A bid of PLN 0 – is that possible in any way?

1. A public procurement contract is a fee-based type of contract, and this is what the Directives and the Public Procurement Law Act say.
2. It is not possible to include a fee of PLN 0 in a public procurement contract and issue an invoice covering this amount (this argument seems to be quite odd but I have heard it a couple times).
3. There is no way to compare the submitted bids because the price of PLN 0 would have to be divided by 0, which is not possible, as we all know from Math classes (although you can find interesting videos online, showing that, in fact, this can theoretically be done).
4. PLN 0 is an abnormally low price in relation to the scope of the contract, or constitutes an act of unfair competition, i.e. an attempt to eliminate competitors from the tender (this begs the question of whether a price of e.g. PLN 1 or 5 will no longer be abnormally low).
5. Contracting authorities make it clear in public procurement documentation that any bid with a price of PLN 0 will be rejected (will bids with a price of PLN 0.1 no longer be subject to rejection?).

In the summary of this article, you will find my responses to these arguments, taking into account the CJEU Judgment (as defined below) and the Advocate General’s opinion (detailed below).

All questions and doubts were addressed in the judgment of the Court of Justice of the European Union of September 10, 2020, case C-367/19 (the “CJEU Judgment”). CJEU answered a pre-judicial question asked by a Slovenian court. The need for CJEU to take a position arose in connection with a dispute that emerged in a public tender for access to a legal information system, organized by the Slovenian Ministry of the Interior. One of the contractors offered such access for the price of EUR 0. When asked by the contracting authority to explain this, the contractor said that such a price did not mean that the contract with the contracting authority would not be beneficial for the contractor. This is because it will gain references and, above all, access to a new market and new users. Consequently, it would have clear benefits from the contract, just not financial ones. The contracting authority, however, did not accept such explanations, noting that the price of EUR 0 means the lack of any remuneration, whereas a public contract can only be fee-based.

However, before we get into the contents of the CJEU Judgment itself and the conclusions arising therefrom, it would be advisable, in my opinion, to read the opinion of Advocate General, Michal Bobek, dated May 28, 2020, related to case C-367/19 (the “Advocate General’s Opinion”).

Firstly, the Advocate General wonders whether it is even possible to consider 0 as an abnormally low number. He begins his opinion with a very interesting observation, i.e. that „Leaving to one side the spirited discussion to which the nature of the number zero has given rise in the field of mathematics, [1] – such a question put to a layman from a legal perspective would in all likelihood cause him to regard the lawyers with the look of astonishment which lawyers are accustomed to receiving when they try to explain what they do. The layman will even observe, perhaps – not without sarcasm – that only a lawyer is capable of devoting page after page to discussing (literally) nothing.”

In the Advocate General’s opinion, this does not change the fact that in the field of public procurement, as in mathematics, zero seems to be a special number that is difficult to be placed in the existing framework of evaluations. Does a contractor proposing goods or services at a nominal price of EUR 0 submit an abnormally low bid? Or is there an automatic exclusion of that bidder from the scope of public procurement law as soon as the magic number zero is put into the bid instead of another nominal amount significantly lower than the actual cost of the contract (e.g. EUR 1.5 or 101), and the sole reason for that would be that unlike all natural numbers, “0” cannot be used in a public procurement contract?

The main legal framework within which the Advocate General’s Opinion and the CJEU Judgment were issued is essentially Title I of Directive 2014/24/EU, named “Scope, definitions and general principles”, especially article 1 sections 1 and 2:

1. „This Directive establishes rules on the procedures for procurement by contracting authorities with respect to public contracts as well as design contests, whose value is estimated to be not less than the thresholds laid down in Article 4.

2. Procurement within the meaning of this Directive is the acquisition by means of a public contract of works, supplies or services by one or more contracting authorities from economic operators chosen by those contracting authorities, whether or not the works, supplies or services are intended for a public purpose.”.

Article 2 section 1 item 5 of Directive 2014/24/EU defines “public contracts” as “contracts for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities and having as their object the execution of works, the supply of products or the provision of services.”

Is a contract with a fee of 0 still a fee-based agreement and a public procurement contract, or is it some kind of a gratuitous contract resembling e.g. a donation agreement?

While the main purpose of public procurement law should be to regulate the acquisition of goods or services by public authorities, Directive 2014/24/EU does not really allow for the identification of the characteristics of the “pecuniary interest” to which article 2 section 1 item 5 of the Directive refers. The concept of “acquisition” is broad enough to include various types of that acquisition; after all, what matters is that the goods or services are ultimately obtained by contracting authorities. Goods and services can be legitimately acquired in different ways.

