Tales from the National Appeal Chamber: Does the contractor suffer the consequences of an error in the documentation by the contracting authority?
In procurements, minor errors often creep into the terms of reference or the forms for bids. Can these errors exert negative consequences on contractors? An important statement on this issue was made by the National Appeal Chamber (KIO) in its ruling of 13 March 2020 (KIO 423/20). The chamber stressed that if there are differences between the description of the subject of the contract and the offer form, the description of the subject matter will control, and contractors cannot be penalised for errors committed by the contracting authority in its own documentation.
In the case before KIO, the offer form contained an obvious oversight: one of the items in the procurement, constituting a small portion of the total contract, did not fall within the subject-matter scope of the terms of reference. A contractor submitted its bid on the defective form, without noticing that one of the items was not included in the terms of reference. The contracting authority’s excuse was that the item in question was included in the offer form by accident, when a similar table was copied from an earlier procedure.
At the stage of analysing the bids submitted in the procedure, the contracting authority corrected the defective aspect of the bids pursuant to Art. 87(2)(3) of the Public Procurement Law. The contractor itself did not object to correction of the error. Was this the right process to follow, considering the ban on changing the contents of a bid after the deadline for submitting offers?
Relation between terms of reference and template for bid form
According to the KIO ruling, when filing an offer in a procedure for award of a public contract, contractors should give precedence to the detailed description of the subject of the contract, over the template for bids. In the event of any doubt or discrepancy between these documents, the detailed description, as part of the terms of reference, is decisive. As the chamber held, “The scope of the subject of the contract and the fundamental requirements for the subject of the contract should be determined first and foremost based on the detailed description of the subject matter of the procurement, as a fundamental element of the terms of reference documentation. The offer form must reflect this description, and not contain elements not reflected in the description of the subject matter of the contract. The offer form does not replace the description of the subject of the contract and does not constitute an overriding document in relation to the description.”
Thus in the event of a discrepancy between the detailed description of the subject of the contract and the template for offers, the contractor should be guided by the description. KIO firmly backed this approach, which will clearly help resolve doubts of interpretation arising in future procurement procedures.
Does the contractor bear the negative consequences of an error in the documentation by the contracting authority?
The contractor cannot bear the risk of possible errors in the offer it submits arising out of errors in the form prepared by the contracting authority. The contractor’s failure to notice the error made by the contracting authority in the offer template cannot shift all the negative consequences onto the contractor.
As the chamber wrote, “Due to the ambiguity in the tender documentation, the negative consequences of the contracting authority’s error cannot be shifted to the contractor, which literally complied with the wording of the offer form and included the erroneous item in its offer.”
Validation of contractor’s offer
But how can the participants lawfully extricate themselves from this situation, in light of the ban on amending a filed bid? Art. 87(2)(3) of the Public Procurement Law is helpful in this respect, providing that the contracting authority shall correct oversights in an offer inconsistent with the terms of reference, but not causing a material change in the offer, promptly notifying the contractor whose offer was corrected.
Applying this provision is the most advantageous solution for the contractor, because its offer will then not be subject to rejection by the contracting authority under Art. 89(1)(2) of the law. This position was also adopted by KIO, which stated: “An offer filed under the contractor’s erroneous belief as to the scope of the subject matter of the contract, caused by the action of the contracting authority, should be corrected under Art. 87(2)(3) of the Public Procurement Law.” In the ruling, the National Appeal Chamber listed the following grounds enabling the use of Art. 87(2)(3):
- An inconsistency between the contractor’s offer and the terms of reference
- An unintentional oversight by the contractor
- The oversight is not material to the offer.
Summary
When filing an offer in a procedure for award of a public contract, contractors should primarily consider the terms of reference. But if an error by the contractor in the offer form resulted from a defective document from the contracting authority, the negative consequences of this event cannot be shifted to the contractor. In such circumstances, the contracting authority should exercise Art. 87(2)(3) of the Public Procurement Law, if the statutory conditions and the conditions stated in the KIO ruling are met.
Legal basis:
The contracting authority shall correct in the text of the tender errors which result in inconsistency with the terms of reference for the contract but do not cause material modifications of the tender, and shall forthwith inform the economic operator whose tender has been corrected (Art. 87(2)(3), Public Procurement Law).
The contracting authority shall reject a tender if it is inconsistent with the terms of reference for the contract, subject to Art. 87(2)(3) (Art. 89(1)(2), Public Procurement Law).
Cyprian Herl, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners