How to break a monopoly in tender procedures

And such was the case of the client, which decided to take the fight to the previous monopolist for the provision of specialised IT services for a state institution, which led to the Regional Prosecutor’s Office taking an interest in the case.

Arguably, the public institution, let’s call it the Agency, in announcing another tender to provide IT environment services, anticipated that this time, too, as before, only one entity would enter the tender: a multinational IT corporation operating under the contractual name IT Corp. This assumption was all the more reasonable as the provisions of the Terms of Reference (ToR) were formulated in such a way that only this company (and its business partners) could actually seek to win the tender. Indeed, the ToR once again sanctioned the de facto monopoly of IT Corp. The action of the state-owned institution (actually limiting competition) was aimed at making it increasingly dependent on the multinational corporation and increasing its IT service expenses by tens of millions of zlotys.

Nevertheless, the client took up the gauntlet this time and started a fight to change the ToR. He appealed to the President of the National Appeal Chamber, leading to favourable changes to the specification. He also emerged victorious from a legal action initiated by the Agency, which, for unclear reasons, still ‘wished’ to be serviced by the existing IT company or its authorised representatives. The client emerged unscathed from these skirmishes, and the result of its efforts was a change to the ToR and the de facto ‘opening’ of the tender to other, new entities.

The most significant change to the ToR from the point of view of the criminal proceedings boiled down to a statement that from now on IT support for the Agency could be provided by an entity with a licence for IT Corp. software or an entity with other, equivalent software. Ultimately, it was the client who won the tender for the service to the public institution, eliminating the previous de facto monopolist.

Soon, to the astonishment of the client, the law enforcement authorities stepped in. It turned out that the exhaustion of the appeal route before the National Appeal Chamber (NAC) and civil courts did not mean the end of the fight for the lucrative multi-million dollar contract for the international corporation. A previous litigation opponent from the IT industry filed a notice to the law enforcement authorities about the possibility of committing a crime specified in Article 297 of the Criminal Code.

This provision refers to the extortion of public funds (sometimes referred to as ‘credit fraud’, ‘subsidy fraud’ or simply ‘financial fraud’). Although the construction of the elements of this type of criminal offence is complicated, in some simplification we can say that it boils down to the accusation of behaviour consisting in the use of a document or statement that is false or even unreliable. The use must occur in the course of applying for public funds or funds available to a financial institution. This can be EU funds, a loan, a credit, but also a public contract.

In the notice of possible offence, the notifying party (IT Corp.) pointed to one of the client’s statements which was alleged to remain unreliable. This concerned, namely, the client’s statement regarding the disposition of the tools necessary for the Agency’s IT service, where IT Corp’s software had been in place for years. This was because it was argued that none of IT Corp’s partners in Poland were cooperating with the client, and on the contrary: all of the corporation’s partners – as a consortium – had submitted a bid in the ultimately unsuccessful public procurement procedure. This being the case, the client – in the notifying party’s view – was not in a position to fulfil 100% of the IT service task set before it, as it did not have the relevant software at its disposal (it was not granted a licence). Therefore, in the light of the theses presented in the notification on committing a crime, the fact of using an untrustworthy or even falsified declaration appeared to be obvious, which led to charging the client on the basis of the provision of Article 297 of the Criminal Code, i.e. he was charged with criminal extortion of a multi-million public procurement contract.

In such a not-so-comfortable situation, the client turned to legal assistance with a view not only to the specific public contract in progress, but, above all, to all subsequent contracts that it could pursue in the future.

It had to be verified which documents the client actually used and whether they were in fact unreliable in the light of the ToR, which had been supplemented by certain provisions as a result of the court path the client had gone through.

Wading through the provisions of the ToR, as well as a search of the client’s documentation, soon made it possible to develop several levels of defence for the client’s interest. On the one hand, it was necessary to present the Regional Prosecutor’s Office with an argument related to the amended provisions of the ToR, in the light of which the failure of IT Corp. to provide a paid licence to the client for its software did not necessarily prejudge the inability to provide IT support to the Agency or the inadequate provision of such support. The reasoning for such a finding was, for example, that the client was using software provided by IT Corp … free of charge (under an open licence) in its operations.

Independent of the above, however, the client also co-operated with a foreign ‘liaison’ – a business partner who held a software licence from a multinational IT corporation and could therefore provide support to the client – a Polish company.

Perhaps if this ‘liaison partner’ had been able to provide uninterrupted services to the client the matter would have been simpler. However, it turned out that during the public procurement process (presumably through IT Corp) the licence for the ‘liaison officer’ was not renewed and so the client lost such vital support. Nonetheless, taking a risk, it still maintained during the public procurement that IT support could be provided in full.

However, the reasoning presented at the Regional Prosecutor’s Office raised some doubts as to the completeness of the evidence gathered and, consequently, the validity of the charges. This led to the appointment of an IT expert to help establish the client’s ability to deliver IT services to the Agency. The above directly affected the determination of whether the statements made by the client – irrespective of the ‘disposition’ of the foreign ‘liaison’ – would prove to be unreliable within the meaning of Article 297 of the Criminal Code.

The polemics with the expert who undertook to give an opinion in the case and his questioning on several occasions finally made it possible to establish that even without the paid licence granted by IT Corp, the possibility of the client’s IT service being fulfilled in a complete manner cannot be completely ruled out. What is more, the client not only had the support of a foreign entity, figuratively referred to as a “liaison”, to which IT Corp had granted a fee-based licence, for a certain period of time, but also made use of the resources provided by this corporation free of charge. The law enforcement authorities were also not helped by the imprecise provisions of the ToR, amended as a result of the court battle, as well as the testimony of witnesses from the Agency, who admitted that in principle they had not encountered a situation of the client failing to perform its tasks.

The above deliberations ultimately allowed the Regional Prosecutor’s Office to decide to discontinue the investigation.

The only alleged victim in the whole case, i.e. the Agency, nevertheless decided to appeal the decision to discontinue the investigation to the court, which, however, was probably done more for the sake of principle. The applicant did not cite any relevant facts or evidence in his complaint, basically repeating the theses of the notice. The Court did not uphold the Agency’s complaint, which meant that the case ended with a final decision, definitively closing the issue of the client’s criminal liability.

However, the case continued, although no longer necessarily related to the client.

The agency, hand in hand with IT Corp, apart from the litigation, had no reluctance to ‘war’ with the client also before the law enforcement authorities. Since this is the case, it also had to face the same Regional Prosecutor’s Office this time, but already in a completely different capacity. It is, however, a completely different story …