Thus, in the Advocate General’s opinion, “a simple literal and systemic reading is not sufficient to enable us to comprehend the meaning of ‘contract for pecuniary interest’ and in particular the crucial notion of ‘consideration’ concealed behind the very concept of contract: what precisely is the nature of the consideration that must be supplied by the contracting authority in order for the public contract to be considered valid?”

In order to clarify the concept of “contract for pecuniary interest,” the Advocate General points to a number of CJEU judgment, including those in which the Court decided that, in accordance with the usual legal meaning of the concept of “contract for pecuniary interest” used in the definition of public contracts, those words designate a contract by which each of the parties undertakes to provide a service in exchange for another. [2]. The existence of “consideration” or “compensation” to be supplied by the contracting authority, and therefore of a synallagmatic relationship (involving reciprocal obligations), constitute, for the Court, decisive elements for the purpose of assessing the existence of a contract for pecuniary interest. [3]

While summarizing the issue of the “public procurement contract for pecuniary interest,” the Advocate General presents the following arguments:

1. “First, the nature of the consideration, inherent in the condition of onerousness, which is supplied by the contracting authority may take forms other than a price paid in money. There is thus not necessarily a need for a transfer of a sum of money. Other types of payment, including those of a non-monetary nature, are possible.
2. Second, the consideration must have a certain economic value, without being required to correspond precisely to the value of the goods or services supplied. Thus, the contracting authority and the tenderer may agree on the option of making payment in different forms, provided that such forms of payment have a clear economic value.
3. Third, the nature and the content of the consideration which the contracting authority must pay must be apparent from the contract as a direct and enforceable legal obligation arising under the contract. (…)
4. Thus, in order to determine whether the contract includes consideration (and, accordingly, whether the condition of onerousness laid down in Article 2(1)(5) of Directive 2014/24 is satisfied), I am of the view that the focal point of the analysis is not the precise sum of money stated in the contract. The question is, rather, whether, on the basis of that contract, the two contracting parties are locked inside a relationship of reciprocal legal obligations which each party may enforce against the other and in the context of which the contracting authority provides at least clear and precise consideration of an economic nature.”

Can 0 be automatically considered an abnormally low price and can a bid with such a price be rejected without examination by the contracting authority and clarifications from the contractor?

The Advocate General gives a very accurate answer to this questions, stating that „all of this is reminiscent of the paradox of Schrödinger’s cat. As long as the box is not opened and its contents examined, it cannot be ruled out that the cat inside the box is alive. Likewise, as long as the contracting authority does not give the tenderer, on the basis of Article 69 of Directive 2014/24, the opportunity to explain the logic and the structure of the costs underpinning its tender, it cannot be ruled out that the tender in question may lead to the conclusion of a public contract, without prejudice, ultimately, to the tender being rejected by the contracting authority. However, the tender cannot be rejected purely because a nominal tender of EUR 0.00 does not satisfy the condition of onerousness set out in Article 2(1)(5) of that directive.

In the second place, it must be stated that Directive 2014/24 does not define the concept of ‘abnormally low tender’ or specify the numerical amount which that concept covers.”

Given the above, there seems to be nothing to prevent the concept of an “abnormally low price” from including a bid of EUR 0. It is true that the amount of EUR 0 seems to be some sort of a psychological barrier. Nevertheless, from the economic point of view, there is nothing to justify distinguishing it from a bid of EUR 10 or 100 when all these amounts are well below the actual cost of the contract.

Thus, any bid, including one where the contractor offers to perform the contract for PLN or EUR 0, should be subject to examination in terms of the abnormally low price criteria.

Given the above, the CJEU Judgment makes it clear that article 2 section 1 item 5 of Directive 2014/24/EU must be interpreted in such a manner that it does not act as a legal basis for rejecting a bid submitted by a contractor in a public procurement procedure solely because of the price of EUR 0.

There have been proceedings in Poland, in which contractors submitted bids with a fee of PLN 0 for the performance of the entire contract. Nevertheless, these are rare occasions. One of the most recent was a public tender for mobile payments in the Non-Guarded Paid Parking Zones in Warsaw. A contractor offered a fee of PLN 0 in one part and a negative (minus) value in another. In this case, the contractor used the CJEU Judgment in its explanations, together with an argument that its mobile payment application has so many functionalities that the actual benefit for the contractor would not be the mere fact of entering into an agreement with the contracting authority, but the acquisition of new users for this application and the profits obtained from these additional functions. Ultimately, the contractor lost the case but only because, in the opinion of the National Appeals Chamber, it failed to demonstrate and sufficiently prove that such a price was not abnormally low.

