Description of the subject of the contract – how to avoid an allegation of restricting competition?

To avoid an allegation of restricting competition when describing the subject of the contract in projects funded from public funds, the description should be technologically neutral and based on functional and performance parameters, rather than on naming a specific manufacturer, brand, model or source of origin.

If, due to the specific nature of the subject of the contract, a description using general characteristics is not possible, a trademark may be indicated provided that the wording “or equivalent” is added and the equivalence criteria are precisely defined.

A breach of these rules is one of the most common reasons for financial corrections when settling EU grants.

Below we present practical guidance on correctly drawing up the description of the subject of the contract (OPZ) in procedures conducted under the competitiveness principle and the Public Procurement Law, with particular emphasis on the risks arising from the Guidelines on the eligibility of expenditure for 2021–2027.

Legal basis for the obligation to ensure fair competition

The obligation to prepare a non-discriminatory description of the subject of the contract arises from two parallel legal regimes, the application of which depends on the status of the contracting authority and the value of the contract.

In the case of beneficiaries obliged to apply the Act of 11 September 2019 – Public Procurement Law, Articles 16 and 99 of the Act are of key importance, as they require the procedure to be prepared and conducted in a manner that ensures fair competition and equal treatment of contractors.

Beneficiaries that are not obliged to apply the PZP are subject to the competitiveness principle set out in the Guidelines on the eligibility of expenditure for 2021–2027, issued by the minister responsible for regional development. These guidelines regulate how the description of the subject of the contract is to be formulated and are available on the European Funds Portal.

Regardless of the regime, a breach of the principle of fair competition results in a financial correction in accordance with the tariff set out in the Guidelines on the correction of irregularities for 2021–2027.

What does an allegation of restricting competition mean in audit practice?

An allegation of restricting competition is raised by audit bodies (managing authorities and intermediate bodies, the National Revenue Administration, the Supreme Audit Office (NIK), European Commission services) where, in the auditor's view, the content of the description of the subject of the contract could have narrowed the group of potential contractors able to submit a bid.

The allegation does not require proof that competition was actually restricted – it is enough to show that such an effect was plausible.

The most frequently challenged elements of the description of the subject of the contract include:

• naming a specific brand, model or manufacturer without allowing equivalent solutions,
• defining technical parameters in a way that matches only one product available on the market,
• citing standards, certificates or technical approvals without the wording “or equivalent”,
• excessive requirements regarding the contractor's experience or technical capacity,
• deadlines too short to allow contractors other than the beneficiary's existing suppliers to submit a bid.

Financial consequences of breaching competition rules

A finding of irregularities in the description of the subject of the contract may result in a financial correction or a reduction of the eligible expenditure related to the contract. The amount of the correction depends on the type of breach, its impact on competition, its financial consequences and the classification adopted by the audit body.

In practice, breaches concerning the description of the subject of the contract may include, among others:

• a description that breaches the principle of fair competition, e.g. naming a specific manufacturer, model, trademark or technical solution without objective justification and without properly allowing equivalent solutions,
• an insufficient, ambiguous or imprecise description, which may make it difficult for contractors to prepare comparable bids,
• less serious breaches, where, despite the shortcoming, a minimum level of competition was maintained or the impact of the breach on the course of the procedure was limited.

Correction rates may amount to, among others, 25%, 10% or 5% of the value of the eligible expenditure related to the contract, although their application always requires an assessment of the nature and seriousness of the breach.

The principle of description by functional and performance parameters

The basic technique for avoiding an allegation of restricting competition is to formulate the description of the subject of the contract on the basis of functional, operational and performance parameters, rather than by describing the design or referring to specific market products.

How to select technical parameters correctly?

Technical parameters should be linked to the legitimate needs of the contracting authority arising from the project objectives, the production technology or the characteristics of the investment being implemented. Every threshold parameter should be capable of justification in the event of a query from a contractor or an audit body.

In practice, it is recommended to use parameter ranges (e.g. “rated power from 15 to 22 kW”) instead of point values, unless a specific value results from the design documentation, the characteristics of the production line or other objective grounds.

Example of a correct and an incorrect description

Indicating a trademark – when is it permissible?

In accordance with Article 99(5) of the PZP and the Eligibility Guidelines, indicating a trademark, patent or origin is permissible only exceptionally, where this is justified by the specific nature of the subject of the contract and the contracting authority cannot describe the subject of the contract using sufficiently precise terms.

In such a case, two conditions must be met together:

• adding the wording “or equivalent” when naming a specific product,
• specifying the criteria used to assess equivalence.

Simply adding the phrase “or equivalent” without explaining which parameters the equivalence assessment is based on is not sufficient. The equivalence criteria must be precise enough for a contractor offering another manufacturer's product to determine unambiguously whether its bid will meet the contracting authority's requirements.

