Second place in a public tender can be compared to fourth place in a sports competition. It was close, but so what, since our competitor wins the contract. The selection of the most advantageous bid is usually a combination of points obtained in the price criterion and in non-price criteria. However, if price was the deciding factor, the first reaction of the losing contractor, who assumed a minimum margin, is to refuse to accept the decision – combined with the suspicion that the contracting authority certainly did not properly examine the bid received, because if it had, it would have had to reject the cheaper bid as a dumped bid and consider the one submitted by us as the most advantageous. This raises the question of how to check whether the competitor’s bid has been properly examined and, if necessary, how to demand that the competitor’s bid be rejected. The situation is different for a contractor who, on the basis of information disclosed during the opening of tenders in a public procurement procedure, assumes that its tender has been considered the most advantageous, but at the stage of examining the tenders is requested to provide explanations for the abnormally low price.Contractors who are aware of the legal significance of the explanations they provide do not treat the contracting authority’s request as mere formal correspondence in the course of the procedure – they know that the content of their explanations will determine not only whether their bid is selected as the most advantageous, but also whether the contracting authority’s decision to select the bid can be defended in subsequent appeal proceedings before the National Appeal Chamber. In this article, we will look at the above issues from a practical perspective.
What is a grossly low price?
Immediately after opening the tenders and making information about the submitted tenders and offered prices available, the contracting authority evaluates the tenders. The provisions of the Public Procurement Law concerning the evaluation of tenders (Article 223 et seq. of the Public Procurement Law) begin with a general rule which grants the contracting authority the right to request contractors to provide explanations concerning the content of the tenders submitted and the relevant evidence or other documents or statements submitted. Article 223 of the Public Procurement Law formulates a general right, and the following provisions specify in which situations the contracting authority may freely decide and when it is obliged to conduct an explanatory procedure with the contractor. These regulations are of great practical importance – any failure by the contracting authority to fulfil its obligations opens the way for an effective appeal to the National Appeal Chamber.
Importantly, the legislator clearly distinguishes between “clarifications regarding the content of a submitted tender” and negotiations on the content of a tender. As a rule (with very rare exceptions), at the stage after the submission of tenders, it is generally unacceptable to conduct negotiations that would result in a change in the content of a submitted tender (even to the smallest extent). The legislator has also provided for a list of situations in which the contracting authority may make corrections to the tender on its own, without obtaining explanations from the contractor – this applies, for example, in the case of obvious clerical errors or obvious calculation errors. The contracting authority corrects such errors on its own, immediately notifying the contractor whose tender has been modified.
Undoubtedly, however, the key factor (though not always the only one) determining the outcome of a tender is the price of the most advantageous tender. Therefore, the legislator has included in the Public Procurement Law a detailed, separate regulation aimed at verifying (clarifying) whether the price of the winning bid is not a dumping price (commonly understood as a price below the cost of production or service provision), which in normal market conditions does not allow for the proper performance of the contract.
At this point, it is worth noting the broader legal context of regulations related to limiting the freedom to calculate prices. The primary, general principle in this regard is the freedom to shape the content of contractual relationships (including contract prices), as articulated in the Civil Code, referred to as the principle of freedom of contract. However, this principle is not unlimited, and in many areas of the legal system (statutory provisions, international agreements) we find specific provisions that limit the principle of freedom of contract, including the principle of free pricing. Such provisions are contained, inter alia, in the Act on Combating Unfair Competition, which in Article 15 defines an act of unfair competition as hindering other entrepreneurs’ access to the market, in particular by […] “selling goods or services below the cost of their production or provision, or reselling them below the cost of purchase in order to eliminate other entrepreneurs”. The above-mentioned Act formulates legal measures that can be used by an entity aggrieved by an act of unfair competition, including, among others, the possibility of claiming compensation for damage caused. Another sanction is also provided for in the provisions of the Public Procurement Law, which obliges the contracting authority to reject a tender submitted “under conditions of unfair competition”. However, due to the fact that the provisions of the Act on Combating Unfair Competition are rather general in nature, and their application would require extensive investigation and evidence gathering, Article 224 of the Public Procurement Law contains a separate detailed regulation obliging the contracting authority to take specific measures to examine the “fairness” of the price calculation. According to this provision, if the contracting authority considers that the offered price, cost or their significant components may constitute a grossly low price in relation to the subject of the contract or raise doubts as to the feasibility of performing the contract in accordance with the documentation, the contracting authority is obliged to request the contractor to provide explanations for the grossly low price, including evidence confirming the method of calculating these elements.
