In the implementation of the latest amendment of the Public Procurement Law, pursuant to Directive 2014/24/EU, the country legislator failed to include a rule stating that public procurement contracts should be divided into lots. As a result, the procurer still does not have to, only may, decide to divide a contract into lots (Art. 36aa par.1 et seq. of Public Procurement Law Act). However, when resigning from such division, the procurer is obligated to specify reasons of their decision in procedure protocol (Art. 96 par. 1 point 11 of Public Procurement Law Act).
In such circumstances, if the procurer does not wish to divide the contract, the only inconvenience for the procurer is the need to justify such decision, or so it seems. And that inconvenience is merely a formal obligation, not threatened by any sanctions.
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The aim of the introduction of the directive by the European legislator is clear: to mobilise small and medium-sized enterprises (SMEs) by creating mechanisms promoting the activity of such entities. The GDP of member states depends on such enterprises. It is clearly visible in Recital 78 to Classical Directive. It reads:
‘ (...) to enhance competition, contracting authorities should in particular be encouraged to divide large contracts into lots. Such division could be done on:
- a quantitative basis, making the size of the individual contracts better correspond to the capacity of SMEs;
- a qualitative basis, in accordance with the different trades and specialisations involved;
or
- in accordance with different subsequent project phases.’
Sadly, however, an analysis of procedures for the granting of a public contract after the amendment — both currently pending as well as those completed — leads to a conclusion that not only are procurers very unwilling to divide contracts into lots, but they also do not fulfil the obligation to justify their decisions or do so very carelessly. Some justifications are only one sentence long; and rarely do they explain the actual reason for which the procurer has not divided the contract.
May the reason be a threat of reduction of competition or excessive technical difficulties? Maybe there has been a risk of disproportionate increase of costs, or the need to coordinate various activities performed by various contractors has threatened the capability to properly perform the contract? This usually cannot be learned from justifications, although such examples of reasons which could be an obstacle in dividing contracts are specified in Recital 78 of the Classical Directive.
This issue has also been raised by the Public Procurement Authority, stating in its opinion that
‘ (…) it needs to be recognised that concerns connected with possible minor difficulties or costs, or with minor problems with the coordination of activities performed by various contractors, and especially the convenience of the procurer, should not constitute a sufficient justification to resign from the division of contracts into lots (…).’
A general change of practice among procurers would be most beneficial to SMEs, right along with national economy. The cause finds support in the practice of rulings of the National Appeal Chamber. In its rulings, the Chamber points out the importance of justification pursuant to Art. 96 par. 1 point 11 of Public Procurement Law Act. And thus, in the ruling of 25th November 2016 (ref. no. KIO 2124/16), the judges concluded that ‘(…) a justification as provided for by the law should be as broad as possible, should contain a precise analysis of the market situation of such kinds of public contracts and should describe price relationships of individual services. For such justification, it is not enough to provide only a general favourable nature of the price itself; it is necessary to refer to the very subject of public contract, market conditions and capabilities of services provided against specific examples (...).’
This means (a contrario) that in case of a lack of justification meeting above-mentioned conditions, i.e. if the procurer fails to provide sufficient arguments explaining their resignation from the division of contracts, such procurer has not fulfilled its obligation — a lack of division should be deemed wrongful.
In the ruling of 8th November 2016 (ref. no. KIO 2018/16), the Chamber expressly ordered the procurer to divide the contract into five lots. In the said ruling, the Chamber substantiated its stand by stating that ‘ (…) during the hearing, the procurer has not presented any reliable and clear reasons for resigning from dividing the contract into five lots, which argumentation would be in line with the provisions of Public Procurement Law Act. Furthermore, the procurer has failed to present any written justification of reasons for not dividing the contract into lots to be included in the documentation of proceedings. (…) The procurer's argument of the intention to achieve economies of scale and, consequently, a more favourable price is to be considered flawed (…).’
In other rulings, the Chamber has discontinued proceedings because the procurer took account of allegations in the scope of wrongful omission of the division of a contract into lots (ref. no. KIO 2051/16, 465/17, 294/17).
The sector of SMEs should look at the rulings of the Chamber with hope: if they are similar, the objective of the directive in the scope of increasing SMEs' access to public procurement contracts will come true.
Because it seems that the obligation to divide contracts into lots in connection with above-mentioned provisions can be derived from Art. 7 par. 1 of Public Procurement Law Act, which states that the procurer shall prepare and conduct procurement procedures in a way guaranteeing fair competition and equal treatment of contractors, and in line with the principles of proportionality and transparency — SMEs should also take matters in their own hands.
It is in their interest to analyse terms of reference with a view to study whether a decision to refrain from dividing a contract into lots in a given case is justified, and whether it thereby does not distort the principle of equal treatment of contractors and does not distort competition by limiting the capability of such companies to apply for contracts.