Directive 2014/24/EU on public procurement (the “Directive”) clarifies cases where public contracts can be modified without the need for a new procurement procedure. The regulation is an example of the influence that the Court of Justice of the European Union (the “CJUE”) case law has on the EU legal system. The Directive aims to make the process of awarding public contracts more efficient and flexible. In general, modifications to the awarded contracts are possible, however within the strict boundaries specified in the Directive.
Article 72 of the Directive lists modifications that may be introduced during the term of an awarded contract: (i) modifications, irrespective of their monetary value, that have been clearly provided in the initial procurement documentation, (ii) additional works, services and supplies, (iii) modifications due to unforeseen circumstances, (iv) replacement of a contractor, (v) low value modifications and (vi) other non-substantial modifications.
At the same time the Directive explains which modifications shall be understood as “substantial” modifications – those that: (i) introduce conditions which, had they been part of the initial procurement procedure, would have allowed for the admission of other candidates, (ii) change the economic balance, (iii) extend the scope of the contract or (iv) involve a new contractor replacing the one which was awarded the contract (in other cases than those allowed by article 72 of the Directive).
Please find below more information about the implementation of article 72 of the Directive in Bulgaria, the Czech Republic, Hungary, Poland and Romania:
Bulgaria has fully implemented the Directive with a new Public Procurement Act (“PPA”), adopted and in force as of April 2016. Previously, the legislation has been very restrictive in terms of modifications of public procurement contracts. Now, following almost literally article 72 of the Directive, the new PPA gives more opportunities to the parties, and allows previously impossible changes of contracts. Currently, the PPA allows even significant modifications. However, in most cases the amendments are insignificant and they take place upon objective justification or unforeseen circumstances. The changes related to contract modification are seen positively in Bulgaria.
The Directive has been implemented by the new Act on Awarding Public Contracts (Act No. 134/2016 Coll.), replacing the previous legislation. Section 222 contains a general prohibition of substantial modifications, while allowing certain limited situations where modifications will be deemed non-substantial or will be otherwise permissible without the need to re-tender the contract. These exceptions include modifications already anticipated in the tender conditions, overhead supplies or work whose value is below certain financial thresholds (up to 50% of the value of the original contract in certain cases), or substitution of contractors in cases of legal succession. Firms have praised the new law for clarifying the legal definition of modification, allowing substitution and expanding the thresholds for permissible adjustments.
The Directive was fully implemented in Hungary by the new Public Procurement Act in 2015. Compared to previous rules, the present Act provides for a more flexible approach regarding contract modifications, however, in order to prevent extensive amendments, the modification possibilities are to be interpreted strictly. An unlawful modification should be considered null and void.
In order to ensure compliance with the Act, the Hungarian Public Procurement Authority monitors contract modifications and initiates ex officio review proceedings if it deems the modification unlawful.
The Directive has been fully implemented by amending the relevant provisions of Polish Public Procurement Law. The general prohibition on public contract modification in article 144 now lists situations that allow for such modifications. Under the previous regulations the only instance when a contract could be modified was when such possibility was provided for by a clause in the procurement documentation or when the change was not substantial. The amendment greatly expanded the permissibility conditions. Any contractual provision amended in breach of article 144 is invalid and must be replaced by the contractual provision in its original wording.
Romania fully transposed the Directive by adopting a new piece of legislation (i.e. Law no. 98/2016 regarding public procurement) which repealed previous laws on public procurement. The new rules on modifications of public procurement contracts are a welcome addition to the legal framework, since the previous rules afforded very limited circumstances as to when the contracting authority and the contractor could amend the contract.
Previously, such circumstances were expressly regulated only in secondary legislation and were in principle limited to changes to prices (e.g. modification of the price due to legislative changes, inflation or unforeseen circumstances), while other cases (which did not fall in the ambit of the legal provisions) were decided by reference to the jurisprudence of the CJUE, the guidelines of the national regulatory authority and jurisprudence of national courts.
The extensive rules currently in effect regulate the conditions for changes to contract during their term and the sanctions applicable in the event of a breach, namely cancellation of the contract amendment, irrespective whether they are in the form of a contractual clause or addendum, all within the framework prescribed by the Directive.