CMS Expert Guide on rising raw material prices in Poland

Neither the Polish Parliament nor the Council of Ministers has adopted any specific laws or regulations in connection with the increase in the prices of raw materials.

On 24 March 2022, the Public Procurement Office in Poland (“UZP”) published a notice regarding the rules for amending public procurement contracts without the need to conduct a new procurement procedure (“Notice”). The UZP relied in this respect on the legal provisions already in force under Polish law.

The Polish Act of 11 September 2019 on Public Procurement (“PZP”) regulates in a general way the procedure for awarding public contracts. The PZP also regulates cases in which it is possible to amend a public contract (although it is also subject to Polish private law). Article 455 of the PZP stipulates the circumstances under which a subsequent contract modification is permissible without launching a new procurement procedure.

Firstly, the PZP allows the contracting authority, already at the stage the public contract award procedure is prepared, to secure the proper course of the performance of the contract by introducing the relevant review clauses. The PZP stipulates that the review clauses on the basis of which the public contract may be amended must be clear, precise and unequivocal, and they must be provided for in the contract notice or the contract documents. The review clauses should specify the type and scope of the changes, specify the conditions for introducing the changes, and at the same time should not provide for changes that would modify the general nature of the contract.

In its Notice, the UZP pointed out that the remuneration due to the contractor envisaged in a public contract can also be modified on the basis of the above-mentioned review clauses. It may be inferred from the above that the contracting authority should formulate clauses allowing the contractor’s remuneration level to be adjusted to changing circumstances. In addition, it should also be noted that the provisions of the PZP make certain price-value-enhancing clauses mandatory. For instance, under the current provisions of the PZP, a contracting authority is required to draft appropriate contractual clauses – if the contract is longer than 12 months – in order to adjust the contractor’s performance to changes in the factors affecting the price of performance of the public contract.

Secondly, the PZP stipulates that modifications to public contracts which amount to a maximum of 10% of the contract value for delivery and service contracts and 15% for construction contracts are non-substantial and thus permissible (the de minimis limit).

In general, all public contracts are governed by Polish civil law, according to which parties to a contract have to stick to what they have agreed upon (pacta sunt servanda). Under Polish civil law, there are only a limited number of tools for a unilateral adjustment of contracts (or an exit from them) due to external reasons arising after conclusion of the contract and which were unforeseen by both parties, namely force majeure, the rebus sic stantibus clause, and the consequential impossibility of performance of the contract.

The conditions in which the clausula rebus sic stantibus may be applied in the case of price increases are very similar to those provided in the PZP, i.e. an unforeseeable change of circumstances.

Under the relevant provision of the PZP, an amendment to a public contract may be introduced if the need to modify the contract arises from circumstances which the contracting authority, acting with due diligence, could not foresee. At the same time, such an amendment cannot modify the general nature of the contract, and the price increase caused by each subsequent amendment of the contract cannot exceed 50% of the value of the original contract.

The concept – under the PZP – of unforeseeable circumstances refers to circumstances that could not have been foreseen, despite a reasonably diligent preparation by the contracting authority of the original public procurement procedure, taking account of the resources available to it, the nature and features of the specific project, good practice in the field in question.

As regards the possibility of amending the remuneration of the contracting authority under the above-mentioned provision of the PZP, the contracting authority must show that the need to modify the contract is caused by circumstances that could not have been foreseen, despite due diligence exercised by the contracting authority when preparing the public procurement procedure.

As a rule, circumstances impossible to foresee and independent of the contractual parties include economic phenomena external to the contractual parties and completely beyond their control, such as a sudden economic downturn, limited availability of raw materials, or a significant increase in material prices.

In the context of the above explanations, it should also be emphasised that the amendments based on the condition of foreseeability may be applied regardless of whether they were provided for in the review clauses to a public contract.

The PZP does not specifically refer to sanctions if the performance of a contract is delayed or has become impossible. Any disruptions in contract performance will be assessed in accordance with the contractual provisions of Polish private law.

As regards potential price increases of raw materials subject to public contracts, the PZP stipulates that the contracting authorities should take potential future price changes into account when preparing contracts in the future.

Not applicable as all public contracts are governed by private law.