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Amending Contracts following Award

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The starting point for any discussion about amending contracts post award is the case of Pressetext, C-454/06.  In this case, the European Court of Justice set out that changes in a contract after its award could trigger the need for a new competition.  In other words, that contract would be annulled.

The Public Contracts Regulations 2015 seeks to codify and clarify when changes will be permitted and when they will not.  Whether it does this or not is open to debate.  Whether or not the Regulations do codify the law, or whether they change it, is a question worthy of discussion.  However, regardless of how you feel, it is the Regulations which you must look to.

Section 72 of the Public Contracts Regulations 2015 is titled “Modification of contracts during their term” and it is here where we find the ‘whens’ and ‘hows’ of amending a contract.  The amount of law and corresponding considerations around this Section is vast, as it invokes all sorts of ‘run off’ explanations.  To try and explain every instance where a contract can be altered would require a small booklet.

So, this article concentrates only on Sub-Paragraph 1.  It is here that an important bit of advice is given legislative approval: plan for the change by including a clear variation procedure within the initial procurement documents.

Public Contracts Regulations 2015 Section 72 (1):

“(1) Contracts and framework agreements may be modified without a new procurement procedure in accordance with this Part and any of the following cases:

  1. a) Where the modifications, irrespective of their monetary value, have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses, which may include price revision clauses or options provided that such clauses –

(b)  State the scope or nature or possible modifications are options as well as the conditions under which they may be used, and

(ii)  Do not provide for modifications or options that would alter the overall nature of the contract and the framework agreement”

A clear example of procurement documents planning for possible future issues is when it is stated within that the contract is due to last three years but with a possible one-year extension.

When considering whether the “overall nature of the Contract” has been altered or not, thought must be given to: the principle objectives of the contracting authority when organising the initial procurement, the main objective of the contract and quality and performance requirements.

The wording of the clause also makes it clear that if the changes are to be enacted, then they must be enacted through the amendment mechanism.  This means that the amendment mechanism must be in place to begin with and the parties cannot simply negotiate an amendment without the basis of the mechanism in play.

Note the wording of Regulation 72(1)(a). The initial procurement documents must allow for modification in “clear, precise and unequivocal review clauses”.  Thus, a broadly drafted attempt at a catch all clause is unlikely to suffice.

Amendment clauses must state in some detail the scope and nature of possible modifications and the conditions under which they may be used.

The Decision in Finnfrogne (C-549/14) is also worth raising.  This was a Danish case which was referred to the European Court of Justice.  As part of their decision, the ECJ rejected the argument that the nature of the contract, being a complex IT contract where performance was unpredictable, granted extensive leeway as regards changes to be made.  The ECJ rejected this argument on the basis of the principles of equal treatment and transparency.  Although this case was decided pre-2015 Regulations it is yet to be contradicted.

In summary, Section 72 (1) provides some scope to amend but emphasis is placed on pre-planning, predicting the types of changes that may arise and making sure that detailed mechanisms to cover these possible changes are included in the initial procurement documents.

Robert Burns, Senior Associate at Quigg Golden

If you have comments or queries on this topic, contact Robert.Burns@QuiggGolden.com

 

 

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