Implementing a public investment is an essential part of the business strategy of many private-sector companies. Why is this? Although such projects are typically low-margin, they do guarantee a stable income.
Therefore, even though preparing a bid requires time and resources, many private-sector companies are keen to win a contract. Compared to 2023, the number of appeals filed with the National Appeal Chamber (the appeal body in public procurement) has increased by more than 27%. This shows that public investments in the Polish market are very attractive. If a private-sector company wants to operate in this sector, it must learn to swim with the sharks. Here are some rules that can help you take first prize.
Rule No. 1: be flexible. The public investment sector in Poland offers a wide range of opportunities to develop extensive cooperation between the public and private sectors. However, it is not only public procurement that can be a sound investment for a business portfolio. Private-sector companies wishing to enter the infrastructure sector may consider engaging in public-private partnerships (PPP) or works or service concession contracts.
A PPP is a form of cooperation in which the private-sector company provides financing, then carries out a project and remains involved in management or maintenance. The company must therefore be prepared for a long-term relationship that requires a high level of organizational commitment. Combining construction and management/maintenance often means finding a partner willing to join forces to deliver a project. However, the benefits are significant: a secure return on investment over many years (often up to 20). The attractiveness of this formula is demonstrated by the 19 new PPP contracts signed last year. Although the number may not seem high, given the realities of the Polish PPP market, it is rather impressive.
A works or service concession is, in simple terms, a PPP project in which most of the project’s economic risk is borne by the private-sector company. The company is paid directly out of end-user fees. Concession contracts offer private-sector companies the possibility of a higher return but at the price of bearing a slightly higher risk.
Rule No. 2: stay active. Sometimes a public entity needs support in structuring a project. Of course, the dialogue with such entities has different rules from those in B2B. The principles of fair competition and transparency must be respected and the public procurement law itself creates mechanisms to facilitate such dialogue. One such mechanism is preliminary market consultation. For a private-sector company interested in such a project, it is worth taking the time to provide insights, presenting them as favorably as possible. The public entity may later return the favor by signing a contract on more favorable terms than it originally assumed.
If a procedure is conducted in a form that allows direct negotiations (such as competitive dialogue) private-sector companies should seize the opportunity. When sitting at the same table with a public entity, be well-prepared, know the ins and outs of the project, and have a list of objectives. Trying to understand the motivations and constraints of the other party is key. Public investment goes hand in hand with the rules on public expenditure, policies, and local community perception. Sometimes, you need a broader outlook than in a B2B relationship in order to find consensus in P2B negotiations.
Rule No. 3: be diligent. The number of appeals mentioned earlier in this article speaks for itself. Private-sector companies have to fight to win contracts. Lack of time and attention in preparing a bid can be a painful mistake. Any omission in the documentation will be spotted by competitors, every statement will be scrutinized and challenged. This also works the other way – the company should examine competitors’ offers to make sure that the principles of equal treatment have been respected.
The infrastructure sector in Poland is full of challenges. The number of public investments is increasing, but with that comes greater competition and challenges in winning a contract. In the coming years, it is expected that alternative public procurement (PPPs, concession contracts, and EPCs) will be implemented in a greater number of projects. Private-sector companies should keep an open mind and be ready to adapt to the market.
By Tomasz Korczynski, Local Partner, and Katarzyna Stochnialek, Senior Associate, Greenberg Traurig
This article was originally published in Issue 12.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
