A characteristic of every public contract is remuneration. Contracts that do not involve remuneration (e.g. donation or lending contracts) are not public contracts within the meaning of the Public Procurement Law Act and therefore do not fall under the Act. As a result, contracting authorities are free to enter into contracts without remuneration, in particular without having to publish relevant announcements or carry out formalised tender procedures. However, it is important to note that the concept of remuneration has its own autonomous definition under both the EU procurement directives and the national PPL Act, which in many cases differs from the common understanding of payment. As a result, determining whether a particular contract involves remuneration and is therefore subject to the PPL Act can often be a significant challenge for contracting authorities.
Examples of IT contracts
This can be seen through the lens of public IT contracts, which by their very nature can involve unusual forms of remuneration and may appear at first glance to be performed free of charge.
Such contracts may concern, for example, the implementation of innovative software or applications, the development of an IT system owned and used by a contracting authority, or the replacement of one particular IT solution with another.
In many cases, contracting authorities conclude these contracts without a tendering procedure, believing that they are free of charge.
Unusual forms of payment by contracting authorities
For example, economic operators may provide apparently free software to contracting authorities in return for the obligation to use or develop the software and to provide economic operators with reports and updates or modifications developed. It may also be the case that economic operators expect contracting authorities to allow access to their database in return for the software provided.
In such a scenario, economic operators do not receive any monetary remuneration from contracting authorities in return for the software.
However, this does not automatically mean that such contracts are free of charge within the meaning of the PPL Act and may therefore be concluded without applying its provisions. This is because each such contract should be subject to an individual analysis, primarily taking into account the following issues:
- Does an economic operator gain an economic advantage via such a contract?
- Is a contracting authority obliged to render a reciprocal performance in return for an economic operator’s performance?
- Does the contracting authority obligation arise from the contract in such a way that it can be enforced in court?
A positive answer to all of the above questions may lead to the conclusion that a contract involves remuneration and should therefore be concluded under one of the procedures provided for in the PPL Act.
Any questions? Contact us