiated procedure

In 378 cases, the procuring entities applied for the use of the competitive negotiated procedure. 331 decisions approved the negotiated procedure, in 20 cases the prerequisites for the use of the procedure were not met, and in 27 cases the procedure was cancelled. Procuring entities usually referred to the following considerations:

a previously undertaken unlimited or restricted tendering procedure was cancelled due to a lack of the required number of tenders, and the original terms of the contract have not been substantially altered;
there is an urgent need for the award of a public contract, which could not have been foreseen.

As for the first consideration, more than half of the applications concerned the situation where only one eligible tender was submitted under the tendering procedure. Thus a strict regulatory framework and the requirement of at least two valid tenders as the prerequisite for the award of contract became the reasons of unnecessary administrative/bureaucratic effort.

In most cases the contracts awarded with the consent of the Chairman of the PPO by competitive negotiated procedure concerned works (nearly 30% of the decisions issued), while in the case of supply and service contracts this procedure was usually applied for by procuring entities willing to raise a loan (20% of the decisions) or the purchase medicines and medical equipment (17%).

It is especially worth noting a very high percentage of procedures involving contracts for financial services awarded in this manner. This shows that procedures other than negotiated procedures are not suitable for such services. One reason is an extremely strong market position of banks vis a vis their customers, which makes them reluctant to participate in procedures based on customer-specific rules instead of rules set by the bank.

Single-source procurement

Most applications for a change of the procedure concerned single-source procurement (14,108), 16% of which were refused by the Chairman of the PPO on the grounds of there being no duly substantiated grounds for the use of the procedure, and in more than 10% of the cases the procedure was cancelled. Such a large number of applications concerning this procedure is mainly attributable to the low value of the contract (EUR 20,000), for which consent from the Chairman of the PPO is necessary in single-source procurement.

Applications concerning the approval of the single-source procurement procedure are highly diversified in terms of contract value. The largest number (59%) of the applications concern contracts under EUR 60,000, and definitely fewer (accounting for just under 4% of concern contracts above EUR 1 million. Applications of the highest value were approved in 77% of the cases, which indicates that applicants opt for the single-source procedure in exceptional cases, where such procedure is actually justified.

The considerations that permit the use of the procedure, and which provide grounds for approval by the Chairman of the PPO are as follows:

for technical reasons or where the contract is awarded for work in the domain of art and culture of a creative or artistic nature, and where, for reasons related to the protection of exclusive rights as provided for elsewhere, the public contract can be performed only by one supplier or contractor. Such circumstances were involved in 57% of the decisions;
a previous unlimited tendering procedure was cancelled due to the absence of a required number of tenders if the original terms of the contract have not been substantially altered, and owing to a special nature of the supplies, services or works they can be obtained only from a single supplier or contractor. 18% of the decisions were issued on this basis;
owing to an exceptional situation, which can in no way be attributed to the procuring entity, a public contract must be performed immediately, and the time limits envisaged for the other award procedures cannot be met. This concerned nearly 12 % of the decisions;
additional contracts are awarded to the same contractor who performs the basic contract, not exceeding in total 20% of the value of the basic contract, where the award of such contracts has become necessary die to situations that could not have been foreseen or where for technical or economic reasons such additional contracts could not have been separated from the basic contract. Such circumstances were involved in more than 6% of the decisions;
the object of the contract is the purchase, rental or lease of a real property, and owing to special circumstances such property can be obtained only from a single tenderer. This concerned over 6% of the decisions;
a competitive procedure was completed and pursuant to its results the contract must be awarded to the contractor whose work was found to be the best. There were only 4 decisions concerning such situations.

Among the approvals, as many as 40% concerned the supply of electricity, heat, gas and water, i.e. situations where the supplier is a de facto monopoly in the local market. Another large group (over 8%) is the supply of medicines and medical equipment, where the urgency of execution of the contract is justified by the well-being of the patients. Software (over 3.5%) is another significant group, where the need to award the contract to a specific contractor results from copyrights. Approvals were also granted for the purchase or rental of real properties (nearly 8.5%) and for the raising of a loan (3%,) where the market of service providers is limited.

