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How to avoid unfavourable public contracts

25 July 2023 | Knowledge, News, The Right Focus

One of the most common mistakes made by economic operators is predatory pricing. This not only makes it impossible to make a profit, but can also result in a loss. Sometimes such a mistake is not the fault of economic operators. In fact, the high inflation and sharp increases in energy, commodity and other prices that we have seen in recent years have had a negative impact on the profitability of public procurement. As a result of such a mistake, economic operators may not only lose the planned profit, but may even risk a surcharge on an ongoing contract.

Validity of tenders: legal implications

Any economic operator who has submitted a tender in a public procurement procedure is bound by it for the period specified in the contract documents. During this period, it cannot release itself from the obligation to conclude the contract on the terms set out in the tender.

Therefore, if a contracting authority selects a particular economic operator’s tender and sets a deadline for signing the contract, the economic operator should sign it. Otherwise, it risks losing a tender bond if, of course, one is requested by the contracting authority.

However, if the validity of the tender expires, the economic operator may refuse to enter into the contract. This is a mechanism to protect economic operators from the risk of entering into unprofitable contracts.

Clarifying a predatory price as a way of avoiding an unfavourable contract

Another way of avoiding an unfavourable contract is to use the procedure for clarifying the price offered.

In the course of a public procurement procedure, a contracting authority may ask an economic operator to provide a relevant explanation or evidence confirming the assumptions made in the tender if it considers that the price offered by the economic operator appears abnormally low or raises doubts as to the economic operator’s ability to perform the subject matter of the contract.

Economic operators who have submitted a quote that is too low and who are seeking a way of avoiding an unfavourable contract do not have to respond to such a request. This will result in the tender being excluded from the procedure without the loss of a tender bond. This is because a contracting authority may withhold a tender bond in cases strictly defined by the Act. And none of these concerns the situation where an economic operator does not respond to a request for an explanation of predatory pricing.

How can we assist?

  • Preparing explanations of predatory pricing
  • Analysing tenders from other economic operators for predatory pricing
  • Preparing appeals to the National Board of Appeal

Any questions? Contact the authors:

Jakub Krysa, PhD

Michał Waraksa

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