PSE as a solid business partner

As a contracting authority, PSE conducts contract award procedures for public and non-public supplies, services and works pursuant to the Act of 29 January 2004 – Public Procurement Law (PPL Act) together with implementing measures and the PSE Contract Award Procedure (Procedure).

Contract award from PSE can be sought by contractors who:

• have formal qualifications to conduct of a specific business or activity, where required by law,
• possess the necessary knowledge and experience,
• have at their disposal the relevant technical potential and personnel capable of performing the contract,
• are in a suitable economic and financial position that ensures the capability to perform the contract,
• are not subject to exclusion from the contract award procedure.

A detailed method of procurement is defined by the provisions of the PPL Act and the PSE Contract Award Procedure.

In order to maintain the transparency of activities related to the award of contracts, we prepare and conduct public and non-public procurement procedures in compliance with the principles of:

• fair competition,
• impartiality and objectivity,
• equal treatment of contractors,
• transparency.

We comply with the above principles in all stages of the procedure; in its preparation phase (preparing the terms of reference and appointing the tender evaluation committee) and in the course of the contract award procedure. In addition, activities related to the preparation and conduct of the contract award procedure are performed by persons who ensure impartiality and objectivity.

The principle of fair competition is the foremost principle in managing tendering procedures and awarding contracts. Its application allows equal access to information on contracts and to contracts themselves of all the parties concerned. The principle concerns, among other things, the method of delivery of statements, applications, notices and information. It should also be taken into consideration at the stage of describing the conditions for participation in the procedure and when preparing the description of the object of the contract. The object of the contract must not be described in a manner that hinders fair competition. It should be described in an unambiguous and exhaustive manner, by means of sufficiently precise and comprehensible statements, taking into account all requirements and circumstances that may affect the tender preparation process.

Sometimes tendering procedures impose a minimum number of potential contractors in order to ensure compliance with the fair competition principle.

The conduct of the procedure in a manner that guarantees fair competition requires compliance with the following rules:

• admission of multiple contractors to participate in the procedure,
• specification of requirements that guarantee access to a contract only for reliable contractors,
• defining terms of the contract in a manner that enables contractors to prepare a competitive tender.

The fair competition principle applies also to contractors. Submission of a tender that constitutes an act of unfair competition is a basis for the rejection of the tender.

According to the equality principle, also referred to as the “principle of equal treatment of parties seeking contract award”, all contractors should be treated equally, based on identical criteria. The contracting authority may not apply requirements that give preference to a particular contractor. It should apply a single measure for all contractors, i.e. place the same requirements, verify compliance and enforce them in the same way.

When preparing the procedure, the contracting authority sets forth, in the terms of reference, the conditions for participation in the procedure which refer to the object of the contract (object-specific), manner of contract performance (contractual), and to the contractor (subject-specific). It should also define the method of confirming contractors’ compliance with requirements. Upon receipt of tenders, in accordance with its rules, the contracting authority verifies contractors' compliance with requirements and takes contract award decisions according to the results of such evaluation.

The conduct of the procedure in a manner that guarantees equal treatment of contractors requires:

• definition of requirements in the same manner for all contractors interested in being awarded a contract,
• definition of the same method of confirming compliance with the requirements for all,
• resolving – by comparing information and documents submitted by contractors with the requirements – whether contractors meet the requirements, and taking decisions specified in the terms of the contract according to the evaluation results.

The principle applies both at the stage of putting forth conditions for participation in the procedure or during the evaluation of tenders or selection of the most advantageous tender. The equality principle means a ban on the discrimination of individual contractors on grounds of their legal status, the contractor’s location or characteristics.

Transparency means clear and unambiguous rules of the game. The principle of transparency is furthered by the openness of the procedure, defined as access of all interested participants of the procedure to related information on equal terms, as well as ensuring maximum impartiality and objectivism in all actions undertaken.

Our organisation, as an entity taking care of high standards of social responsibility, cooperates with a large group of contractors and suppliers.

The main groups of PSE’s suppliers include contractors for new build, upgrade and repair projects performing work on grid assets, suppliers of equipment and instruments, and service providers.

In 2018, PSE’s counterparties (by contract value) came from:

• 86.6 percent – from Poland,
• 0.2 percent – from EU countries,
• 13.2 percent – from non-EU countries.

Our purchasing policy is pursued in compliance with the following provisions: the Act of 29 January 2004 – Public Procurement Law, together with implementing measures issued to the Act; Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors; Directive 2009/81/EC of the European Parliament and of the Council on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security; and Commission Interpretative Communication on the Community law applicable to contract awards not or not fully subject to the provisions of the Public Procurement Directives (2006/C 179/02).

In working with suppliers, we care about building lasting links and partner relations. This is important, as all activities carried out by contractors are performed as PSE activities and affect the image of our organisation as investor. Therefore, it is so important to maintain high standards and coherent guidelines on the cooperation of contractors with local communities which we take care of every day.