The provision of Article 224(1) of the Public Procurement Law does not appear to leave the contracting authority any discretion in deciding whether to request explanations, as it specifies the circumstances in which it should request explanations. However, the grounds for the obligation to apply this rule are quite broad, as the provision uses the words “appear” and “raise doubts”, which, on the one hand, suggests a certain degree of discretion on the part of the contracting authority in deciding whether to initiate a procedure to verify a grossly low price, and, on the other hand, grants the contracting authority the possibility of such verification even in cases of slight differences in bid prices. This is because the contracting authority may always “think” that the price offered is grossly low.
The contracting authority’s freedom to decide to verify the price of a specific tender is limited by paragraph 2 of the aforementioned Article 224 of the Public Procurement Law. According to this provision, the contracting authority is obliged to initiate a verification procedure if the price of the winning tender is at least 30% lower than a) the contract value determined before the commencement of the procedure or b) the arithmetic mean of the prices of all tenders submitted that are not subject to rejection. In addition, if the total price of a bid submitted within the deadline is at least 30% lower than the updated contract value – taking into account circumstances that have arisen after the commencement of the procedure, in particular significant changes in market prices – the contracting authority may consider that there is a risk of an abnormally low price and request the contractor to provide appropriate explanations.
To summarise the described stage of the procedure and referring to practical experience, it should be noted that it is difficult to build an argumentation that would be the basis for an appeal to the National Appeal Chamber against the contracting authority’s failure to verify an abnormally low price, in a situation where there is no difference of at least 30%. In this regard, however, it is important to note the judgments of the National Appeal Chamber of 22 February 2024, in which the Chamber stated that “the provision of Article 224 of the Public Procurement Law refers not only to the 30% threshold, but requires the contracting authority to conduct an in-depth analysis of whether there are other doubts as to the price of a given contractor’s bid.” The above ruling confirms the interpretation of Article 224 of the Public Procurement Law, according to which the contracting authority should not limit the verification of the most advantageous bid price solely to the 30% threshold, and thus it should be considered that contractors participating in the procedure have the possibility to request the contracting authority to examine the most advantageous price in each case if they can demonstrate that the price offered is unrealistic, does not take into account all costs or prevents the proper performance of the contract.
Request for clarification of an abnormally low price
If the contracting authority has doubts about the price of the most advantageous tender, it shall request the contractor to provide explanations. The law does not specify the content of the request, but it is assumed that it should be detailed and should specify the contracting authority’s doubts and indicate its expectations regarding evidence for the calculation of the price or cost (or their significant parts). This approach is confirmed by and the case law of the National Appeal Chamber, which states that “a contracting authority that issues a general request to a contractor cannot expect the contractor to respond to the request in detail.”(3)Thus, it is the contracting authority that is responsible for the content of the request for clarification of a grossly low price – the contracting authority should formulate it in such a way as to obtain explanations and, possibly, evidence concerning elements of the tender that raise doubts on the part of the contracting authority. This also has a specific practical dimension. If the contracting authority formulates the content of the request in a general manner and receives a vague response from the contractor, any decision to reject the tender on the grounds of an abnormally low price will be difficult to justify and subsequently difficult to defend in any proceedings before the National Appeal Chamber. It is worth noting here (as discussed in more detail below) that although the provisions of the Public Procurement Law do not provide for such a procedure, the prevailing view in the case law of the National Appeal Chamber is that it is permissible to request the contractor to clarify the explanations concerning the abnormally low price(4) .However, the circumstances indicated later in this publication should be taken into account in each case. 5
Response to a request for clarification of an abnormally low price
The contracting authority’s request for clarification of the bid price updates the contractor’s obligation to prepare and present relevant explanations, calculations or evidence regarding the calculation of the price or cost, or their significant components. The Public Procurement Law clearly defines the principle of the burden of proof in such a situation – according to Article 224(5) of the Public Procurement Law, “the obligation to demonstrate that the tender does not contain a grossly low price or cost rests with the contractor.” The explanations and evidence submitted by the contractor will form the basis for the contracting authority’s decision to accept the explanations or reject the tender on the grounds of an abnormally low price. This decision is made by the contracting authority, but it may be challenged both by the contractor concerned (in the event of rejection of its tender) and by other contractors, if the contracting authority accepts the contractor’s explanations which, in the opinion of another contractor, do not deserve to be accepted.