Public works contracts accounted for 8.5% of the approvals issued and concerned mainly additional works and the urgency of completion of the contract. The other approvals concerned highly diverse de facto situations, usually connected with a specialised nature of services, e.g. the purchase of specialised research apparatus, or procedures which have not resulted in the selection of the most advantageous tender, though repeated several times, due to a lack interest among tenderers (see Table 6 in the Annex).

Among the refusals, works contracts formed a substantial group, with a share of more than 27%. The other groups are as follows: purchase of fuels (nearly 10%), medicines (over 12%) and supply of motor vehicles (over 5%). The main reason for refusal of an application for the approval of single-source procurement is the fact that there is a competitive market for the particular object of the contract and no de facto monopoly of a single supplier or contractor exists (more than 65% of refusals). Another one is the absence of the need to perform the contract immediately (more than 17%) and the absence of grounds to decide that additional works cannot be separated from the basic contract (10%).

Among the decisions concerning the approval of the procedure, a relatively large group consisted of decisions to cancel the procedure - more than 1,500. The main reason for cancellation was the conclusion that the contract value does not exceed the thresholds laid down in the Act, which makes it necessary to obtain a decision, and the other ones included the withdrawal of an application by the procuring entity or the fact that the application was submitted after the performance of the contract.

In issuing decisions authorising the use of a procedure other than unlimited tendering, in cases involving specialised objects of the contract, the Chairman of the PPO often relies on data and information collected by other bodies. In 2002, the Chairman requested an opinion in more than 1,700 cases. Such opinions are sometimes used in considering subsequent applications concerning the same object of the contract. It can be taken for granted that in about 30% of the application concerning contracts other than the supply of electricity, heat, gas and water the Chairman consulted the competent body.

b) Entering into a contract for a term exceeding 3 years

A public procurement contract can be made for a fixed term of not more than 3 years, but a contract for a longer term is also possible subject to approval by the Chairman of the PPO. Last year, 2,093 applications concerned such a situation, of which approvals were granted in 1,311 cases, refusals in 558 cases, and in 223 cases the procedure was cancelled.

The largest proportion of the decisions concerned the raising of a long-term loan (30% of the decisions) and the supply of electricity, heat, gas and water (25%). However, while in response to almost 100% of the applications concerning loans the Chairman authorised a long-term agreement, a refusal was more common in the case of purchase of energy resources. The other approvals concerned e.g. the rental of real properties and large construction projects, i.e. situations where the investment process or cost-effectiveness analysis of the project forced the procuring entity to enter into a long-term contract with the contractor.

Refusals usually concerned services of a recurring or periodical nature, provided as part of municipal economy: waste disposal, maintenance of green areas, street cleaning, where the duration of the public procurement contract determines its contents and value. Another group consisted of computer, medical or office equipment maintenance/support services, where the proposed term of the contract often exceeded the depreciation period of the equipment.

The most common reason for the cancellation of a procedure was the request for authorisation of an indefinite-term contract, which is contrary to the Act, or for a term of less than 3 years, for which no decision of the Chairman of the PPO is required.

c) Other decisions

Decisions authorising a contract award procedure other than unlimited tendering and those concerning a contract term of more than 3 years account for more than 93% of all decisions issued. Thus the rest have no significant effect on the public procurement market and concern exceptional situations, mainly those involving a special nature of the object of the contract, which is the case with decisions to waive national preferences or a decision to exempt the applicant from the deposit requirement.

Of the 1,175 decisions in question, 300 concerned the waiver of national preferences - including 66% approvals and 23% refusals. The decisions are issued by the Chairman of the PPO, having consulted the competent minister, whose opinion, if any, is decisive to the decision.

129 decisions concerned the exemption from the deposit requirement and in nearly 100% of the cases approval was granted, as procuring entities made such requests to the Chairman in a highly cautious manner and only in justified situations, being reluctant to waive a deposit that guarantees correctness of the process.

77 decisions concerned applications for derogation from the Act owing to fact that the contract involved international funds and a special procedure had to be applied. Most of them concerned the co-financing of pre-accession programmes and - which is a significant departure from the practice seen in the previous years - the financing of housing construction out of the resources of Bank Gospodarstwa Krajowego, originating from loans granted by international financial institutions. In both situations the Chairman of the PPO approved the applications.