2018 was a period of intensive work in our organisation, aimed at improving the investment process. Efficient management of infrastructure investment projects is the responsibility of a specialised unit established within our organisation, performing tasks within the framework of the project structure called Central Investment Unit (CJI). It is responsible for the management of investment projects throughout the project life – from the moment the project is included in the Investment Portfolio, through the contract award procedure, to its completion. The CJI purchasing processes are the responsibility of the Public and Non-public Procurement Division (WZ).

As of 1 November 2018, the Investor Deliveries Department (WI) was established within the CJI Contracting Division. The establishment of the team made it possible to optimise the unit costs of equipment in investment projects, standardise equipment and reduce bid prices for particular investment tasks.

Owing to the opening of the market for contractors, significant changes were made in subject-specific conditions based on which CJI selects the contractor. The conditions currently in place are intended to reduce the risk of selecting a contractor who is unable to implement a contract or who is likely to be unable to properly perform the contract owing its subject-specific situation. Diverse bid assessment criteria are also used (described below).

To optimise and standardise tendering documentation, WZ has developed and implemented templates of Parts I and III of the ToR for services, supplies and works for different type of procedures, in a fully electronic manner, i.e. with the initiation and conduct of the procedure by electronic means (through PSE’s purchasing platform) to the extent required by the EU directives. These arrangements allowed tender documentation to be prepared faster and more efficiently, and eliminated significant differences between different contract award procedures.

According to the new purchasing model, the initiation of a procedure in a public open tendering procedure is preceded by a technical dialogue with potential contractors. The new purchasing model introduced negotiation procedures, i.e. the competitive dialogue or negotiations with notice for procedures conducted under the PPL Act regime, as well as negotiations for non-public procedures. The use of the technical dialogue and negotiation modes will allow contractors’ needs to be addressed. The discussion of contractual provisions, conditions for participation and technical documentation will make it more acceptable for both parties and adjusted to the current market situation. The discussion of contractors’ comments and suggestions with them will make it possible to improve the quality of tendering documentation being prepared, in particular the description of the object of the contract and the draft agreement, which will consequently reduce the need to amend the agreement in the course of its performance.

In 2018, we conducted a competition to select a contractor for design work of a complicated nature. The use of the public promise in the form of a competition allows a contractor for works to be selected based on factors other price alone, taking into consideration: quality, functionality and innovativeness of solutions applied, based on the assessment of competition entries submitted by contractors (e.g. including mock-ups of a planned building).

The purchasing process is significantly facilitated by entering into framework agreements with investment support contractors. This makes it possible to quickly satisfy the needs relating to e.g. land surveys, drawing up property appraisal reports, autotransformer measurements and laboratory testing of structural steel. The award of specific contracts under framework agreements allows the contractor to be selected quickly owing to the elimination of the need to repeat the assessment of bids for formal compliance. At the specific contract award stage, the contractor may offer terms and conditions which are more advantageous than those originally provided for in the bid.

The procurement platform was deployed as of 1 May 2018 to increase the transparency and streamline tendering procedures. The platform is the main tool for communication with counterparties in the course of the purchasing process. Owing to it, the bid presentation and tendering processes are performed in electronic form. It is a convenient and secure method which fully responds to the needs of PSE and its counterparties, and ensures full data protection.

The establishment of the Investor Deliveries Division (WI) within CJI will provide the following in the long term:

• Benefits resulting from the reduction of bid prices of construction works under a particular investment task due to the exclusion of supplies – reduction of contractors’ financial needs in terms of capital to cover the cost of supplies, a lower estimated contract value and the contractor’s total remuneration – a lower amount of tender security, performance bond, no financial commitments of contractors to suppliers of selected product groups, and consequently the contractor’s improved financial liquidity.
• Benefits resulting from the reduction of unit costs of products classified as investor deliveries due to better commercial terms owing to the economies of scale, which should translate into the reduction of the project implementation costs. No indirect costs related to contractors’ mark-up on the equipment and product supplies, and reduction of PSE’s risk exposure – reduction of the financial burden under each investment task in the case of contractors performing a number of work assignments under different tasks for PSE, thus reducing the global risk related to the possible loss of the contractor’s liquidity under one of the tasks, which might trigger negative effects under other contracts.
• Increasing competitiveness – successive exclusion of parts of investor deliveries from works contracts, resulting in reduced contract values, which may lead to an increased share of “smaller and medium” contractor in investment procedures.
• Streamlining the purchasing processes through standardisation and repeatability of the description of the object of the contract, template agreements and standardisation of equipment (one manufacturer of supplier of equipment and materials for the purposes of several investment tasks).
• Building a supplier database and purchasing strategy, trend monitoring, updates with the use of IT tools, industry websites, participation in industry fairs and conferences at home and abroad allowing a qualification and assessment system to be built for prospective suppliers.

