Stories from the National Appeals Chamber: Bid Bond Validity vs. Bid Validity Period

As host of the procedure, the contracting authority must specify in the contractual documentation the formal and technical requirements of a bid bond. In some procurement procedures, the contracting authority requires contractors to submit a bid bond whose validity extends beyond the validity period of bids. In a recent decision, the National Appeals Chamber ruled on the question of whether such provisions of the warrant are permissible or invalid under the law (Case No. KIO 3482/21).

An entrepreneur goes before the National Appeals Chamber

In the terms of reference, the contracting authority required the contractors to allow it to effectively satisfy the guarantee or surety after the expiry of the period of validity of the tenders. The contracting authority has clarified that contractors should give it the opportunity to request payment of the bid bond during the period of:

  • Up to two working days after the end of the period of validity of tenders, if electronic submission of payment requests has been authorized, or
  • Up to seven working days after the end of the period of validity of the offer, if a written request for payment was required.

However, during the examination of the tenders, it turned out that the period of validity of one of the bid bonds of the contractors was to expire on the same day as the expiry of the period of validity of the tenders. Consequently, the contracting authority decided to reject the offer, stating that the bid bond presented did not meet the requirements of the ToR. In the opinion of the contracting authority, the wording of the guarantee suggested that if the conditions for payment of the amount of the bid bond had appeared towards the end of the validity of the guarantee, it would not in practice be possible to execute the guarantee due to the formal procedures which, in accordance with the requirements of the bank, must accompany the request for payment.

But the entrepreneur excluded from the procedure refused to give up and appealed to the National Appeals Chamber for erroneous rejection of his offer pursuant to art. 226(1)(14) Polish Public Procurement Law. The contractor considered that the bid bond should remain valid only until the end of the validity period of the tenders, at which time the contracting authority should complete the procedure for the selection of the contractor.

The contracting authority has discretionary power, but it is limited

First, the National Appeals Chamber pointed out that the contracting authority is the host of the procedure and therefore the law on public procurement grants it a certain freedom in elaborating the terms of the contractual documentation. This gives the contracting authority the right to require a bid bond, and if it chooses to exercise this right, it is required to specify the requirements for the amount and timing of payment of the deposit. However, this does not mean that the contracting authority can formulate the ToR in an unlimited manner, since the margin of appreciation conferred on it is limited by the generally applicable legal provisions, in particular the law on public procurement. This means that all formulations of the terms of reference not contested by the contractors will not be absolutely binding.

In principle, the chamber authorized the contracting authority to define the formal and technical requirements of the bid bond. The board admitted the difficulty of asserting a guarantee or bond if the contracting authority requests payment of the bid bond on the last day of the period of validity of the bids, in particular if the guarantor requires that the request for payment be presented in a manner that it can seriously be doubted that the contracting authority is able to satisfy its claims.

To solve this problem, the contracting authority must structure the documentation in such a way that it can successfully submit a request for payment on the last day. However, the contracting authority may not formulate the ToR in violation of generally applicable law. In this case, the board concluded that the contested provisions of the ToR were not only invalid under Art. 58 of the Civil Code, but also violated the fundamental principles of public order governed by art. 16 (1) and (3) of the Public Procurement Act.

De factothe contracting authority circumvented the law

In accordance with art. 97(5) of the Public Procurement Act, a bid bond is presented before the deadline for submission of bids and must be maintained without interruption until the expiry of the period of validity of bids. However, the contracting authority has exceeded this deadline by requiring the submission of a bid bond valid for two to seven working days beyond the period of validity of the offers. Thus, in the opinion of the board, the wording of the ToR was inadmissible, as it constituted a legal act aimed at circumventing the law (in fraud legis), while appearing to respect the law. The wording of the ToR did not contain elements directly contrary to the law, but the effect it produced violated the obligation to maintain the bid bond exclusively until the expiry of the period of validity of the offers. In the opinion of the board, this action fell within the scope of Art. 58, meaning it should be considered invalid and not deserving of legal protection.

The appeal panel also noted that the wording of the procedural documentation unfairly differentiated the situation of contractors depending on the type of bond they had posted, namely those who had posted cash bond and those who had deposited a bond in the form of a bank guarantee. In the board’s view, this violated the principle of equal treatment of contractors (Public Procurement Act, Art. 16(1)) and was unjustified, as the bank guarantee should provide a similar level of protection to money available in the contracting authority’s account. bank account, and not allow a longer time to submit a request for payment than a bid bond posted in cash.

Therefore, the contracting authority’s action was disproportionate to the problem it sought to resolve with the contested provisions of the ToR. The additional two working days for submitting a request for payment in electronic form or the seven working days for submitting a request for payment in writing after the expiry of the validity period of the offer was disproportionate to give the contracting authority the possibility of being actually satisfied with the bid bond, i.e. it went beyond what was necessary for the contracting authority to achieve its purpose. According to the Chamber, it would suffice to specify in the ToR a method of issuing a request for payment to the guarantor or surety for there to be a real possibility of presenting an effective request for payment within the period of validity of the offer (especially on the last day), for example by including an obligation to accept a request for payment sent by post or entered into the computer system during the period of validity of the offer.

Eventually, the National Appeals Chamber upheld the appeal, ordering the contracting authority to reverse the rejection of the bid and reconsider the bids.

Comments are closed.