The provision in question, Article 224(3) of the Public Procurement Law, indicates the types of arguments that may be used by a contractor submitting explanations.
According to this provision, explanations may relate in particular to:
- production process management, services provided or construction methods;
- selected technical solutions, exceptionally favourable conditions for supplies, services or related to the performance of construction works;
- the originality of the supplies, services or construction works offered by the contractor;
- compliance with the provisions on labour costs, the value of which used to determine the price may not be lower than the minimum wage or the minimum hourly rate, determined on the basis of the provisions of the Act of 10 October 2002 on the minimum wage (Journal of Laws of 2020, item 2207 and of 2023, item 1667) or separate regulations applicable to matters related to the contract being performed;
- compliance with the law within the meaning of the provisions on proceedings in matters concerning public aid;
- compliance with labour law and social security regulations in force in the place where the contract is performed;
- compliance with environmental protection regulations;
- fulfilment of obligations related to entrusting the performance of part of the contract to a subcontractor.
It is assumed that the above list is illustrative and not exhaustive. When issuing a request, the contracting authority may therefore also indicate other price-determining factors that should be clarified by the contractor. Furthermore, pursuant to Article 224(4) of the Public Procurement Law, in the case of contracts for construction works or services, the contracting authority is obliged to request explanations at least to the extent specified in points 4 and 6 above.
The case law of the National Appeal Chamber also points to the lack of a statutory, closed catalogue of evidence that the contractor should have at its disposal. Thus, the contractor is free to choose the means it will use. The contracting authority should also accept the fact that not all contractors will be able to use the same evidence to prove that the price is not grossly low. For example, a distributor of specific goods will have purchase invoices, while a manufacturer of a specific product range will not have such evidence. The National Appeal Chamber (KIO) explained this issue in the following manner in the justification for its judgment of 8 October 2024: “The provisions of the Public Procurement Law do not specify a closed catalogue of evidence that a contractor must submit when providing explanations regarding an abnormally low price. The key issue here is that the evidence submitted must be relevant to the specific situation and confirm what the contractor claims in its explanations. Nor can the contractor be required to provide evidence for every circumstance and every element of the price it declares and lists. The accepted price cannot be questioned solely on the grounds that it is based on the contractor’s own calculations, especially since in this case we are dealing with a manufacturer of equipment. This circumstance, in turn, is sufficient reason to conclude that such an entity will not have the same evidence at its disposal as a seller, i.e. invoices, offers from subcontractors or other evidence, which in this case is the most common means of proof.”(6)
Rejection of a bid due to failure to explain a grossly low price
Although the legislator has not introduced a legal definition of “abnormally low price”, it is generally accepted that this is a price that is detached from market realities. In practice, the Public Procurement Law refers to an amount that does not allow for the proper and reliable performance of the contract, indicates that the contract is being performed below the cost of providing the service, delivery or construction work, and does not take into account the specific nature of the contract.
