More intense measures by the Polish Public Procurement Office to draw up standards for indexation of fees in public construction work contracts
Under article 439 of the Public Procurement Law, where public procurement agreements are concluded for a term exceeding six months, a contracting authority is required to specify the rules on adjustment (indexation) of a contractor’s fee if prices of materials or costs of performance of the contract increase. The Public Procurement Law provides for certain requirements regarding the wording of the indexation clause, but these are general requirements. In particular, the issue of the specific indices and detailed rules to be followed concerning adjustment of a fee is not addressed. Contracting authorities have a great deal of discretion in this regard, but it is often highlighted that there are no clear guidelines on the proper procedure.
The Public Procurement Office addressed these concerns when it published a set of ready indexation clauses on 30 November 2022, which contracting authorities can use in construction work tender contracts. The Public Procurement Office proposed two clauses.
The simpler of the two applies a single indexation rate, the construction-assembly price index published by the Polish Statistical Office. The Public Procurement Office has stressed that this index is to be used as a sample, and that a contracting authority may draft a clause that applies a different index suitable for the envisaged project.
The other is a “indexation basket” clause in which a number of indices are applied in indexation, including the sold production of industry index, remuneration, and the consumer price index published by the Polish Statistical Office, as well as data in a separately produced table containing the indexation basket for various types of construction ventures.
In addition to the sample clauses, the released paper includes provisions that have been in use for some time by large state-owned contracting authorities such as the General Directorate for National Roads and Motorways and PKP Polskie Linie Kolejowe S.A., while weightings and limits, and the risk allocation factor, have been removed from the clauses. Contracting authorities that wish to use the clauses in their agreements need to determine the values to be inserted, and adjust them to ensure they are feasible for the contract concerned in the particular circumstances, especially the market climate.
The Public Procurement Office is now working with the Polish Statistical Office to produce indexation calculators for the clauses. Once the work is completed, there are plans to commence work on sample indexation clauses for the IT industry.