It is worth noting the relatively high number of applications for the reduction of time limit for submitting tenders. In 2002, the Chairman of the PPO issued 337 decisions to cancel procedures owing to the fact that from 26 October 2001 procuring entities can reduce the time limit for submitting tenders on their own, based of the circumstances listed in the Act. The large number of applications testifies to unawareness of the changing provisions of the law.

d) Re-examination of a case; complaints to NSA

In accordance with the provisions of the Code of Administrative Procedure, a petition is available to the applicants for re-examination of the case by the Chairman of the PPO. Last year, 756 such petitions were lodged, representing only 4% of all decisions issued in the first instance. A vast majority concerned decisions refusing the approval of the single-source procurement procedure (85%), and the other petitions concerned the refusal to authorise a contract for a term of more than 3 years (11%), plus other decisions in individual cases. This breakdown matches the structure of decisions issued in the first instance.

Re-examination of a case provides an opportunity to submit additional explanations and evidence in support of the petition. In about 60% of the cases, the Chairman of the PPO reversed the decision, having reconsidered the case, based on new circumstances presented in the petition. It should be noted that petitions for re-examination of a case are usually characterised by a much greater degree of diligence, and the factual and legal grounds of the request for reversal of the Chairman's decision are fully substantiated.

Having obtained a decision in response to the petition for the re-examination of the case, the applicants may appeal to the Supreme Administrative Court (SAC). In 2002, ten complaints were examined, including 6 filed in the previous years and 4 filed in 2002. Furthermore, two cases filed last year were adjudicated in 2003. Of the 12 cases, the SAC rejected the complains in 4 cases, a further 4 were dismissed and in 4 cases the proceedings were discontinued. The small number of complaints and the resolutions of the SAC testify to a minimal number of faults in the decisions made by the Chairman of the PPO.

5. Activities in support of participants of the public procurement market

Last year the Public Procurement Office took a series of measures aimed to support the participants of the public procurement market, both procuring entities and tenderers.

a) Long-term education/consulting programmes

One major measure that ensures compliance with the public procurement law is the education of the parties involved in the procedures and bodies involved in procurement compliance control. In 2002, the Office prepared and started the implementation of two education and information programmes.

Public Procurement Education/Information Programme for 2003-2005

The programme envisaged under the Anti-Corruption Strategy is an instrument that furthers public procurement awareness building, the introduction of good practice and professional support to procuring entities and tenderers, and thereby minimises opportunities for informal (corrupt) activities within the system. It is aimed to prepare tenderers and procuring entities to function in the public procurement market based on the EU regulatory framework, to increase the participation of entrepreneurs in the market, popularise good practices and prevent unfair conduct.

Though the programme was adopted in the last month of 2002, a number of the measures planned were completed, e.g.:

framework and detailed training programmes were prepared and made available to the parties concerned, addressed to selected groups (e.g. schools of higher education, small and medium-sized enterprises (SMEs), trainee legal counsels and trainee prosecutors);
preparation of the first of a series of public procurement guides was contracted;
the first training courses were provided to control bodies, advisers acting on behalf of tenderers, and certain procuring entities;
a system of regular delivery of public procurement information via the media was launched with support from a group of journalists contacting the Office on a regular basis;
workshops were organised for journalists dealing with the issues of public procurement;
preparatory work started on a database of foreign public procurement opportunities (in the EU territory);
the first of a series of publications was prepared for print and distribution, containing a set of decisions of the panel of arbiters, which is to become a source of information on the interpretation of the public procurement law by arbiters resolving public procurement disputes.

Support Programme for Small and Medium-sized Enterprises Participating in the Public Procurement Market for 2003-2005

The preparation and implementation of the programme is a joint effort of the Public Procurement Office and the Ministry of the Economy, Labour and Social Policy.

Small and medium-sized enterprises are active participants of the public procurement market, but they still need support to be able to overcome difficulties in access to the market. The programme provides for legislative, training/consulting, organisational/information measures as well as financial support, which is to serve the following ends:

provide small and medium-sized enterprises with wider and fuller access to information on the public procurement system;
overcome the "competence barrier";
create and activate mechanisms of financial support to small and medium-sized enterprises participating in the public contract award process.

