It must be borne in mind that prior to commencement of a procurement by the Armament Inspectorate under Decision 118/MON, the Minister of National Defence must first approve an application to commence a procedure excluding application of the Public Procurement Law, pursuant to the Government Regulation of 12 February 2013 on the Procedure for Assessment of the Existence of an Essential Interest of State Security. Under this regulation, an essential interest of state security justifying exclusion of the tender from the regime of the Public Procurement Law may be found to exist on the basis of a showing by the entity seeking the minister’s approval of the need to assure the security of supply of military equipment, as well as proper repair and renovation of existing military equipment, along with a showing of the effect that exclusion of the procurement from the Public Procurement Law will have on conditions of competition in the internal market regarding products which are not intended for specifically military purposes.

The procedure for review by the Minister of National Defence of the application by the Armament Inspectorate or other contracting authority is specified by the Decision of the Minister of National Defence no. 112/MON of 24 April 2013, under which the factors to be taken into consideration are:

1. Geopolitical and operational conditions, including operational use of the military equipment
2. Security of information connected with the subject of the procurement
3. Security of supplies of military equipment, including the scope and need for independence from a foreign supplier (including the method for achieving independence with respect to servicing and maintenance in the event of a crisis)
4. The need and scope for establishing or maintaining national industrial potential in the context of the importance of the military equipment or services to be obtained. In this respect, the need for sourcing specific contracts from Polish industry should be considered, including the need to establish or maintain narrowly defined production, renovation or servicing potential, in light of the military needs of the Polish Armed Forces, particularly as included in the economic mobilization program.

The factors for determining whether a specific procurement should be excluded from the regime of the Public Procurement Law appear fairly general. Decision 112/MON also seems to stress the possibility of exclusion due to state interests connected with the need to maintain the potential of the national defence industry. In light of the opening of the market for defence procurement to free competition, this represents a concession to the Polish defence industry on the part of the ministry.

Rules for awarding contracts

The procedure for awarding contracts excluded from the Public Procurement Law regime is specified by Decision 118/MON of 25 April 2013, which replaced the previous Decision no. 291/MON of 26 July 2006 on Rules and Procedure for Conclusion in the Ministry of National Defence of Contracts for Armaments or Military Equipment.

A fundamental principle set forth in Decision 118/MON is that tender proceedings be open and in writing. There is an exception for information designated as a business secret and classified information pursuant to the Act on Protection of Classified Information. In the case of an open procedure, the contracting authority publishes an announcement of commencement of the procedure at its offices, on its website, and in the ministry bulletin (Biuletyn Informacji Publicznej Ministerstwa Obrony Narodowej), but there is no publication in the Tenders Electronic Daily supplement to the Official Journal of the European Union. Decision 118/MON does not say whether the contracting authority may also publish an announcement elsewhere, e.g. a nationwide Polish newspaper or an international publication such as The Economist, Military Technology or Naval Forces.

As a rule, the contracting authority and the contractor will reach agreement in writing, unless the contracting authority expressly provides for other forms of communication, such as fax or email, in the announcement or the invitation to negotiations. The offer itself must be made in writing or will be invalid. All correspondence must be conducted in Polish, unless the contracting authority permits documents to be filed also in a foreign language.

Contract awards may be sought by consortia, and thus an application for admission to the procedure and the offer may be filed by more than one prospective contractor. However, the composition of the consortium may not be changed during the course of the tender proceeding.

A contract may be sought by contractors who meet the conditions for participation in the proceeding specified by the contracting authority in the announcement or invitation to negotiations. The conditions may concern issues of legal capacity, knowhow and experience, technical potential, and staff capable of performing the contract, as well as economic and financial condition assuring performance of the contract. For contractors to demonstrate that they meet such conditions, they are required to submit the documents specified in the announcement or invitation. A fixed list of documents is set forth in Decision 118/MON, and includes such items as a transcript from the commercial register, concessions, insurance certificates, list of supplies, financial reports, a bank reference concerning the contractor’s funds or credit capacity, civil liability insurance policies, etc. If a contractor fails to demonstrate fulfilment of the conditions for participation in the procedure by submitting the documents specified by the contracting authority, it will be excluded from the proceeding, but the contracting authority has the right to summon the contractor to submit a missing document or correct an erroneous document.

