After two months since being enacted, the new public procurement legal framework continues to raise many questions both to economic operators and contracting authorities.
One intensely discussed aspect refers to the cases in which the amendment of the public procurement contract is allowed without a new procurement procedure in the light of the changes brought by the recent legislation. In this regard, we note that the European Classic Directive (2014/24) aimed to reduce uncertainty arising from European Court of Justice jurisprudence (in particular, Pressetext, C-454/06), which stated that changes in a contract after its award could lead, in certain cases, to the requirement for organizing a new award procedure.
The amendments, irrespective of their monetary value or of the possibility of being or not evaluated, have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses, which may include price revision clauses, or any other options, which specifies the object, limits, nature and conditions of such amendments; such review or option clauses should not alter the overall nature of the contract.
Review clauses include any amendments that are previously agreed between parties while the options refer to the unilateral right of the contracting authority to modify the public contract. A review clause is precise as long as it clearly states the cases in which the amendment will apply, the type of amendments, content, limits of amendments.
It should not be left open the possibility of the parties to negotiate an amendment of the contract after its award. The contract should state the amendment mechanism that will apply automatically.
In case there are necessary additional works, services or supplies from the initial contractor that have become strictly necessary and that were not included in the initial procurement, and where a change of contractor cannot be made for economic or technical reasons, and the change of the contractor would cause significant inconvenience or substantial duplication of costs for the contracting authority.
Any increase in price shall not exceed 50% of the value of the initial contract.
It is interesting that the Romanian legislator chose a different solution than the one stated under the Classic Directive which provides that where several successive amendments are made, the 50% limitation shall apply to the value of each amendment. On the contrary, the Romanian law provision states that the limitation shall apply to the cumulated value of all amendments.
When the following conditions are met: the need for amendment has been brought about by circumstances that a diligent contracting authority could not foresee, the amendment does not alter the overall nature of the contract and any increase in price is not higher than 50% of the value of the initial contract.
By “the overall nature of the contract” it is understood the principal objectives considered by the contracting authority when organizing the initial procurement, the main object of the contract, including main quality and performance requirements.
Where a new contractor replaces the one to which the contracting authority had initially awarded the contract as a consequence of any of the following: (i) an unequivocal review clause or option as referred to above, (ii) universal or with universal title succession into the position of the initial contractor, following corporate restructuring, including merger or spin-off, of another economic operator that meets the criteria for qualitative selection initially established, provided that this does not entail other substantial amendments to the contract and is not aimed at circumventing the application of the award procedures established by law; (iii) in the event that the contracting authority itself assumes the main contractor’s obligations towards its subcontractors in case of pre-term cancellation of the contract.
We note that, once again, the Romanian legislator has chosen a different approach considering that the Classic Directive refers also to the insolvency of the awardee economic operator. This might be a suitable option for continuing the performance of the contract in case the initial contractor faces financial difficulties leading to insolvency.
Where the amendments, irrespective of their value, are not substantial
The meaning of “substantial amendment” has been long disputed. In part, the conditions in the sense of a substantial amendment have been already stated under Pressetext case. However, the Classic Directive, as implemented under the Romanian law, goes further in setting out comprehensively all the circumstances in which a contract may be amended.
- introduces conditions that would have allowed for the selection of a different tenderer or acceptance of another offer or it would have facilitated the participation of other tenderers; or
- changes the economic balance of the contract in favour of the contractor; or
- extends the scope of the contract “considerably”; or
- a new contractor replaces the initial contractor, other than where the change arises from a review or option clause in the original contract or from corporate changes as explained above.
In any case, the amendment should not materially alter the overall nature of the original contract.
Contracts may equally be modified without a new procurement procedure being necessary where the value of the amendment is below both of the following values: (i) the thresholds for application of a procurement procedure, (ii) 10% of the initial contract value for service and supply contracts and below 15% of the initial contract value for works contracts.
The new legislation also provides for the right of the contracting authority to terminate the contract during its term in case the contract has been subject to a substantial amendment, which would have required a new procurement procedure.
It should be noted that these new rules will apply only to the contracts/framework agreements concluded after the entry into force of the new public procurement legislative package (i.e. May 26, 2016) and not to contracts concluded prior to this date.
Is has been said that where the law does not give all needed details in respect of the new rules and terminology, the contracting authorities should make their own assessment. Given that these new provisions have not yet been tested in the competent courts, it is expected that the jurisprudence will explain the controversial aspects in relation to the public contract amendment.