The most common mistakes in the description of the subject of the contract

In advisory practice, the most common mistakes in drawing up an OPZ fall into several categories of irregularities that are worth analysing before publishing the request for quotation.

Copying the specification from a single supplier

A common way in which a defective OPZ arises is basing the specification on the commercial offer of one supplier whom the beneficiary regards as the preferred contractor. This practice leads to the parameters being automatically tailored to a specific product, which is a classic case of restricting competition.

The recommended approach is to obtain quotes or product data sheets for at least three comparable products available on the market and to compare their parameters in order to identify common values or acceptable ranges.

Citing standards without an equivalence clause

Referring to specific technical standards (PN-EN, ISO, IEC) without adding the wording “or equivalent” constitutes a breach of competition rules. A standard should be treated as one of the possible ways of confirming that the requirements are met, not as an absolute requirement – unless its application results from separate legal provisions.

Excessive contractor experience requirements

Requirements concerning the contractor's technical and professional capacity (e.g. the number of completed projects, the value of references, staff experience) must be proportionate to the subject of the contract. A requirement for experience in projects with a value significantly exceeding the value of the current contract is often challenged by audit bodies.

Short deadlines for submitting bids

Setting a deadline for submitting bids below the minimums laid down in the Guidelines (under the competitiveness principle: 7 days for supplies and services, 14 days for works, 30 days for contracts above the EU thresholds) or in the PZP constitutes a procedural breach. Even a deadline that formally complies with the minimum may be deemed too short if the subject of the contract is technically complex and requires a technical bid to be prepared.

Procedure for verifying the description of the subject of the contract

Before publishing a request for quotation or a contract notice, it is recommended to carry out an internal review of the OPZ according to the following procedure:

• analysing whether each threshold parameter has a justification arising from the design documentation or the beneficiary's legitimate needs,
• verifying that at least three products meeting all the requirements together are available on the market,
• checking that the description contains no proper names, brands or models without an equivalence clause and equivalence criteria,
• assessing whether the conditions for participation in the procedure are proportionate to the value and nature of the contract,
• verifying the deadline for submitting bids in terms of the time needed to prepare a technical bid.

For contracts of considerable value or of a complex technical nature, it is worth considering preliminary market consultations (Article 84 of the PZP) in order to identify the market's capabilities and define the parameters correctly. However, consultations must not lead to a competitive advantage for a contractor who took part in them.

Documenting the process of drawing up the OPZ

An important element in reducing audit risk is properly documenting the process of drawing up the description of the subject of the contract. The beneficiary should retain:

• internal memos or justifications for the technical parameters adopted,
• a comparison of quotes or data sheets of comparable products available on the market,
• documentation confirming that preliminary market consultations were carried out, if they took place,
• correspondence with potential contractors during the preparation of the procedure, in compliance with the principles of confidentiality and equal treatment.

This documentation constitutes first-rate evidence in the event of an audit and makes it possible to effectively challenge any findings of irregularity.

Specific features of the OPZ in procedures conducted under the competitiveness principle

Beneficiaries that are not obliged to apply the PZP and conduct procedures under the competitiveness principle should bear in mind that the requirements for the description of the subject of the contract are analogous to those under the PZP, with certain modifications arising from the Eligibility Guidelines.

The request for quotation is published in the Baza Konkurencyjności (Competitiveness Database) (BK2021), and the description of the subject of the contract is a mandatory element of the request. As under the PZP, the content of the description is subject to audit by the managing authorities and intermediate bodies competent for the given programme.

Handling queries from contractors

During the procedure, contractors may submit queries about the content of the OPZ, including requests to modify parameters they consider excessively restrictive. Every such query should be treated as a signal of potential audit risk and the challenged parameters should be re-analysed.

If the objection raised by the contractor is justified, the beneficiary should amend the content of the request for quotation and extend the deadline for submitting bids accordingly. Failure to respond to a contractor's justified objections significantly increases the risk of a financial correction being imposed in a subsequent audit.

Key principles of a correct OPZ

A properly drawn-up description of the subject of the contract is based on four basic principles:

• the description must be technologically neutral and based on functional parameters,
• each threshold parameter should be justified by the beneficiary's objective needs,
• indicating a trademark requires equivalence criteria to be set out at the same time,
• the entire process of drawing up the OPZ should be properly documented.

Compliance with these principles does not completely eliminate the risk of the OPZ being challenged by audit bodies, but it significantly reduces the likelihood of a financial correction and increases the chances of successfully raising objections to audit findings.

Verification of procurement documentation before publication is covered by the service of project implementation and settlement. If the OPZ has already been challenged, a useful option may be support during project audits and evaluations. The full scope of cooperation is described in our grant advisory services.

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