Basic procedures for awarding contracts

The basic procedures for awarding contracts under Decision 118/MON are an open tender and closed negotiations.

Under Decision 118/MON, an open tender comprises the following stages:

1. Announcement of procurement, containing primarily:

a) A brief description of the subject matter

b) The period of contract performance

c) Conditions for participation that must be met by contractors and documents they must present to demonstrate that they meet the conditions

d) The number of contractors the contracting authority will invite to negotiations

e) Criteria for evaluation of offers submitted following the negotiation phase

f) The location and deadline for filing applications for admission to the proceeding and the language in which they may be filed.

2. Submission of applications for admission to the procedure and evaluation of fulfilment of the conditions by the contractors. At this stage, the contracting authority may request contractors to clarify any doubts apparent from the applications or to supplement the application by providing missing documents or correcting erroneous documents.

3. Invitation to contractors meeting the conditions for participation in the procedure to submit preliminary offers, representing a negotiating position but not containing prices. In the invitation, the contracting authority will specify, inter alia:

a) The deadline for submitting preliminary offers

b) A detailed description of the subject of the procurement and the terms of the contract (typically in the form of a specimen of the contract)

c) The time and place for negotiations, which are confidential and conducted separately with each contractor

d) Rules and scope of the negotiations to be conducted.

4. Evaluation of preliminary offers and conducting negotiations.

5. Invitation to contractors participating in the procedure to submit final offers containing prices.

6. Evaluation of offers, and any clarification of offers.

7. Resolution of the procedure, with notice to the contractors of selection of the most favourable offer and any rejection of offers by specific contractors.

The contracting authority may use a closed tender, involving negotiation of the terms of the procurement with only one contractor, if necessary for the protection of essential interests of state security. During the procedure, the contracting authority will verify the contractor’s fulfilment of the conditions for participation, conduct negotiations with the contractor concerning the subject of the procurement and the conditions for performance, and then conclude a contract.

Contract amendments

The contract is concluded under the terms of the offer, which must be consistent with the requirements of the contracting authority specified in the invitation to submit final offers. This means that after selection of the most favourable offer in an open tender, the contractor does not have the right to renegotiate the conditions presented in its offer. Decision 118/MON includes a provision which used to be found in the Public Procurement Law that once a contract is concluded (in the open or closed procedure), it may be amended only if the need for amendments arises out of circumstances which could not have been foreseen at the time of conclusion of the contract, or if the amendments are favourable to the contracting authority. The wealth of case law from the National Appeal Chamber involving the former Art. 144(1) of the Public Procurement Law will be helpful in interpreting this provision. The rule, however, is that there are very limited possibilities for amending a contract once it has been concluded.

Conclusions

Decision 118/MON is essentially a compilation of various provisions of the Public Procurement Law in its current form and the wording from prior to 2009. While certain elements are new, generally the open procedure is comparable to negotiations with publication and the closed procedure is comparable to a single-source procurement. At first glance, the provisions of Decision 118/MON do not in themselves appear to protect essential interests of state security to a greater degree than the provisions of the Public Procurement Law concerning defence procurements. Practice will show how the Ministry of National Defence demonstrates that application of Decision 118/MON provides a more effective level of protection of essential interests of state security than would be the case under the Public Procurement Law—which is one of the grounds permitting the use of TFEU Art. 346.

One of the departures that may be provided by a contracting authority awarding a contract under Decision 118/MON is to require the contractor to conclude an offset agreement prior to conclusion of the procurement contract. The previous practice of the Ministry of National Defence indicates that conclusion of an offset agreement has not been required in the case of procurements conducted under the Public Procurement Law procedure, but it should be assumed that in the case of contracts awarded under Decision 118/MON, conclusion of an offset agreement will be required if the conditions set forth in the Offset Act of 10 September 1999 are fulfilled.