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Authors:

  • Monika Gnący-Witt

    Junior Associate, Duraj Reck & Partners Law Firm

19 August 2024

How to prove to the Contracting Authority that the bid price is not abnormally low?

Many contractors participating in the tender were called to explain the abnormally low price. While entrepreneurs using the services of entities specializing in public procurement law (law firms) are perfectly capable of preparing answers, for small, often one-person companies, the preparation of explanations poses many problems. As a result, although the price of their offer may not actually be abnormally low, they cannot prove it.

What is a grossly low price?

In order to answer the question of how to properly prepare explanations regarding the calculation of the price, it is first necessary to determine what an abnormally low price is. According to the jurisprudence of the National Appeals Chamber, a grossly low price is an unrealistic price, inadequate to the scope and costs of works constituting a given subject of the contract, leading to the performance of the contract below its actual costs. The suspicion of an abnormally low price, which results in the initiation of an explanatory procedure by the Contracting Authority, occurs, as a rule, in two cases, namely when the price of the offer is lower by 30% than the value of the contract increased by the due value added tax, or when the price of the offer is lower by 30% than the arithmetic mean of the prices of all submitted offers.

The contracting authority calls only once

Although it would be desirable to formulate calls precisely by informing Contractors which elements of their offer raise doubts, in practice this is not always possible. It also happens that the contracting authority, when calling for explanations, refers in general terms to Article 223(3) of the Public Procurement Law, indicating that the explanations are to concern the management of the production process, the services provided or the method of construction, selected technical solutions, exceptionally favourable terms of supplies, services or related to the performance of construction works, compliance with labour cost regulations, compliance with labour law and social security regulations. However, this poses a certain danger, because the scope of the request very often determines the content of the response. At the same time, it is difficult to expect the contractor to independently create circumstances that it would then support with evidence if the contracting authority has not received an appropriate request in this regard (see the National Appeals Chamber’s judgment of 20 January 2023, file ref. no. KIO 65/23). The content of the Contracting Authority’s letter is also important in the context of the principle of a one-time call for an abnormally low price, which, although the Act does not provide for, has been developed in the jurisprudence of the National Appeals Chamber. The exception, of course, is a situation where the contractor has submitted specific, reliable explanations responding to the content of the request, attached evidence and referred to the required elements, but there is a need to clarify them.

Calculations and evidence matter

When responding to the contracting authority’s request, it is important to remember to refer in detail to all the elements that make up its content. The contractor is primarily obliged to dispel the contracting authority’s doubts in this respect, which arises from the request for explanations. If the contracting authority demands appropriate calculations or calculations, they should be provided. In the case law of the National Appeals Chamber, it is very often indicated that the contractor’s explanations must be specific and detailed enough for the contracting authority to be able to find out on their basis what circumstances specific to the contractor called upon for explanations caused the price of its bid to be reduced, how these circumstances caused the price reduction and what savings the contractor could have made thanks to them (so: Judgment of the National Appeals Chamber of 9 September 2022, file no. KIO 2200/22), the obligation under Article 224(1) of the Act to submit evidence for the calculation of the price or cost or their essential components is also significant. Practice shows that contractors very often stop at providing explanations only, and yet they have invoices that document purchase prices and various types of price lists or offers of their suppliers, which, if there are grounds for it, can be reserved as a trade secret. The regulations do not list an exemplary catalogue of evidence that the contractor would be required to submit, and therefore may submit one that it deems adequate to a specific situation.

The burden of proof lies with the contractor

It should be remembered that it is the contractor who has to prove the reality of the offered price. The contracting authority may not replace the contractor in this respect. The role of the contracting authority is only to assess its explanations and submitted evidence. If the contractor fails to prove that the price of its bid is not abnormally low, the contracting authority will be obliged to reject it.

Read more on the blog:

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  • 26/09/2024

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