The majority of such public procurement procedures in Poland, however, are those in which it is not so much the price for the entire contract that is set at 0, but the unit price or optionally the price for a specific element of the contract. In such a case, there is often an accusation that the contractor did not offer that part of the scope of the contract at all. Based on the rulings of the National Appeals Chamber, offering a price of 0 for a specific element of the contract (e.g. one of the cost estimate items) does not automatically mean that the price for a given service has not been estimated/determined. This was confirmed e.g. in the judgment issued by the National Appeals Chamber in case no. KIO 1302/14: “Entering the amount of PLN 0 in a given item should be considered as the valuation of this item. 0 is a number used in European mathematics since at least the Middle Ages, recognized as a real, whole and measurable number. The symbol 0 is thus assigned a specific numerical value. Consequently, the amount of PLN 0 constitutes a valuation of a given item, as opposed to the absence of any numerical value, which would have to be considered as the lack of valuation. By indicating the amount of PLN 0, the contractor specified what value a given item represents. Showing that this is a borderline low value, i.e. implying that the item is (to put it informally) worthless, definitely constitutes a valuation, and the number 0 assigned to the monetary units in which the valuation was made, expresses and illustrates the result of this valuation.”

Similarly, in the judgment issued in case no. KIO 1902/13, the Chamber noted as follows:

“Providing a value of PLN 0 in item 319 of the cost estimate does not mean that the contractor has not offered to perform this part of the contract and will not perform it. As the joining party rightly pointed out, the bid submitted by it covers the performance of the entire contract, including the supply of wall-mounted programmers and a web server in the quantity required by the contracting authority.”

In the judgment issued in case no. KIO/UZP 496/10, the National Appeals Chamber analyzed such a case, noting that “the fact that one of the components of the bid was priced at PLN 0 (which is undoubtedly a value much lower than the actual cost of manufacture or provision) is irrelevant in this context because the contractor does not separately sell the individual supplies, services and works that make up the contract. On the contrary, it offers comprehensive performance of a complex investment project for a fixed price.

Due to the nature of the fixed fee, the contractual price is a price accepted in advance for the entire scope of the contract, rather than the sum of individual parts that have already been completed. Importantly, the fixed fee (i.e. a global price covering the entire contract) is a reasonable price that does not differ from other bids submitted in the procedure. Thus, the selected contractor offers its services for a monetary consideration of an adequate value, with respect to which there is no basis to claim that is has been underestimated in relation to actual costs.”

Responding to the arguments presented at the start of this article:

1. A public procurement contract is a fee-based type of contract, and this is what the Directives and the Public Procurement Law Act say – Yes, but consideration can also occur when the offered price is PLN 0 and the contractor will benefit from the performance of the contract.
2. It is not possible to include a fee of PLN 0 in a public procurement contract and issue an invoice covering this amount – It seems that the answer has already been given in point 1 above. It is not the remuneration or the price of PLN 0 entered in a given part of the contract that determines whether we are dealing with a public procurement contract.
3. There is no way to compare the submitted bids because the price of PLN 0 would have to be divided by 0, which is not possible – In my opinion, it will be sufficient for contracting authorities to include a provision in the public procurement documents, based on which they will allow bids with prices of 0 for the entire scope of the contract; of course, this does not exempt them from the obligation to examine such a price in terms of its potentially abnormally low nature.
4. PLN 0 is an abnormally low price in relation to the scope of the contract, or constitutes an act of unfair competition, i.e. an attempt to eliminate competitors from the tender – In each case, the contractor should be asked to submit relevant clarifications, the method of calculation of such a price and the assumptions made.
5. Contracting authorities make it clear in public procurement documentation that any bid with a price of PLN 0 will be rejected – It seems that such a provision is inconsistent with the CJEU Judgment discussed in this article, which dismissed such a solution involving the “automated” rejection of bids solely because of the price of 0.

1. For an accessible introduction (short on calculations and long on cultural history), see, for example, Kaplan, R., The Nothing that Is: A Natural History of Zero, Oxford University Press, Oxford, 1999.
2. See, in particular, judgments of 18 January 2007, Auroux and Others (C‑220/05, EU:C:2007:31, paragraph 45), and of 18 October 2018, IBA Molecular Italy (C‑606/17, EU:C:2018:843, paragraph 28).

3. See, to that effect, judgment of 21 December 2016, Remondis (C‑51/15, EU:C:2016:985, paragraph 43 and the case-law cited), concerning the interpretation of the notion of ‘public contract’ referred to in Article 1(2)(a) of Directive 2004/18.

The article, “A bid of PLN 0 – is that possible in any way?”, was published in the September – October 2023 issue of ZAMAWIAJĄCY magazine. Feel invited to download the full article as a PDF file.