Consortium’s issues with its member’s personal performance of a public contract

The primary objective of forming a consortium is to accumulate the experience, skills and potentials held by individual consortium members.

This is done in order to meet the participation conditions and to cover (as widely as possible) the non-price bid evaluation criteria, thus securing the highest position in the rank-list of the evaluated bids.

It is worth making a reference to the judgment of the Provincial Administrative Court in Warsaw of June 09, 2017, case files no. V SA/Wa 1906/16, in which the court clearly noted that “it is not possible to expect the comprehensive fulfillment of the tender participation criteria by just one of the consortium members. The essence of a consortium is that entities that would not be able to meet all the requirements individually can do so jointly, and can enter the public procurement procedure with a better chance of winning the contract together.”

Needless to say, a contractor may pursue the award of a public contract independently or as part of a specific group of entities, commonly referred to as a consortium. In practice, we can see various models of cooperation between consortium members. In most cases, however, the members define their rights and obligations on the basis of a cooperation agreement.

In that context, it is worth focusing on how a consortium meets the tender participation conditions. Pursuant to article 117 section 1 of the Public Procurement Law Act (“PPLA”), the contracting authority may specify a special and reasonable way for contractors jointly applying for the award of a contract to fulfill the participation criteria, so long as this is justified by the nature of the contract and is proportionate in nature. Clearly, this provision forms an exception to the general principle of equal treatment of contractors regardless of whether they participate independently or as part of a group. Also, the contracting authority is authorized to regulate the manner of fulfillment of the participation conditions for the consortium only such a solution is justified by the nature of the contract, is proportionate in nature, and the contracting authority will be able to demonstrate compliance with the aforesaid criteria.

Given the above, the judgment of the National Appeals Chamber of October 30, 2018 (case files no. KIO 2140/18) continues to be valid and applicable:

„“In order for the contracting authority to determine a specific way in which contractors are supposed to meet the participation conditions, it should objectively justify the applicable requirement. Moreover, in order for the contracting authority to apply the provisions of article 23 section 5 of the Public Procurement Law, the scope of the contract must match its specific nature.””

We have recently witnessed a substantial rise in the number of tenders in the broadly-defined IT sector, in which contracting authorities use article 117 section 1 of the PPLA. However, in our opinion, the description of the participation conditions for a consortium is not always adjusted to the scope of the contract and its nature. Nevertheless, from the perspective of a consortium’s participation and the concept of combining and aggregating skills, the provisions of article 117 sections 2 and 3 of the PPLA still (i.e. even though they were introduced into the Polish legal system some time ago) raise doubts as to their interpretation, and generate significant problems related to their application in practice. According to those provisions, if the contracting authority specifies participation condition(s) concerning:

• authorizations to conduct specific activities – this condition is regarded to be fulfilled if at least one of the consortium members is authorized to conduct such activities and will perform the scope of works for which these authorizations are required;
• education, professional qualifications or experience – the part of the scope of the contract, for whose performance these capabilities are required, can only be performed by a consortium member that has the educational background, professional qualifications or experience required by the contracting authority.

Based on the lawmaker’s intention, these provisions were supposed to implement the concept of ensuring the actual involvement (in the performance of the contract) of the consortium member that holds the potential expected by the contracting authority, which is crucial from the point of view of the public contract. Hence, the structure of these regulations is similar to article 188 of the PPLA, which focuses on ensuring the actual participation (in the performance of the contract) of a third party that makes its potential available for the purpose of meeting the tender participation criteria.

While comparing the two regulations above, one may arrive at the conclusion that the lawmaker equates the role of a consortium member to that of a subcontractor, at the same time assuming extended liability (i.e. one that is typical for a consortium member).

Nevertheless, there is an important difference between the contractor – third party and consortium member – another consortium member relationships. Consortium members have joint-and-several liability, which – in the case of a third party – occurs only to a limited extent, concerning the provision of financial or economic resources (article 120 of the PPLA). To the remaining extent, the liability of a subcontractor towards the contracting authority is limited, and the liability for the proper performance of the contract is borne by the contractor that appointed such a subcontractor.

