Irregularities
Please review the statement sent on ____.
The statement documents serious horizontal irregularities around interpretation of fair competition. In my opinion the case doesn’t pertain only the particular co-financing agreement terms specific to the case of Zagozda Ltd. In fact the irregularities impact larger horizontal topic of how fair competition is defined and understood across projects operated by PARP (Polish Industrial Development Agency). In case of the particular ruling disputed between PARP and Zagozda Ltd, OLAF should observe forming of a well documented pattern of low participation rate in public tenders in Poland. Currently Poland leads bottom of the table where only one participant takes part in public tender. This is one of the lowest ranks amongst all EU countries. OLAF has an opportunity to examine particular of PARP vs Zagozda Ltd case in order to spot one of the key reasons for horizontal and systematic failure to increase participation rate in tendering process in Poland. As detailed below, the ambiguity of rules set out by PARP across all programmes, as well as misinterpretation of what fair competition is weakens the rate of participation in public tenders. This irregularity affects current, and past funding programmes operated today by PARP.
As we know, PARP (along with NCBIR) is the main operator of EU structural funds in Poland. At the same time all co-financing agreements (8.1 programme being here just an example) stipulate that all beneficiaries should adhere to elusive principle of fair competition (stated as is, open for interpretation). The free competition principle requirement is embedded in every co-financing agreement, also for all 8.1 programmes (here in the version as applicable during period of 2010-2014), as well as most of the co-financing agreements for the period of 2014-2020. The elusive principle allows PARP to make arbitrary decisions whether “fair competition” has been adhered to or violated as the “principle” has no definition in the co-financing agreements, neither it’s defined in the law applicable for the co-financing agreements. The agreement and the legal framework provide no clues for what constitutes sufficient publication of tenders and sufficient process requirements for beneficiaries to satisfy the requirement of such “principle”. Worse still, since procurement laws don’t apply to private beneficiaries, it leaves elusive “free competition principle” entirely at discretion of PARP which (as detailed below) can confuse what such “principle” even means.
As PARP is itself a body of public government of Poland, it should not be leading beneficiaries by any elusive principles but it should adhere predictably to clear rule of law. Adhering to standards, rules and laws would allow beneficiaries to rely on predictable actions of the government body – something beneficiaries are entitled to as part of basic rights to good administration. In this case lack of any shape of form for clear definition of “fair competition” leads to horizontal irregularities whereas beneficiaries are denied the fundamental right of good administration. Controversies around application of “fair competition” have been a topic of disputes in multiple court cases. High court (NSA) has stated in multiple rulings that in case of civil agreements (such as co-financing agreement) any “principle” would have to be well defined in the agreement itself in order to lend itself to being violated by beneficiaries. Views of the NSA have been also observed by national courts in Poland, specifically that the co-financing agreement is an agreement based on civil law and therefore not governed by public procurement rules. OLAF should also observe that ambiguous agreements effectively corrupt the free competition and open market procurement of EU structured funds to unlimited abuse. Irregularities can stem from serious abuse and misinterpretation by either beneficiaries or government bodies (such as PARP itself).
Further to that, in the specific case of PARP vs Zagozda Ltd, written opinions made by leading PARP’s inspector – Mrs Anna Płusa – clearly indicate PARP’s representatives oftentimes don’t even know what “principle of free competition” is in the first place. In this specific example Mrs Anna Płusa has during the interview by the prosecutor has faced a question: “what the principle of fair (free) competition means and where is it defined”? Prosecution service’s documentation states Mrs Płusa replied “she couldn’t answer” (to both parts of the question). Therefore, in this specific case, even though PARP inspectors have clearly indicated violation of free competition “principle”, she couldn’t even justify what principle means, or how it could be possibly ensured or violated. To that effect OLAF should also request PARP to present all inspection protocols signed after every inspection in the project made between 2010 and 2014. OLAF should observe that Mrs Anna Płusa certified (with her own signature) in every protocol that every on-the-spot inspection concluded that “free competition principle has been fulfilled”. Mrs Anna Płusa, as the representative of PARP in the Westpomeranian region, also supervising execution of the project managed by Zagozda Ltd, certified that “fair competition rule” has been satisfied during each of three inspections in years 2010-2014. This contradicts further statements made by Mrs Płusa in front of the prosecution service, where she’s changed her mind all the sudden in 2015 stating that “fair competition principle” has not been satisfied by the beneficiary by no means. Her view has influenced views of Mrs Iga Kolinko, followed by PARP’s final administrative decision made in the 2016. The final administrative decision wrongly condluded that based on the findings, PARP changes their previous decision regarding 18% of the project expenditure previously verified and accepted by PARP as qualified project costs. This situation clearly indicates serious misconduct made by PARP (and their representatives) as firstly there were no legal grounds to conclude that “fair competition principle” has been violated, neither there were legal grounds to change the decision accepting the costs in the first place.