PSE has also introduced additional arrangements aimed to guarantee security of investment project implementation:

• The period for which the contractor seeking contract award must demonstrate its experience has been extended to 5 years.
• The obligation has been introduced for the contractor’s personnel to include the Commissioning Group Manager who will be responsible, among other things, for checking equipment for correct installation, parametrisation and entering settings, connection of power supply, activation of required functionalities, performing studies and tests to check the operation of equipment prior to its energisation from the mains, as-installed control and measurement testing and participation in voltage and loading tests. The candidates for this position will be required to have completed at least 2 works consisting in the construction or upgrade of electric power facilities completed with substation start-up (commissioning).
• Depending on the object of the contract, contractors must demonstrate experience in designing/upgrade/construction works conducted in the ENTSO-E Continental Europe synchronous area at 220 kV and higher voltages.
• The requirement has been introduced for the contractor to employ a person with appropriate HSEQ (Health, Safety, Environment and Quality) qualifications, with higher education degree in HSEQ, having completed training in first aid with the use of an automated external defibrillator (AED) as well as current periodic training for HSEQ personnel (including qualifications to provide training). The contractor’s possession of appropriate personnel should lead to the reduction of the number potentially hazardous events and accidents (including fatal ones).
• The requirements concerning the experience of the contractor’s Project Manager have been modified – the person is allowed to demonstrate experience in other construction disciplines, i.e. construction/upgrade of road infrastructure (lines), rail infrastructure (lines) and gas infrastructure (lines), and industrial infrastructure (substation contracts only).
• In setting the above requirements, CJI not only follows the principles of non-discrimination, equal treatment, transparency and proportionality, but it also aims to create market conditions that take into account the company’s actual needs.
• The requirements for social and crisis communication in the course of project implementation have been expanded. Rules for the preparation and conduct of social communication have been set for electric power projects, the necessary content of social communication programmes, and guidelines on the preparation and release of publications and website designs.
• Changes have been made leading to a significant reduction of the tender security amount (previously tender security amounted to 2% of the remuneration value). The credit or financial capacity thus freed up can be used effectively at the project implementation stage.
• New guidelines have been created for the preparation of the Baseline Contract Schedule for construction contractors. The intention is to combine information on the scope of works, time and resources necessary for their completion and monitoring of the actual progress of work against the originally adopted time schedule.
• In the last quarter of 2018, the proposal was put forward at the company to include in the specifications the development of BIM-based as-built documentation. An object created fully in the BIM technology has all the possible parameters of the real-life object. Using the BIM technology, the cost, quantity of materials and time for project completion can be analysed much easier and faster.
• Provisions were included in agreements to allow advance payments to be made towards investment tasks.
• Non-price bid evaluation criteria were introduced which allow the most advantageous instead of the cheapest bid to be selected. The “price = 100%” formula was replaced with the following criteria:
  • extension of the warranty and defects liability period,
  • construction without outages ,
  • downtime ,
  • professional qualifications and experience of persons engaged to perform the contract,
  • reduction of the contract performance time,
  • price criteria based on a median of submitted bid prices.
  
  The basic bid selection criteria are the price, construction without outages and downtime. The other criteria are supplementary to the basic criteria. The appropriate choice of the criteria mentioned above (technical, qualitative, which deserve higher weighting and credit points in the tendering procedure) as well as other criteria which are conducive to supporting experience and a more efficient implementation method will guarantee to deliver an outcome in the form of bids which are the most advantageous in qualitative and technical terms, advantageous in terms of security and durability of PPS elements, and not merely the cheapest ones.

The Central Investment Unit is continuously monitoring the contracting market and trends prevailing in the Polish and foreign markets, which is aligned with PSE’s new strategy. Changes in approach to investment management by separating out CJI within the PSE structures have led to a number of breakthrough modifications in the way tendering procedures are conducted. In developing a new method of conducting tendering procedures, the CJI team has designed arrangements aimed to ensure the implementation of the Investment Projects Plan while ensuring the best quality, economical management of PSE’s assets and a positive impact on the contracting market. The new arrangements – in the form of negotiation procedures and dialogues – facilitate contractors’ participation in contract award procedures. Opening up to the needs and opinions from the market will allow purchasing procedures to be conducted more effectively. Taking into account the proposed provisions and arrangements will make it possible to conduct the tendering procedure better and more efficiently, and to select the contractor engaged in the implementation of the project from the beginning. The modifications will relieve potential contractors of some burden in several important issues, e.g. bureaucratic, professional and financial/economic. They also make it possible to select a contractor who gives assurance of the proper performance of the contract, without breaching the principles of equal treatment of contractors and fair competition.