The programme provides for close partnering with organisations of entrepreneurs and business support institutions, in particular with the network of Consulting and Advisory Outlets established to provide free-of-charge (state-funded) aid to small and medium-sized enterprises. The success of the planned measures will largely hinge upon the interest of the organisations concerned in the services offered by the Office. Full-fledged implementation of the programme started in 2003. However, in 2002:

necessary legislative changes were agreed with the Minister of the Economy, aimed to provide financial support to small enterprises seeking public contracts;
a time schedule was agreed and the first training courses were carried out for representatives of the Consulting and Advisory Outlets, future professional advisers in public procurement;
the scope and time schedule for the publication of SME guides were agreed with enterprise promotion institutions, concerning specific components of the public procurement system;
a survey was conducted among SME tenderers - the first one since the Public Procurement Act entered into force, providing information on barriers to participation in contract award procedures and on the needs and expectations of entrepreneurs with regard to changes in the law and support instruments.

b) International programmes

Last year the Public Procurement Office took steps to acquire funds to finance three projects under the Phare programme and a project to be financed from a World Bank grant. The programmes are aimed to increase the entrepreneurs' share in the contract market, improve the expertise of procuring entities in the procurement law, prepare template documents, which will facilitate the procedures, and create a basis for the introduction of electronic instruments to the public procurement system.

Phare programmes

Under the Phare 2001 programme, the PPO is executing the Public Procurement project PL2001/IB/FI-04, the purpose of which is to implement an IT system supporting procuring entities in tendering procedures. The project has been carried on in co-operation with the Italian Ministry of Community Policies. The development of software, the purchase of hardware, and the adjustment of e-procurement requirements to the SIMAP system¹⁶ will enable the electronic contract information transmission process to be fully computerised by EU accession at the latest.

Furthermore, the software developed will make it possible to perform all activities provided for under the Public Procurement Act by means of electronic tools, based on a common standard and full compatibility of the activities carried out by procuring entities, tenderers and the Public Procurement Office. In accordance with the time schedule of the programme, in 2002 a detailed agreement with the Italian partner was prepared and submitted for approval to the Delegation of the European Commission, terms of reference were developed and agreed for the contractors who will be involved in the project. The project will be completed in 2004.

The total value of the project (including Polish co-financing) is 2,150,000.

Under the Phare 2002 Programme, the PPO prepared project No. PL 2002/00-580-02-03 "Improvement of the Understanding of Public Procurement Procedures". The project provides for the provision of training in the Polish and EU provisions of the public procurement law and the related practice. 180 two-day training events are planned, addressed to representatives of procuring entities and tenderers at the central, local and regional levels. The project will provide training to about 5,400 people (180 two-day training courses with about 30 participants per course). The long-term effect of the project will be the establishment of a network of professional training institutions, specialised in public procurement, which will support the participants of the contract market based on uniform standards.

Training will be supplemented by materials on the practical functioning of the public procurement system, such as guides to the Polish and European procurement system, educational / information materials, case law publications on decisions issued by panels of arbiters and the practice of common courts, publications on the current status of EU laws and regulations on public procurement, and publications on the public procurement market and law in the EU Member States.

In 2002 the project was approved by the European Commission. The PPO also prepared detailed terms of reference for the contractors who will be selected under the procedure adopted by the Co-operation Fund and will start work in 2003.

The project amount, including co-financing, is EUR 1,530 m, and the contract completion time spans the period 2003-2005.

The PPO also prepared and submitted to the European Committee through the Office of the Committee for European Integration a proposal for the project "Improvement of the Control Practice and Mechanisms for Public Procurement" to be financed under Phare 2003. The projects provides for:

unification and popularisation of practices and template documents for public procurement procedures, taking into account the European experience;
unification of the internal and external control of the award of public contracts, both ex-ante and ex-post;
support to the monitoring of the public procurement system;
education of experts involved in public procurement consulting and training, tenderers, procuring entities, and entities involved in internal and external control of the contract award process in the context of the European and Polish public procurement law practice.

The envisaged project amount including co-financing is EUR 1,020 m, and the contract completion time spans the period 2004-2006.

The World Bank Project

In 2002, a grant agreement was signed for USD 150,000 between the World Bank and the Public Procurement Office for the implementation of the project "Preparation of a Template Tender Dossier and Template Public Procurement Agreements". The draft covers the following tasks:

preparation of a template tender dossier: template short-list documents, template tender documents, and template agreements, separately for supplies, works and services;
preparation of a guide to the use of the aforementioned documents, laying down the rules and guidelines for the use of template documents;
dissemination of template documents, including training to procuring entities.

