The article examines when a Polish municipality may award an in-house contract directly to its own company instead of opening a tender.
What the rulings change
Two recent and now final rulings by Poland’s Public Procurement Court point to a stricter approach to municipal in-house contracts. These arrangements allow a city to award a contract directly to its own municipal company, without a competitive tender, but only where the company carries out more than 90 per cent of its activity for the public bodies that control it. The underlying rationale is that a company focused overwhelmingly on public tasks should not have to compete for those same tasks against private firms. The decisions indicate that corporate reorganisation can no longer be treated as a straightforward way to satisfy that condition.
How the in-house mechanism works
An in-house award is a form of direct, or free-hand, procurement rather than an open competition. A municipality can use it for a company under its control when the company’s activity is sufficiently concentrated on work for the municipality or related public bodies. The 90 per cent test is central because it separates a public-service vehicle from a business operating substantially on commercial markets. The source describes a tension at the heart of the system: many municipal companies serve their cities but also pursue profitable private-sector work. That commercial activity can prevent them from meeting the legal condition for a direct award.
Why municipalities created subsidiaries
Some local authorities sought to address the problem by moving commercial activity into newly created subsidiaries. In one version of the arrangement, a parent company transferred its market-facing work to a subsidiary and then presented itself as working exclusively for the city. In another, the subsidiary concentrated on services for its own municipality. This structure also enabled municipalities to rely on financial forecasts for newly established companies rather than historical figures showing a broader commercial record. The source says the approach was used especially for waste-collection contracts, where municipalities argued that residents could not be left without the service.
A narrower path for direct awards
The two judgments do not remove the in-house procedure, but they make the conditions for using it more significant in practice. Municipalities and their companies must account for how the relevant activity is organised and evidenced, rather than assuming that a new corporate structure will itself resolve the problem. For suppliers, a stricter line may preserve more opportunities to compete for work that might otherwise be placed directly with a municipal company. For contracting authorities, the rulings underline that continuity of an essential service, including waste collection, does not by itself replace the statutory conditions for an in-house award.
IN NUMBERS
The practical lesson is that restructuring a municipal group is no longer a dependable shortcut around the in-house test. Direct awards remain available, but the company’s actual activity and the evidence supporting the arrangement remain decisive.
Reported from pro.rp.pl, 2026-11-12. The Tender Wire is published by Otnox.