Pursuant to Article 226(1)(8) of the Public Procurement Law, the contracting authority is obliged to reject a tender if it contains a grossly low price or cost in relation to the subject matter of the contract. However, before this happens, the contracting authority should (Article 224(2)(1) of the Public Procurement Law) or may (Article 224(2)(2) of the Public Procurement Law) request the contractor to provide explanations, and on the other hand, the contractor has the right to provide such explanations in order to comprehensively address any doubts regarding the price presented, in accordance with the procedure described above, resulting from the provision of Article 224 of the Public Procurement Law. Only if the explanations provided and the evidence presented do not justify the unit prices quoted in the tender shall the tender be rejected on the basis of Article 224(6) in conjunction with Article 226(1)(8) of the Public Procurement Law (cf. KIO judgment of 24 March 2022, KIO 638/22).
This type of analysis of tender prices and possible requests for justification are an important element in protecting the public interest against unreliable performance of the contract. First and foremost, however, the provision of Article 224 of the Public Procurement Law imposes on the contracting authority an obligation to examine the most advantageous tender in terms of fair competition and, in the event of a breach, to reject the tender on the grounds of a grossly low price, which could lead, among other things, to the improper performance of the public contract.
However, the contracting authority’s findings in its analysis of the contractor’s documentation may go in a completely different direction. It may happen that the contracting authority will be exempt from the obligation to request the contractor to provide explanations regarding the abnormally low price, despite the existence of the grounds specified in the Act. This approach in case law is confirmed, inter alia, by the position expressed in the judgment of the National Appeal Chamber (KIO) of 2 October 2024 (KIO 3214/24). It follows from this judgment that in a situation where the price of one tender is twice or almost twice as high as the other three tenders, which in turn are at a similar level and at market level, and this has generated a 30% difference between these prices and the arithmetic mean of the prices of all bids submitted, it should be considered an obvious circumstance that does not require explanation in terms of a grossly low price. (7)
Furthermore, pursuant to Public Procurement Law , a tender shall be rejected if the contractor fails to provide explanations within the prescribed time limit or if the explanations provided together with evidence do not confirm the feasibility of the offered price or cost.
If the value of the contract is equal to or exceeds the EU thresholds, the contracting authority shall notify the President of the Office and the European Commission of the rejection of tenders which, in the opinion of the contracting authority, contained a grossly low price or cost due to the granting of public aid, and the contractor, within the time limit set by the contracting authority, has not proved that the aid is lawful within the meaning of the provisions on proceedings in matters concerning public aid (Article 224(7) of the Public Procurement Law).
Repeated request for clarification of an abnormally low price
The Public Procurement Law does not specify how many times the contracting authority may request the contractor to provide explanations regarding an abnormally low price. In theory, therefore, there are no formal restrictions on the number of such requests, so both repeated and multiple requests to the contractor should be considered acceptable if the information provided by the contractor raises doubts on the part of the contracting authority. In principle, however, a request for clarification of an abnormally low price should only be made once, and subsequent requests should be an exception justified by specific circumstances (e.g. in the event of discrepancies in the parameters previously presented by the contractor or if it is necessary to clarify the information provided in the contractor’s previous letter). In any case, correspondence between the contracting authority and the contractor regarding explanations of an abnormally low price should not build on the contractor’s gradual argumentation, and subsequent requests by the contracting authority cannot serve to “guide” the contractor towards providing the answer expected by the contracting authority.
As has been pointed out many times before, the contractor, as part of its obligation to provide explanations regarding the abnormally low price, should present its arguments in a comprehensive and complete manner. To this end, the contractor may also use any evidence which, in its opinion, confirms the arguments presented in the explanations and may prove useful and helpful in the case in question.
It is not the contracting authority’s task to take the initiative in explaining the circumstances related to the occurrence of a grossly low price and to issue effective requests to the contractor. However, there is no obstacle to the contracting authority conducting negotiations or discussions with the contractor in subsequent requests, referring directly to the contractor’s valuation of all elements of the tender. However, such correspondence should only serve to explain in detail the circumstances related to the calculation of the abnormally low price, which is subject to the contracting authority’s assessment.