In 2002, necessary design documents were prepared, based on which common template documents will be designed for all types of procedures, as well as specific documents for supplies, services and works. The future of the procurement system will be significantly affected by how template documents is prepared for contracts concerning IT supplies or services. Template documents will be recommended by the Chairman of the PPO for use, especially in contracts financed with a share of EU funding, given the European Commission's expectation of the adoption of documentation standards. The end of 2002 saw the launching of the contractor selection process for the project.

c) Training and publishing activities

In 2002, representatives of the Public Procurement Office took active part in training courses and seminars in public procurement, organised by the PPO in-house or by external entities.

The Regional Audit Chambers were a particularly important partner in the delivery of training, with whom the PPO held 16 regional conferences on public procurement (addressed to procuring entities). In joint projects with the Office of the Committee for European Integration and private partners (banks, entrepreneur organisations, etc.), the PPO participated in a series of dozens of projects addressed to entrepreneurs, explaining the effect of EU integration on the procurement market in Poland and presenting the opportunities arising for Polish firms from access to public markets in the EU Member States.

Owing to the fact that the provisions of the Public Procurement Act were extended as of 1 January 2003 to private entities in the utility sector (power sector, water supply, organised passenger transport, mining, etc.) the Office, together with the Ministry of the Economy and the Ministry of Infrastructure, organised a series of workshops at the end of 2002, preparing the firms for the new situation. Relatively the most problematic was the involvement of national organisations grouping together entrepreneurs, which were not willing to demonstrate greater activity in reaching its members with public procurement expertise. The subjects of most meetings included training combined with the resolution of defined problems facing the participants of the public procurement market in practice, as well as the issue of legislative changes and market changes related to the accession to the European Union.

In 2002, work was continued on the publication of the Bulletin of the Public Procurement Office, which appears every month on the PPO website, including opinions of key significance to the PPO, studies on institutions of the Polish and European public procurement laws, court sentences connected with decisions of importance to the public procurement practice.

The Public Procurement Office is trying to use its web pages as one of its basic instruments for reaching the largest possible number of recipients. In addition to up-to-date versions of legislation and information about the Office, and a browser for the Public Procurement Bulletin issues, they contain legal opinions, directories, and publications of the PPO, as well as information on public procurement in the EU and in other countries. The PPO website is one of the most frequently visited websites of central administration.

6. Harmonisation of the Polish public procurement system with the EU system

2002 was the first year of the application of the provisions amended to adjust the Polish law to the EU law. Therefore the Office monitored with particular interest the functioning of the arrangements introduced, e.g. the publication notices on planned contracts above EUR 500,000 or the prohibition to use subject-specific eligibility criteria. It should be noted that in spite of difficulties arising in the transitional period due to insufficient knowledge among procuring entities, the arrangement concerned are generally adopted and accepted by the participants of procedures.

The Public Procurement Office also carried out an in-depth analysis of the discrepancies that still exist, in order to prepare a relevant draft Act that will eliminate them. In the course of the analysis the PPO took into account comments from the European Community, conveyed at meetings attended by a representative of the PPO. Representatives of the Commission emphasised the great progress in the implementation of the EU laws, but also stressed the need for further work related e.g. to the preparation for the disbursement of structural funds.

The Commission noted the need to:

implement template procurement notices in line with the directives,
use the Common Procurement Vocabulary (CPV),
ensure compliance with the statistical obligations,
ensure compliance with the principles of primary law (non-discrimination, equal treatment, free movement of goods and services, transparency) for contract below the thresholds laid down in the directives.

7. Compliance control of the public procurement system

a) Control exercised by the Chairman of the Public Procurement Office

The Chairman of the Public Procurement Office, as a central agency of government administration in charge of public procurement is authorised under Article 9 (2) (2) of the Public Procurement Act to request information on the progress of the contract award process and to make available documentation on public contracts. This means the power to request information on the progress of the public contract award process at each stage, also after the completion of the process and the execution of a public procurement agreement. The power is not subject to any restrictions, and this it can also apply to the procedures, for which:

the appeal procedure has been exhausted, with a final decision issued by the Panel of Arbiters;
the estimated value of the object of the contract or the share of public funds in the financing of the contract is below the amount of EUR 30,000.

