The far-reaching measures taken to limit the spread of the coronavirus could be considered as "unforeseeable circumstances" within the meaning of public procurement legislation, if they affect a public procurement contract. This applies only to the extent that these measures were not reasonably foreseeable when the relevant public procurement contract was awarded (by the contracting authority) and when the tender was submitted (by the contractor).
The Royal Decree laying down general implementing rules for public procurement contracts (hereinafter "RD AUR") provides for various mechanisms in the event of "unforeseeable circumstances" during the performance of a public contract, both on the part of the contracting authority as on the part of the contractor.
Such circumstances may give rise to changes to the contract (such as, for example, an extension of the execution period), or to its termination.
We explain these two possibilities below.
1. Changes of a public procurement contract
A public procurement contract is changed whenever, in the course of the contract, the contractual conditions are changed.
This is also the case when, as a result of unforeseeable circumstances, the execution, the execution period, the price, the indemnity or any other form of revision of the contract are required.
It is very likely that the far-reaching governmental measures in the context of the coronavirus will be regarded as reasonably unforeseeable circumstances in respect of public procurement, which neither the contractor nor the procurer could have foreseen.
Already on 17 March 2020, the federal government has declared not to impose sanctions or fines on contractors, if they delay the execution of their contract or have stopped the execution of the contract, subject to the condition that such contractor can prove that such delay or non-execution is a consequence of the governmental measures or their effects to stop the coronavirus. This measure only applies for federal public procurement contracts. It is not excluded that other authorities will follow and apply the same measure.
However, only in a limited number of defined cases (which we will explain below) a new public procurement procedure will not be required as a result of the changes of a contract. In other cases, however, a new public procurement procedure is required.
A distinction must be made, depending on whether unforeseen circumstances arise on the part of the procurer or on the part of the contractor.
1.1 Unforeseen circumstances on the part of the procurer
A change to the contract may be made without a new tender procedure if all of the following conditions are met:
- the change is the inevitable consequence of circumstances that a careful procurer could not have foreseen;
- the change does not alter the general nature of the contract or the framework agreement;
- the price increase resulting from a change does not exceed 50% of the value of the original contract or framework agreement.
If several successive changes are made, this limitation applies to the value of each individual change. However, this may not result in an unbridled number of successive changes circumventing in this way the public procurement legislation.
Contracting authorities should also bear in mind the thresholds to publish a contract notice in the Official Journal of the European Union and in the Bulletin of Procurement. They are obliged to do so when the estimated value of a change due to unforeseeable circumstances reaches the thresholds for European publication.
1.2 Unforeseeable circumstances on the part of the contractor
Unlike the case above, the procurer is obliged to include a revision clause in the contract documents, which regulates the arrangements for reviews in the event of unforeseeable circumstances on the part of the contractor.
The contractor may invoke the revision clause only if he can prove that the review has become necessary due to circumstances which he could not reasonably have foreseen when submitting his tender.
On the basis of the revision clause, the contractor may opt for one of the following solutions:
- the extension of the execution period,
- compensation in the event of a very significant disadvantage, or
- the termination of the contract.
Should the financial conditions of a contract be reviewed, it should be noted that the threshold of a very important disadvantage is reached if such disadvantage amounts to 2.5% of the original value of the contract.
Should the specifications of the procurer not include a revision clause, the RD AUR provides for fall back option. In such case, the hard core of the above rule applies by law.
In order to be able to call on a review, the contractor must comply with a number of formalities within the deadlines set by the law.
In addition to the specific possibilities to change mentioned above, the RD AUR also contains other possibilities that may be called upon in the context of the Corona crisis, in particular in the case of changes that result in a minor change to the value of the contract (i.e. the de minimis rule), the non-substantial change or the price revision. This of course presupposes that the conditions for such changes are met.
2. Termination of the contract by the procurer
If, as a result of unforeseeable circumstances, a public procurement contract must be changed, but this change does not fit with any of the possibilities for review provided for in the RD AUR (e.g. if there is a price increase of more than 50%, see point 1 above), the procurer may terminate the contract. In that case, the contract will be settled in the state in which it is on the basis of the actual execution of the contract at the date of termination.