In an earlier blog of 27 March 2020, we addressed frequently asked questions about procurement law in Corona times. One of the issues addressed related to the question whether it is permissible to modify contracts entered into with a contracting authority on the grounds of the Corona pandemic.
In principle, contracts awarded may be modified only in the cases specifically identified in the Public Procurement Act. The blog pointed towards “unforeseen circumstances” as the most obvious modification possibility. That option is set out in the law in Article 2:163e(1) of the Public Procurement Act as a means of modifying a government contract without following a new procurement procedure if “the modification is required due to circumstances that a diligent contracting authority could not have foreseen”. Another condition is that the price increase may not exceed 50% of the originally estimated value of the contract and may not change the general nature of the contract.
Although contracting parties were wary of using this option in practice, this viewpoint has now been confirmed by the Procurement Expert Committee. It found in its recently published advice that if the contract cannot be completed before the deadline due to the impact of the Corona measures imposed by the government, the deadline may be changed by relying on Article 2:163e(1) of the Public Procurement Act.
The complaint
The complaint procedure related to the performance of a government contract for the implementation and the technical management and innovation of the Student Information System (SIS). That contract was awarded to company X in late 2018 after a European public procurement procedure. The complaint was filed by a company that had also taken part in the procedure in question at the time.
It was not in debate that the contract would most likely have to be modified, but rather what reason should be identified for the modification, which consisted of moving forward the deadline of 1 September 2020. The complainant argued that the contracting authority itself was to blame for the delay with company X.
The advice
The Committee found that the complainant had insufficiently substantiated its arguments. The Committee therefore did not assess the permissibility under public procurement law of a possible exceeding of the deadline, which the complainant regarded as the reason for the impact of the extended development phase of the SIS and its implementation.
The Committee furthermore found that the contracting authority had provided insufficient evidence of its argument, namely that the delay was due to the impact of the government’s Corona measures on the implementation of the SIS. The complainant in its turn had presented insufficient counterarguments.
The Committee’s conclusion was therefore that, if the implementation did not take place before the deadline, reliance on Article 2:163e(1) of the Public Procurement Act would succeed. The change in the deadline is necessitated by the Corona measures, which constitutes “a circumstance that a diligent contracting authority could not have foreseen”. With reference to the “Modification of ongoing public procurement contracts in the context of the COVID-19 crisis” document, the Committee noted for the record that the modification possibilities are not unlimited: “In the current circumstances, it should be presumed that modifications of public contracts on the grounds of Article 72(1)(c) may be acceptable, however with the following limit: the modifications must be justified to the extent that they are needed to mitigate the consequences of the crisis in the execution of public contracts and only to that extent.”
In sum, contracting parties that wish to modify an awarded contract on the grounds of the Corona measures do indeed have more scope to do so than in pre-Corona times.