Further explanations concerning the abnormally low price may be submitted in the same form as the original explanations. In its judgment of 19 July 2022, KIO 1790/22, the National Appeal Chamber referred to the form of explanations, indicating that, for example, the electronic form is not required under pain of nullity in the case of submitting explanations regarding a grossly low price, as it has not been reserved for this type of statement. In the opinion of the KIO, explanations should be treated like any other statement submitted in the course of a procurement procedure, and therefore, in accordance with the provision of § 2(2) of the Regulation of the Prime Minister of 30 December 2020 (Journal of Laws 2020.2452), they may be drawn up in electronic form, in the data formats specified in the Act of 17 February 2005 on the computerisation of the activities of entities performing public tasks, or as text entered directly into a message transmitted by means of electronic communication referred to in § 3(1) of the above-mentioned Regulation.(8)
Response to a request for clarification of a grossly low price
The provisions of the Public Procurement Law do not regulate the length of the deadline for responding to a request to explain an abnormally low price. The contracting authority, when requesting both explanations and further questions pursuant to Article 224 of the Public Procurement Law, has the option of setting its own deadline for their submission. Although the provisions of the Public Procurement Law do not specify how long this deadline should be, this does not mean that it can be set at will.
The deadline should be appropriate to the nature of the contract, its complexity and the scope and number of issues requiring clarification. In practice, this means that the time allowed for preparing a response, including further clarifications, should enable the contractor to respond to the contracting authority’s expectations. In addition, the contractor may submit a duly justified request for an extension of the deadline for performing certain activities. As a rule, granting such a request should not violate the provisions of the Act9 .
This is also confirmed by the case law of the National Appeal Chamber. In one of its judgments, it was pointed out that although there are no uniform rules for determining the length of the deadline for submitting explanations, a deadline of one working day was considered too short, especially given the high requirements regarding the content of the explanations (see the ruling of the National Appeal Chamber of 22 December 2016, KIO 2313/16).
Depending on the situation, explanations or re-explanations by the contractor may also be submitted together with subjective evidence and be marked as “business secret”.
In the absence of precise provisions in the Public Procurement Law regarding the withdrawal of explanations, it can generally be assumed that the contractor has the right to withdraw previously submitted explanations regarding a grossly low price – although the risk of divergent assessments of such action should be borne in mind. The mere fact that the Act does not contain regulations concerning the withdrawal of contractor actions other than the tender does not automatically mean that they are inadmissible.
In a situation where the deadline for submitting explanations is still running, the contractor should be able to re-state its position – either by supplementing the previous information or by replacing it entirely. Such a change – made within the set deadline – should not be treated as a procedural defect, but as a natural part of the dynamic process of clarification.
It is crucial that the new explanations are complete, consistent and accurately address the contracting authority’s concerns. In that case, they – and not the previously withdrawn versions – should form the basis for the evaluation of the price proposed in the tender.
How does the National Appeal Chamber interpret an abnormally low price? Interesting rulings of the National Appeal Chamber
The case law of the National Appeal Chamber presented below clearly confirms that the obligation to provide detailed, consistent and evidence-based explanations regarding the bid price rests with the contractor, and their assessment cannot be based on the contracting authority’s assumptions or its experience from previous relations with the entity in question.
As indicated in the ruling of 11 February 2025 (KIO 76/25), a grossly low price is not only one that does not provide for a profit, but also one that does not even cover the contractor’s own costs. It was emphasised that evidence presented only at the appeal stage, and not previously taken into account in response to a request for clarification of a grossly low price, cannot constitute a basis for defending the tender. The National Appeal Chamber expressed a similar opinion in its judgment of 5 November 2024 (KIO 3866/24), emphasising the contractor’s obligation to provide clear and logical explanations based on a reliable calculation of the abnormally low price. The ruling of 19 April 2022 (KIO 919/22) also emphasised that the contracting authority’s experience with a given contractor cannot replace a substantive analysis of the explanations provided. This position is also confirmed in the ruling KIO 600/21, which clearly states that the contractor’s declaration alone is not sufficient – specific evidence is necessary to verify the feasibility of the calculation presented.
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