The checks and audits undertaken by the Chairman of the Office largely result from complaints of the participants of the public contract award process, i.e. suppliers or contractors. The complaints mainly concern the procedures where:

the possibility of protest and appeal is excluded owing to the estimated value of the object of the contract;
the appeal is dismissed for formal reasons, including the failure to submit such appeal within the time limit allowed.

Complaints and conclusions from tenderers are only one of the sources of measures taken. Another important source is the information available to the Public Procurement Office, based on the examination of applications for a decision or on procurement notices and award notices published in the Public Procurement Bulletin. Press articles are also an important source of information, where the author reports on what he believes to be infringements of the Act in a particular public contract award procedure. There are also cases where the procuring entity itself requests a procedure to be audited.

In view of a increasing number of complaints concerning irregularities in the award of public contracts, addressed to the Chairman of the Public Procurement Office, in 2002 steps were taken by the new Analyses and Control Department to streamline the control procedures and target them on day-to-day analysis and monitoring of the public procurement system, especially as regards the disclosure of pathological areas, exposed to corrupt conduct. The implementation instrument of the project is the system-based control procedure, which was initiated in 2002. In the coming years, the system-based control procedure should phase out ad-hoc control and become a major source of information on processes within the public procurement system. In 2002, two system-based audits were carried out, involving state fire service units and schools of higher education.

Besides, in exercising his statutory powers, the Chairman of the Public Procurement Office, initiated 447 checks, 341 of which were completed before the end of the year. Of the total number of cases covered by the checks 54% concerned contracts awarded by communes; followed by Autonomous Public Health Care Establishments - nearly 9%, state schools of higher education - over 6%, and counties - 6%.

The basic charge raised in 15% of the complaints was the infringement of the procuring entities of the principle of equal treatment of the entities seeking a public contract. The other most common charges included the selection of contractors by procuring entities disregarding the provisions of the Act, incorrect rejection of tenders or rejection of tenders which do not qualify for rejection, performing transactions without an administrative decision required by the law.

In more than 50% of the cases, the checks did not disclose any infringements of the Act or established that the application concerned a procedure to which the provisions of the Act do not apply, in 11% of the cases the procuring entity was given an instruction, and in 7% the commissioner for public finance discipline was notified of an infringement of the discipline of public finance. The largest number of notifications concerned procedures conducted by communes.

The irregularities disclosed in the course of the checks usually concerned:

infringement by the procuring party of Article 27d (1) - selection of the most advantageous tender based on criteria other than those laid down in the specification, invitation to tender or invitation to submit tenders;
selection of a tender that was not the most advantageous tender and the award of a public contract to a contractor who was not selected in accordance with the rules laid down in the Act;
infringement of the principle of equal treatment of tenderers by failing to enforce, with the same degree of firmness, the compliance with specific requirements by all entities, different treatment of comparable tenders or even giving a higher score to a tender that should have been rated lower than the other tenders if the evaluation criteria had been applied correctly;
infringement of Article 27a by failing to reject a tender that qualified for rejection on a mandatory basis as being contrary to the Act or the Specification;
contract award by single-source procurement procedure without the required approval from the Chairman of the PPO or in the absence of de facto grounds for the use of the procedure;
definition of the object or terms of the procedure in a manner that did not warrant fair competition.

As a result of 25 notifications sent by the Chairman of the PPO, in six cases the commissioners refused to file petitions with Decision-Making Committees to impose penalty on persons named in the notifications, and in one case action was brought (the PPO is currently in possession of information on only seven cases). By comparison, in 2001, twelve notifications (of the total of 22) resulted in declaring the party guilty; three persons named in notifications received the penalty of reprimand, 6 - the penalty of admonition, and no penalty was imposed on 5 persons. In 2000, twelve notices (of the total of 28) resulted in declaring the party guilty. In this case the penalty of reprimand was imposed on one person, 5 received the penalty of admonition, and no penalty was imposed on 6 persons.

Audit of state schools of higher education

The audit covered 6 selected schools of higher education, i.e. University of Białystok, Cracow Technical University, Pomeranian Medical Academy, Warsaw Agricultural University, the Main School of Fire Service and the Higher Police Training School in Szczytno. It concerned procedures conducted in 2001.

An analysis of the data made available by the institutions concerned shows that most procedures involved activities ancillary to the core educational and research activity, connected with the maintenance of holiday centres and dormitories, canteens, etc. Most public contracts were awarded by the institutions by single-source procurement procedure, usually invoking Article 71 (1) (7) of the Act in the wording effective before the June 2001 amendment.