OLAF should therefore extract project inspection protocols and PARP decisions from dates 2010-2014 signed by Mrs Plusa and also Mrs Kolinko. Those protocols and decisions gave PARP grounds to transferring funds to the beneficiary in years 2010-2014, also asking which documentation previously presented by the beneficiary has changed justifying the change of PARP’s decision. Since PARP has changed their previous decisions, OLAF should check why previous decisions were even taken in 2010-2014, since no new documentation has been revealed in run up to PARP’s changing their mind in 2016. OLAF should also investigate horizontal irregularities caused potential lack of adequate training provided for employees in the area of “principles” of fair competition, as current understanding lead PARP to a wrong decision effectively limiting free competition and violating beneficiary’s rights to good administration. Finally, since no one has a clear definition of what fair competition is, and the beneficiary has only followed previous directions of PARP, declared that it satisfied all criteria of fair competition, even though PARP takes a different stance. It is up to OLAF to investigate whether fair competition has been adhered to on the grounds of legal provisions found both in the co-financing agreement, as well as the legal framework as applicable in the 2010 (when the questioned contracts between Zagozda Ltd and Taskscape Ltd have been signed off). As clearly, both Zagozda Ltd and PARP have a completely different view on whether those agreements have been signed in line with principle of free competition, both PARP and Zagozda Ltd cannot be right at the same time on this topic. It is up to OLAF to detect if any fair competition irregularity during the procurement process has even taken place.
More to that, as in case of Zagozda Ltd, based on invalid understanding of the concept of free completion PARP has incorrectly concluded in the final administrative decision that in case of open public tendering procedure (as in case of Zagozda Ltd and Taskscape Ltd), only the companies explicitly invited to the open tender can be selected as subcontractors of the EU funds…. Such ridiculous conclusion obviously contradicts every understanding of free and fair competition, as such ruling denies access tendering process for all companies which have not been explicitly invited, even if they could participate in the tendering process (but simply were not explicitly invited by the beneficiary). It cannot be deemed fair competition that in case of open public tendering procedure, only companies invited explicitly are accepted, and companies which were not – are declined right to compete for EU funded contract. Contrary to PARPs opinion, in our opinion is that beneficiary should and could not discriminate valid offers made by any particular subcontractor based on origin of their capital, or even personal connotations – as no law allowed beneficiary for such discrimination at the time the specific contracts with this specific subcontractor were concluded. Further that we believe that every company meeting criteria of the tender, as specified, should be allowed to compete for the EU funds, specifically that the tendering process was advertised to public meaning everyone was indirectly invited by the beneficiary to make valid and competitive offers in the due course of the project.
Therefore, PARPs ruling in this violates the right to good administration, as well as limits the free competition within the EEC area. Such wrong ruling creates horizontal risks across many projects closing off the open market of EU contracts to few companies pre-selected by beneficiaries. Such situation goes against free movement of capital within EU and therefore OLAF should observe that PARP’s ruling is entirely illegal. OLAF conclusion on this topic is specifically more important, that the decision has contributed to the filing for bankruptcy of Zagozda Ltd, which effectively wasted whole EU investment into the project as the new administration have discontinued management of the project, as well as discontinued the service to over 10 thousand existing users of the TaskBeat service. Since OLAF has picked up the case of irregularities it should observe that illegal PARP’s decision not only wastes EU funding entirely, but also obstructed recovery of funds from the project, should any other irregularities are found. PARP seems to have learned their lessons. As the beneficiary managed to sue for defamation regarding alleged personal connnotations claimed by Mr Runowski in his letter dated 29th of June 2015, Mr Runowski has successfuly defended his position claiming that his false claims about alleged connotions were made “under influence of error”. As we have learned, following errors made by Mrs Płusa, Mrs Kolinko and Mr Runowski PARP is nowresearching options for outsourcing market research to third parties. As the agency clearly is unable to perform their duties on their own, PARP is now looking for companies in order to outsource those duties. Therefore OLAF should strengthen this process ensuring that proper market research is in place, so that PARP is equipped with right competencies, understanding and information in order to correctly interpret rules of fair competition.