Conflict of interest in public procurement
In public procurement, persons acting for the contracting authority must not have a conflict of interest, or they must be excluded. A contractor can also be excluded from a tender if its ties to the contracting authority could affect the result of the procedure.
Impartiality and objectivity are an overriding principle in public procurement. The point is that individuals whose relations with a contractor could warrant an assumption that they might favour the contractor must not be involved in the procedure for awarding a public contract. Otherwise the result of the procedure would not be objective. This principle is inextricably linked with the principle of fair competition and equal treatment of contractors: contractors cannot be treated fairly if one of them is favoured due to financial, economic or personal interests. The principle of impartiality on the part of the contracting authority applies equally to the contracting authority’s own personnel and third parties providing procurement support services to the contracting authority (e.g. technical, legal and financial advisers).
Conflicts of interest on the part of the contracting authority are examined with respect to the persons indicated in Art. 17(1) of the Public Procurement Law. Among the grounds set forth there, one that is particularly notable is that persons are excluded from work on the procurement if they have a legal or factual relationship with a contractor that could give rise to justified doubts as to their impartiality. This means any legal relationships creating a situation involving an entitlement on one side and an obligation on the other. Factual relationships that can violate impartiality include various degrees of intimacy. Such relations should result in exclusion of the person from work on the procedure, but only when the doubts as to the person’s impartiality are justified.
Persons performing actions during the procedure, including actions involving signing of the contract, must file a statement on whether or not they have a conflict of interest. Actions preliminary to the procedure, such as drafting the tender documentation or description of the subject matter of the contract, or estimating the value of the contract, are not covered by this examination. Nor does the issue of conflict of interest apply to persons who have no influence over the conduct of the procedure but only perform technical activities, such as receipt of correspondence, giving them access to information about the procedure. Nonetheless, such persons can be subject to examination for the existence of conflicts of interest if the director of the contracting authority develops a justified suspicion that there is some relationship between contractors and persons on the contracting authority’s side that could even indirectly affect the result of the procedure, threatening the principle of impartiality and objectivity. If such suspicion is confirmed, the contracting authority must promptly remove the persons in a conflict of interest from any tasks connected in any way to the procedure.
Importantly, an examination into the existence of conflicts of interest may be conducted only when the procedure is at a stage where it is possible to identify the contractors. However, this need not be the moment when applications are filed for admission to participate in the procedure, or when bids are filed. Submission of inquiries about the terms of reference, appeals against the wording of the specifications, or joining an appeal preceding the filing of applications or offers is sufficient to give rise to a need to examine conflicts of interest.
A conflict of interest may also result in exclusion of a contractor. Under Art. 24(5)(3) of the Public Procurement Law, the contracting authority may exclude a contractor from the procedure if the contractor or one of its authorised representatives has connections to the contracting authority, its authorised representatives, members of the tender commission, or persons filing statements under Art. 17(2a) of the law, which could threaten the principle of impartiality and objectivity (as described in Art. 17(1)(2)–(4) of the law).
The grounds for excluding a contractor due to a conflict of interest are optional and should be applied only as a last resort. When a contracting authority finds that there is a relationship between a contractor and the contracting authority that could affect the result of the procedure, its first line of defence should be to eliminate the conflict of interest on its own side. The contractor should be excluded from the procedure only if such measures cannot be undertaken or do not have the intended effect, and the objectivity of the contracting authority cannot be achieved in any other way.
Anna Prigan, legal adviser, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners
