Investments under the''Premises for Land'' Act – a departure from PPP on the municipal housing market in Poland

On 16 December 2020, the Polish Parliament adopted the Act on the Settling the Price of Apartments or Buildings against the Price of Real Properties Sold from the Municipal Real Property Land Bank. The act will enter into force on 1 April 2021, as part of the National Residential Programme adopted under a resolution of the Council of Minister of 27 September 2016. The act, referred to as the “Lokal za Grunt” [Premises for Land] Act, is aimed at increasing the housing stock of municipal resources in Poland. As a rule, this task can currently only be implemented through the use of public-private partnerships, which in Poland are regulated under the Public-Private Partnership Act of 19 December 2008.

The advantages of municipalities applying PPP for the implementation of housing projects include: the accurate preparation of the project/investment due to the need to analyse the effectiveness and efficiency (Articles 3a and 3b); the transparency of the processes of selecting a private partner (Articles 4(1) and 4(2)); minimising the risk to reputation and the risk surrounding the appropriate performance of the private partner's obligations (Provisions from the Act on Public Procurement and the Act on Concession Agreements); the promotion of pro-environmental and pro-social solutions (Provisions from the Act on Public Procurement and the Act on Concession Agreements); and a clear path of reporting on the performance of obligations assumed by the private partner (Article 3(3)). Despite the existence of perfectly applicable PPP regulations, the Polish legislator decided to adopt a detailed “Lokal za Grunt” Act, once again undermining the importance of PPP in practice.

In the context of the adopted act, special attention should be paid to the content of Article 9(1) of the Act on PPP, which stipulates that a party’s own assets can be contributed, in particular through sale, making available, transfer for use, lease, or rental. This means that the Act on PPP does not currently set out any obstacles preventing the sale of a real property to a private partner who is a party of a PPP Agreement. In addition, even if the public entity decides not to sell the property to the private partner due to Article 12(1), if the public entity or the company referred to in Article 14(1) or (1a) sell the property constituting the contributed asset, the private partner can exercise the right of pre-emption within two months from being notified about the content of a relevant contract concluded with a third party, unless a longer deadline is specified in the agreement on public-private partnership.

The “Lokal za Grunt” Act specifies the rules of selling real properties from the municipal land bank of real properties, with the prices of such real properties being set off against the value of apartments or buildings handed over by the buyer of a real property to the municipality. It also regulates the method of dealing with apartments and buildings once they have been handed over to the municipality. The value of apartments or buildings handed over to a municipality in connection with an investor purchasing a real property sold from the municipality land bank may therefore be subject to settlement with the price of this real property.

The term “investor” is understood as an entity who a) applies to purchase real property from the municipal land bank, or b) an entity that has purchased real property from the municipal land bank and has set off the price of the real property against the value of apartments or buildings handed over to the municipality. The act does not set out any minimum requirements to be met by an investor. As opposed to the procedure of selecting a private partner under the Public Procurement Law or in the Act on Concessions for Construction Works or Services, the “Lokal za Grunt” Act is much more liberal with regard to these issues. According to Article 7 of the act, an investor’s offer is only obliged to provide basic information including: a) first name and surname or company name, b) address, phone number and email address, c) number in the National Court Register, if applicable, d) the legal form of economic activity, if applicable.

The municipal council decides about the sale of the real property (land) from the municipality land bank. The relevant resolution on the sale of the real property indicates, among other things: the minimum and maximum number of the apartments and buildings and the usable area, the designation of apartments or buildings, the minimum standard of apartments or buildings, the price per square metre of the usable area of an apartment or building. The selection of an investor should follow a tender procedure. The tender is announced, organised and conducted by the applicable body of the municipality. Therefore, as opposed to the Act on PPP, the basic procedure is introduced in the form of an open tender, leading to the sale of the real property, and, consequently to the selection of a private partner. The PPP Act offers entities significantly more opportunities to shape the agreement with private partners. It also requires carrying out appropriate analyses concerning the effectiveness of the management of the municipality’s real property before carrying out the procedure. In accordance with Article 3a(1) of the Polish Act on PPP, before initiating the selection procedure of the private partner, the public entity must perform an assessment of the effectiveness of implementing the project within the framework of a public-private partnership in comparison with the effectiveness of implementing it in any other way, in particular with the exclusive use of public funds. The choice of a private partner is itself the result of negotiations, most often conducted in a competitive dialogue allowing for the parties' expectations to be defined in some detail.

Among other things, the tender notice includes information concerning the minimum and maximum number of apartments or buildings and usable area to be handed over by the investor to the municipality as part of the “premises for land” settlement, as well as the minimum standard; the designation of the apartments or buildings to be handed over; the price of one square metre of usable area of the apartment or building to be handed over; the period in which the apartments or buildings must be handed over to the municipality – calculated from the date of transferring ownership of the real property sold to the investor; the asking price – not lower than the value of the real property as specified in the estimate enclosed with the draft resolution on the sale of the real property; the form, date and place of paying the tender bond and the amount of the bond, which is to be not lower than 5% and not higher than 20% of the asking price.

Therefore, the price submitted by the entities in the tender procedure will determine the most advantageous offer. Again, a much wider range of criteria enabling the correct selection of the most advantageous offer is provided for in Article 6(3) of the Act on PPP. Due to this provision, the criteria for evaluating the offers may be, in particular: 1) the division of proceeds from the project between the public entity and the private partner, including the proceeds in the form of a share in the profit of the company referred to in Article 14(1) or (1a); 2) the ratio of the public entity’s contribution to the private partner’s contribution; 3) the effectiveness of implementing the project, including the effectiveness of using the asset; 4) criteria referring directly to the subject of the project, in particular its quality, functionality, technical parameters, level of technologies offered, operational costs and servicing; 5) the division of project-related tasks and risks between the public entity and the private partner; and 6) the dates and amounts of planned payments or other considerations by the public entity, if any. The agreement concluded with an investor includes information about the investment, including the date of its completion, the price of the real property obtained as a result of the tender and the method of paying the price. The difference between the price of the real property obtained as a result of the tender and the value of the apartments or buildings that the investor undertook to transfer to the municipality as part of the “premises for land” settlement is subject to a cash payment. The agreement also sets out the investor's obligation to transfer to the municipality the ownership of apartments or buildings, as well as the price of apartments or buildings that the investor undertakes to transfer to the municipality as part of the "apartments for land" settlement. 

If the apartments or buildings are not subsequently transferred to the municipality in accordance with the requirements arising from the obligation, the investor will be obliged to pay the municipality a sum of money amounting to 150% of the value of the apartments or buildings that it undertook to transfer to the municipality as part of the “Lokal za Grunt” settlement. Once again, it is worth pointing out that the Act on PPP protects the interests of public entities, in this case municipalities, to a much greater extent. In accordance with Article 9(2)of the Polish Act on PPP, if an asset contributed by a public entity is used by the private partner in a way obviously contrary to its intended use as specified in the public-private partnership agreement, the private partner must transfer that asset to the public entity in accordance with the principles specified in the public-private partnership agreement.

European Competency Framework for Public Procurement Professionals

The European Commission has released ProcurCompEU. A new tool to support the professionalisation of public procurement. ProcurCompEU shall help contracting authorities and individuals in EU countries assess their competences and knowledge of public procurement, identify skills gaps, and design targeted learning and development tools.

ProcurCompEU is a tool designed by the Commission to support the professionalisation of public procurement. It recognizes and supports public procurement as a strategic function that delivers public investment for sustainable growth. ProcurCompEU defines 30 key competences in a ‘competency matrix’ to provide a common reference for public procurement professionals in the EU and beyond. ProcurCompEU also contains a self-assessment tool and a generic training curriculum. ProcurCompEU enables procurement professionals to play a pivotal role in facing current and future challenges in delivering high value investment and services for the citizens. It helps individual public procurement professionals to valorise their competences, facilitates training and professional development. It helps organisations to build the teams of professionals they need to reach their strategic investment goals and to encourage careers in procurement. It also helps training providers to build the appropriate training programmes.

Polish public procurement during and after the Covid-19 pandemic

The Covid-19 pandemic caused by the SARS-CoV-2 coronavirus has rapidly and unexpectedly changed the way in which the world functions in practically every possible area. Its impact is noticeable in global, national and local economic relations, including the public procurement sector. The impact of the pandemic on the Polish public procurement market can be observed at least on several levels.

First of all, the situation has directly affected the legal regulations on public procurement. Already in the initial regulation concerning threats resulting from the impending pandemic, the Polish legislator referred to the issue of public procurement. This regulation, commonly referred to as the "Coronavirus Special Act", was included in The Act on Special Arrangements for Preventing, Counteracting and Combating COVID-19, Other Infectious Diseases and the Crisis Situations they Cause of 2 March 2020. Subsequent regulations concerning public procurement appeared in successive versions of what are known as "Anti-Crisis Shields". These included: the Act Amending the Act on Special Arrangements for Preventing, Counteracting and Combating COVID-19, Other Infectious Diseases and the Crisis Situations they Cause and Certain Other Acts of 31 March 2020 (the “Anti-Crisis Shield 1.0”), the Act on Special Support Instruments in Connection with the Spread of the SARS-CoV-2 Virus of 16 April 2020 ("Anti-Crisis Shield 2.0”), the Act Amending Certain Acts in the Field of Protective Measures in Connection with the Spread of SARS-CoV-2 Virus of 14 May 2020 ("Anti-Crisis Shield 3.0”) and the Act on Subsidies to Interest on Bank Loans Granted to Provide Financial Liquidity to Businesses Affected by Covid-19 of 19 June 2020 ("Anti-Crisis Shield 4.0”). The Polish Public Procurement Office, in subsequent communications and information, actively referred to issues related to the impact of the pandemic that were subject to the legislative initiatives described above.

Secondly, the Covid-19 pandemic has had an impact on international trade, including those aspects related to public procurement. This primarily concerns problems related to maintaining the proper functioning of international supply chains, as well as guaranteeing cross-border supplies of medical equipment of appropriate quality and suitability to combat the pandemic. The issue of the numerous abuses and illegal activities by manufacturers of this equipment and their sales intermediaries was particularly worrying. A communication from the Commission Guidance from the European Commission of 1 April on using the public procurement framework in emergency situations related to the COVID-19 crisis was a noteworthy action at an EU level. Quite importantly, the position presented in the Communication was contrary to the solution provided for in Article 6 paragraph 1 of the Coronavirus Special Act, based on a comprehensive exclusion of the regulation contained in the Public Procurement Law regarding supply and service contracts, and on the basis of Article 46c of the Act on Preventing and Combating Infections and Infectious Diseases in Humans of 5 December 2008, also contracts for construction works related to the Covid-19 epidemic.

Thirdly, the situation related to the pandemic should naturally provoke a discussion on the desired shape of public procurement in the future, namely in the “post-Covid era”. The reflection should cover the existing regulatory loopholes, as well as using the full range of legal structures available de lege lata and those provided for in the new Polish Public Procurement Law of 11 September 2019, which is to enter into force on 1 January 2021.

The World Bank's Fifth International Debarment Colloquium

Please join the Fifth International Debarment Colloquium - Roundtable 3. We will be discussing the "Other" Grounds: Performance- and Capacity-Based Debarments. This event will be organized by World Bank and will take place on October, 6 from 10 AM – 11:15 AM.

More information and registration at: Registration Roundtable 3

Prof. Christopher Yukins' and Prof. Michał Kania article concerning suspension and debarment in the U.S. and comparative lessons for the EU’s next steps in procurement can be found here

Webinar – Current Challenges and Opportunities for Green Public Procurement – September 30

Join a free webinar with European and U.S. experts to discuss international developments in “green procurement”

Wednesday, 30 September 2020 — 9 am ET/15:00 CET

Global challenges related to the climate changes as described in the Paris Agreement influence various aspects of public policies across the world. This leads us to observe in the U.S. presidential candidate Joe Biden’ s New Green Deal and in Europe, where for example the New Industrial Strategy for Europe calls for the support and implementation of the green aspects in public procurement. Also, the New European Green Deal and the Just Transition Fund should have a significant impact on the public procurement market and regulations.

Although Green Public Procurement (GPP) is still a non-mandatory legal instrument, the European Commission has opted for this solution as an effective measure in the EU's efforts to become a more resource-efficient economy. GPP can help stimulate a critical mass of demand for more sustainable goods and services which otherwise would be difficult to get onto the market. The new European initiatives are important not only for European public authorities and contractors but also for U.S. enterprises interested in Transatlantic cooperation.

The Institute of Law at the University of Silesia, Association ''Pro Silesia’’ with the support of the George Washington University’s Government Procurement Program invites you for a 90-minute, free webinar concerning current challenges and opportunities for green public policies and their influence on public procurement markets in the USA and the European Union, with discussions with leading specialists from both sides of the Atlantic.

Registration at: GPP Webinar Registration

Agenda and Speakers:

• Prof. Jerzy Buzek, Member of the European Parliament, President of the European Parliament in the years 2009–2012, Prime Minister of the Republic of Poland in the years 1997–2001: New Green Deal and Just Transition Fund
• Prof. Alexandra Harrington, University of Albany School of Law, Assistant Director of the Global Institute for Health and Human Rights (USA), Adv. Magdalena Stryja, University of Silesia in Katowice, Just Transition Research Group (Poland): Intersections between Global Governance Regimes and Climate Change Law
• Prof. Christopher Yukins, George Washington University, Washington D.C. (USA): The U.S. experiences with the support of environmental aspects in government contracting
• Dr Wojciech Hartung, DZP, Public Procurement Law Association (Poland): European Green Deal and Just Transition Fund reflections on the European Public Procurement legal regime
• Adv. Katarzyna Kuzma, DZP, Public Procurement Law Association (Poland): The support of the green effects in the new Polish Public Procurement Act
• Question and Answer Session Moderator: Prof. Michał Kania, University of Silesia in Katowice (Poland)

Speakers:

Prof. Jerzy Buzek - Member of the European Parliament continuously since 2004, and in the years 2009-2012 - its president. In the European Parliament prof. Buzek is a member of the Committee on Industry, Research and Energy. In 2016, Euractiv recognized him as one of the three most influential people of European energy policy. The winner of the rankings of the Rzeczpospolita daily for the best Polish MEP in 2008 and 2018. In the years 1997-2001 the Prime Minister of the Republic of Poland; his government carried out reforms of administration, education, health, pensions and mining. Professor Buzek also introduced Poland to NATO and started negotiations on its membership in the European Union. Knight of the Order of the White Eagle.

Prof. Alexandra Harrington – author of the book International Organizations and the Law and the forthcoming International Law and Global Governance: Treaty Regimes and Sustainable Development Goals Interpretation. Alexandra is the Director of Studies for the International Law Association Colombian branch, a member of the International Law Association Committee on the Role of International Law in Sustainable Natural Resource Management for Development, and an adjunct professor at Albany Law School. She also provides guest lectures globally on topics related to international law, environmental law, global governance and sustainable development.

Prof. Harrington has served as a consultant for entities such as the Commission for Environmental Cooperation of the North American Agreement on Environmental Cooperation and UN Environment. Prof. Harrington’s publications address a variety of fields relating to international law, including environmental law, legal issues relating to climate change, natural resources regulation, international organizations, international human rights law, international child’s rights, international trade law, corporate social responsibility, and criminal law. Prof. Harrington routinely presents her works at domestic and international conferences.

Adv. Magdalena Stryja performs the function of the Chair of the Science and Development Committee with the District Bar Association in Katowice. She is Poland’s first member of the international organization: Centre for International Sustainable and Development Law. Magdalena is a member of the interdisciplinary Polish Research Group Just Transition, which aims at developing and implementing the concept of fair transformation with a view to transforming the economy, lifestyle, culture and social values in Silesia in the face of climate change. She is a member of the University of Silesia-based Bioethics Research Group dealing with legal and bioethical aspects of medicine and animal protection as well as environmental and climate protection.

She is also a member of The Labour Law and Social Policy Research Group at the Institute of Legal Sciences at the University of Silesia. Magdalena delivers lectures on labour law and social policy. Her research interests also encompass legal aspects of climate change, including the social aspects of retraining employees.

Prof. Christopher Yukins - serves as co-director of the government procurement law program at George Washington University Law School, and has taught there on contract formations and performance issues in public procurement, bid protests and claims litigation, state and local procurement, Anti-corruption issues, foreign contracting, procurement reform, and comparative and international law. He has testified on issues of procurement reform and trade before committees of the U.S. Congress and the European Parliament. He is a visiting professor at the Université Paris Nanterre, where he lectures annually, and has taught a week-long course on procurement issues and corruption at the International Anti-Corruption Academy (Austria).

Prof. Yukins has spoken as a guest lecturer at institutions around the world, and he was a contributing editor to the UN Office on Drugs and Crime manual, Guidebook on Anti-Corruption in Public Procurement. He is an active member of the Public Contract Law Section of the American Bar Association, and is a member of the Procurement Roundtable, an organization of senior members of the U.S. procurement community. He is a faculty advisor to the Public Contract Law Journal, is a member of the editorial board of the European Procurement & Public-Private Partnership Law Review and is on the advisory board of The Government Contractor. He has worked on a wide array of international projects on capacity-building in procurement, and he was an advisor to the U.S. delegation to the working group on reform of the United Nations Commission on International Trade Law (UNCITRAL) Model Procurement Law. Together with his colleagues, he runs a colloquium series on procurement reform at The George Washington University Law School.

In private practice, Professor Yukins has been an associate, partner and counsel at leading law firms; he is currently counsel to the firm of Arnold & Porter.

Dr Wojciech Hartung - counsel at the Polish law firm Domański Zakrzewski Palinka, advises on infrastructure projects carried out under the Public Procurement Law or using partnership structures, i.e. PPP, concessions and other forms of co-operation between public and private partners, specialises in public-public cooperation (in-house procurement) issues. They have been addressed in his PhD dissertation on the "Independence of a basic local government unit upon the organisation and provision of municipal services in light of European law and Polish legal order’’. Wojciech is a Member of a working group set up by the Ministry of Development to review the law on public-private partnerships and to draw up a government policy in this respect. Until March 2009 dr Hartung acted as the Director of the European Union and International Co-operation Department at the Public Procurement Office. Wojciech was also Polish representative on the European Council’s Working Group on Public Procurement and on the Advisory Committee for Public Works Contracts set up by the European Commission.

Wojciech is a member of Public Procurement Law Association. 

Adv. Katarzyna Kuzma - partner at the Polish law firm Domański Zakrzewski Palinka and heads the team providing services relating to Polish and European public procurement law. She has extensive experience in advising both public and private entities operating in various sectors (including construction and engineering services, environmental protection, pharmaceutical and energy) on projects carried out in the traditional form (public procurement) and those based on partnership structures in the broad meaning of the term (PPP, concessions). The advice Katarzyna renders covers all stages of procedures (including representation before the National Appeal Chamber and common courts) and performance of public contracts, including inspections and financial adjustment procedures.

She actively promotes implementation of compliance systems in the area of public procurement, with special focus on bid rigging. Katarzyna is also the Vice-President of the Public Procurement Law Association.

Prof. Michał Kania - professor at the Silesian University in Katowice, legal adviser with 15 years of experience, member of the Just Transition Research Group. Michał is also an active member of the Public Procurement Association and legal consultant with the specialization in Public-Private Partnership and public procurement law, Visiting Fulbright Scholar at the George Washington University (2018-2019), Fellowship of German Academic Exchange Service at the Ludwig Maximilian University in Munich (2017), speaker at the Polish and international conferences, initiator and lecturer at the Postgraduate Studies in Public-Private Partnership and Public Procurement at the Silesian University in Katowice, independent adviser for the Polish Ministry of Development for the concept of the new Polish Public Procurement Act, adopted on 11 September 2019, plenipotentiary of the President of the University of Silesia for PPP projects.