Selected contracts awarded by unlimited tendering procedure procedures were subjected to a detailed audit. The results of the audit show that the different institutions committed the same mistakes under the procedures conducted. The most common ones included:

failure to reject a tender in a situation where the circumstances arose mentioned in Article 27a (or failure to exclude tenderers where the circumstances arose mentioned in Article 19 (1) of the Act);
failure to clarify, where necessary, doubts arising from the tenders submitted;
unclear and imprecise definition of criteria for evaluation of tenders, in particular the criterion of "suitable professional background", which resulted in excessive discretion in technical evaluation of tenders;
technical evaluation of tenders based on subject-specific eligibility criteria;
failure to meet the obligation to require confirmation by tenderers of have satisfied the conditions mentioned in Article 22 (2);
definition if the terms of participation in the procedure in a manner that distorts competition and equal treatment of tenderers;
failure to provide proper evidence of procedures completed.

The irregularities arising confirmed the findings of the Supreme Chamber of Control concerning the compliance with the Public Procurement Act by the schools of higher education listed in the report "Public Contracts Granted by State Schools of Higher Education in 1999 - 2000".

Audit of state fire service units

The review of the activities of the State Fire Service units concerning the compliance with the provisions of the Public Procurement Act in awarding public contracts was preceded by a preliminary analysis of 341 public procurement procedures for the period 2000-2002, including 20 under appeals and 321 under procurement notices placed in the Public Procurement Bulletin. The investigation carried out under Article 9 (2) (2) of the Public Procurement Act covered 13 of them, including:

appeals - procedures conducted in the period 2000-2002, for which appeals were allowed,
notices - procedures conducted in the period 2000-2001 under each of the procedures and contract types advertised, and those under which the price of the selected tender was higher than the lowest price offered.

An analysis of the documents required under the Public Procurement Act did not disclose any infringements that could provide grounds for notification of a disclosed infringement of the discipline of public finance to the commissioner for public finance discipline.

b) Co-operation of the Public Procurement Office with other control bodies

In 2002, the Chairman of the PPO signed the control co-operation agreement with the National Council of Regional Audit Chambers and prepared an identical agreement with the Supreme Chamber of Control. The intention of the agreement is to co-ordinate control measures and to jointly monitor the procurement market in order to prevent irregularities in the management of public funds. In implementation of the agreement, the PPO analysed the previous checks of public contracts by the SCC and the NCRAC, the results of which are indicative of a number of infringements of the public procurement law in the award of contracts, similar to the results of the audit performed by the Chairman of the PPO

According to the Supreme Chamber of Control, the most common irregularities and infringements of the provisions of the Public Procurement Act include:

the lack of certain data in procurement notices,
failure to meet the obligation to furnish explanations concerning the Specification of Essential Terms of the Contract,
the award of contracts by single-source procurement procedure in contravention of Article 71 of the Act, which lays down the grounds for the admissibility of the procedure, including the failure to obtain a relevant decision from the Chairman of the PPO,
subdivision of the contract into lots in order to avoid the application of the Public Procurement Act,
undue rejection of the tender or exclusion of the tenderer from the procedure,
examination by the tender committee of tenders that fail to meet the requirements stated in the invitation to submit tenders,
the failure of the members of the tender committee to submit declarations that they are not subject to exclusion from the public contract award procedure,
waiver in the performance of the contract of the requirements laid down in the Specification of Essential Terms of the Contract and the proposals contained in the tenders submitted,
entering into an agreement with the successful tenderer within less than 7 days of the award notice (Article 51 of the Act),
insufficient protection if the tenderers' interest by waiving the provision by the contractors of the public contract performance security or accepting such security in a lower amount,
late refund of the deposit,
failure to notify the other participants of the procedure of the award of the contract and the value of the tender selected,
keeping the documentation of the public procurement procedure incorrectly, incomplete documentation or lack of such documentation.

The responsibilities of the Regional Audit Chambers include checks of public contracts awarded by local government units, inter-commune unions, commune associations, and commune and county associations, county unions, county associations, local government organisational units, and other entities, as part of the disbursement of subsidies allocated from budgets of local government units.