The joint-and-several liability of consortium members provides the contracting authority with a high level of protection. This gives rise to the question of whether the solution discussed herein is indeed necessary in the legal system. Since the contracting authority is free to demand performance from any consortium member, the requirements contained (in particular) in section 3 of article 117 of the PPLA could be regarded as a consent for excessive interference with the contractors’ rights.

By allowing joint participation in a public procurement procedure and subsequent performance of the contract in the same scenario, the lawmaker (both at the EU and national level) legitimized this particular model, and gave such entities the possibility of securing public contracts, but at the same time expecting them to assume full liability for the performance of the contract. Since no mechanism has been introduced to divide this liability or to determine for which parts of the contract the contracting authority can pursue claims against individual consortium members (as each of them is liable for the performance of the entire contract), a solution in which the contracting authority can substantially interfere in the work organization and operations of the consortium would be disproportionate in nature and would violate the principle of the parties’ equality.

Another source of numerous problems is section 4 of the aforesaid article, which imposes an obligation on contracting authorities to require a statement showing the manner in which the consortium will perform the contract if the requirement indicated in section 3 applies. If we adopt the interpretation of article 117 section 3 of the PPLA, as discussed above, this statement should only include the entity that provides the necessary experience.

The determination of the legal nature of such a statement also gives rise to interpretation problems as it has not been clearly defined in the PPLA. It is worth noting that the PPLA employs terms such as “participation eligibility evidence” (article 7 section 17 of the PPLA), “contract-related evidence” (article 7 section 20 of the PPLA) and “other documents or statements submitted in the procedure” (article 128 section 1 of the PPLA). Given the fact that the categorization of such a statement as a document of a given type involves (among others) the obligation to make it in a relevant form, as well as questions regarding the possibility (or lack thereof) of its clarification, submission, modification or correction, we believe that the provision referred to above needs to be clarified as part the upcoming amendment of the PPLA. On May 26, 2021, an opinion was published at the website of the Public Procurement Office, whose author unequivocally states that the statement on the division of works should be categorized as “participation eligibility evidence.” Nevertheless, this issue continues to evoke significant doubt.

In its judgment of November 22, 2022 (case files no. KIO 2925/22), the National Appeals Chamber opted for the interpretation that the statement referred to in article 117 section 4 of the PPLA is “participation eligibility evidence”, required to be submitted along with the bid:

„This is demonstrated by the fact that the aforesaid provision refers to article 117 sections 2 and 3 of the Act, which specify the manner in which the conditions are supposed to be met by contractors submitting a joint bid. Consequently, this statement does not form part of the bid contents. The purpose of its submission is to demonstrate the eligibility for participation in the procedure. Hence, the statement is subject to the procedure discussed in article 128 section 1 of the Act.”

When evaluating the issue discussed herein, it is worth making a reference to Directive 2014/24/EU, in which the EU lawmaker pays a lot of attention to a group of contractors [“economic operators”] acquiring and performing public contracts. Given that joint bidding and the aggregation of potentials are among the cornerstones of the public procurement system, being at the same time an expression of equal treatment and fair competition, any restrictions in this area need to be applied in a thoughtful and regulated manner. Moreover, the Directive contains provisions which stipulate that while groups of contractors might be subject to conditions which are not imposed on individual participants, such conditions have to be justified by objective reasons and be proportionate (recital (15) and article 19 section 2 of Directive 2014/24/EU).

Even in the EU case law, it has noted that the EU law does not require any contractor to perform its obligations only directly and using its own resources (cf. judgments in the following cases: CoNISMa, C-305/08 (item 41); Partner Apelski Dariusz, C-324/14; Ostas celtnieks, C-234/14 (item 23), Pippo Pizzo, C-27/15 (items 25 and 26); Swm Costruzioni 2 and Mannocchi Luigino, C-94/12, (item 33)).

The article, “One for all, all for one. Is that really the case?”, was published in the January – February issue of ZAMAWIAJĄCY magazine. Feel invited to download the full article as a PDF file.