Nearly 10% of the audits performed by the RACs led to notifications (proposals) on the infringement of the discipline of public finance. In the case of procedures involving the award of a contract above EUR 30,000, the percentage was 15.71%, in procedures of up to EUR 30,000 - 6.52%. The data show that procuring entities are unable to handle more formalised procedures applicable to larger contracts. Based on the audit results, the Regional Audit Chambers sent three messages to the Chairman of the Public Procurement Office and 17 notifications to the Prosecutor's Office and the Police of suspected offences.

An analysis of the audits carried out by the Regional Audit Chambers in 2002 shows that the most common irregularities in the application of the provisions of the Public Procurement Act included:

failure to observe the principle of universal application of the Act,
failure to comply with the prohibition to subdivide the contract into lots in order to avoid the application of the Act or any procedures laid down by the Act,
incorrect definition of the object of the contract,
incorrect use of a procedure other than unlimited tendering,
failure to reject a tender or to exclude a contractor from the procedure,
failure to cancel the procedure in the cases provided for by the Act,
absence of the Specification of Essential Terms of the Contract or its incorrect contents,
failure to request the tenderers to confirm compliance with the terms required by the procuring entity,
irregularities involved in the determination of the criteria for evaluation of tenders, their change or use contrary to the provisions of the Specification,
infringement of the requirements of the Act with regard to the competence of the tender committee,
irregularities involved in the lodging and refund of the deposit,
irregularities involved in the collection and return of the contract performance security,
irregularities involved in the execution of a public procurement agreement,
incorrect preparation of a report on the procedure or the documentation of basic activities related to the procedure.

The findings correspond to the results of checks carried out by the PPO.

The experience acquired from an audit performed by authorised bodies in the public procurement system shows that owing to limited evidence available to the control bodies in the course of the checks (e.g. inability to hear a person as a witness, inability to call former personnel of the audited units to provide explanations), it is not always possible to prove that the procuring party' intentional conduct is the source the infringements disclosed. Furthermore, in spite of the disclosure of many significant infringements of the Public Procurement Act, the persons responsible for such irregularities suffer minimal sanctions. An analysis of decisions of panels deciding on cases involving the infringement of the discipline of public finance leads to the conclusion that a prevailing majority of the decisions issued consists of decisions to waive punishment or to impose the penalty of admonition. The number of infringements to the Public Procurement Act, as well as the fact that they repeatedly concern the same procuring entities justifies doubts as to whether the penalties decreed fulfil their preventive role.

VI. Appeal system and court control of public procurement procedures

The supplier or contractor whose legal interest has been adversely affected by the procuring entity's infringement if the contract award rules may take advantage of the measures of appeal - protest and appeal, and then complaint to the District Court in Warsaw. Before the expiry of the time limit for the submission of tenders, measures of appeal are also available to organisations of employers and entrepreneurs, grouping together suppliers or contractors, entered on the list maintained by the Chairman of the Public Procurement Office. Appeal measures are available in the procedures where the value of the object of the contract was estimated above EUR 30,000.

An appeal can be lodged to the Chairman of the PPO against the procuring entity's decision or lack of decision on a protest. An appeal is considered by a panel of three independent arbiters: on appointed by the procuring entity, on by the appellant, and the chair of the panel by the Chairman of the PPO. Arbiters are not representatives of any participant of the procedure and should perform their duties in an impartial manner.

1. Appeal procedure

The number of appeals filed with the Chairman of the PPO is growing steadily by about 200 cases a year. In 2001, 1,687 appeals were lodged, and in 2002 - 1,936. It should be noted, however, that the number of cases examined by arbiters is lower than the number of cased lodged: in 2001 - 1,202, and in 2002- 1,404, which results from a substantial volume of appeals, which are withdrawn before trial (64 in 2002) and the appeals for which the statutory deposit was not paid (468 in 2002). Appeals rejected and dismissed on formal grounds represent about 15% of the total number of appeals. It is also worth pointing out that the number of appeals relative to the number of procedures advertised remains at a similar level - in 2000, appeals were lodged in 4.85% of the cases; in 2001, in 4.1%' and in 2002, 4.77%.

More than 50% of the appeals concern works contracts. Appeals involving supply and service contracts account for about 25% of all cases each. The prevalence of appeals in works procedures results from the proportions of the tendering procedures advertised - nea

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