This article was published on www.maverick-law.com
At the 16th of March 2020, the Dutch working population paused for a moment: Prime Minister Rutte announced several measures to slow down the spread of the coronavirus. The proclaimed measures that have been developed, both by the government and the industry, affect all strata of the economy and society. The corona crisis became reality and has given rise to many challenges. One of those challenges relates to the application of procurement law during this extraordinary period. Is the Public Procurement Act really as rigid as one always claims it to be? And how do tender procedures progress during these times?
The five most frequently asked questions regarding the procurement-law consequences of the coronavirus and the answers to those questions are addressed below.
Question 1: What impact will the corona pandemic have on pending tender procedures?
Depending on the status of the tender procedure in question, the following issues are relevant.
The main advice is to continue pending tender procedures. Many tender procedures are already fully digitalised; tenderers working from home can therefore also participate and submit a tender. But tenders are drawn up by teams and consultation has become more complicated. It is therefore advisable to extend pending time limits on the grounds of the proportionality principle (see paragraph 3.6 of the Proportionality Guide). Assessors working from home can then assess those documents, during digital consensus meetings if necessary.
If the tender procedure involves physical meetings, presentations by tenderers, POCs, interviews and the like, it must be investigated whether they can proceed without the physical presence of tenderers. It is also possible, for instance, to organise an information meeting in digital form, which all the tenderers (or potential tenderers) can digitally attend. It is possible for a tenderer to give a presentation to the assessment committee, for instance in order to demonstrate how certain software works. Such solutions are also conceivable for POCs and interviews, in order to complete the tender procedure in accordance with the rules set by the RIVM (National Institute for Public Health and the Environment).
It is furthermore advisable to go through the tender documents in the knowledge that the corona pandemic will most likely be a recurring problem in the coming year and in light of the consequences that the virus may have for the contract in question. Problems, if any, can then be identified beforehand, while prescribing solutions or determining the manner in which the parties will consult with each other to solve such problems.
If a provisional award decision is issued during that period and a tenderer objects, the parties involved must bear in mind that the postponement period prior to the final awarding will take longer than usual. A contracting authority may not issue the final award until judgment is passed. All the Dutch courts (and courts of appeal) are closed until at least 6 April 2020 for non-urgent cases. In principal, preliminary relief proceedings (also on appeal) under procurement law are considered non-urgent; a hearing will therefore be scheduled much further in the future. If contracting authorities are faced with problems as a result, it is possible on certain conditions to extend the contract with the current service provider or supplier, or to enter into a bridge contract with another party.
Alternatively, the parties (the complainant and the contracting authority) could jointly obtain legal advice and determine whether an outcome that is acceptable to both parties can be reached without the intervention of a preliminary relief judge.
Question 2: The contracts that we have entered into with a contracting party must be modified due to the corona pandemic. Is that permitted?
In principle, contracts may be modified only in the cases expressly stated in the Aanbestedingswet (Public Procurement Act); see Articles 2.163a et seq. In principle, a new procurement procedure is necessary in the event of modifications not provided for in the Public Procurement Act, known as substantial amendments.
The statutory possibilities of amending a contract already offer sufficient means of amending a pending contract. Briefly stated, the Public Procurement Act offers the following options:
- De minimis exception
One option is for the parties to agree on modifications, provided that the amount involved does not exceed the applicable threshold amount and does not exceed 10% of the initial contract value.
- Review clauses
Regardless of the financial value involved, an amendment may be made if it was included in the original tender documents in the form of “clear, precise and unequivocal” review clauses. Many general conditions, for instance, also offer such options, both the contracting authority’s own purchase conditions and standard industry provisions such as the UAV-gc (Uniform Administrative Conditions for the Execution of Works – Integrated Contracts) and the UAV (Uniform Administrative Conditions for the Execution of Works).
- Necessary additions
A public contract may also be modified if (i) additional works, services or supplies by the original contractor become necessary; (ii) awarding the contract to another contactor is impossible for economic or technical reasons and would give rise to significant inconvenience or cost increases; and (iii) the price increase does not exceed 50% of the initial contract value. This could be a good option for expanding existing contracts due to the corona pandemic.
- Unforeseen circumstances
This may well be the most obvious amendment option during this pandemic. It provides that amendments may be made if “the modification is necessitated by circumstances that a diligent contracting authority could not have foreseen” and the price increase does not exceed 50% of the initial contract value. Please note: this definition of unforeseen circumstances differs from that in Article 6:258 of the Dutch Civil Code for changing the consequences of a contract or dissolving (ontbinden) the contract.
- Residual category of non-material amendments
A final relevant option exists if the amendment in question, regardless of the value involved, does not constitute a substantial amendment. Following the of the European Court of Justice (C-454/06), Article 2.163g of the Public Procurement Act states what amendments in any event constitute substantial amendments and are therefore not permitted:
- briefly stated, modifications that change the group of tenderers for the original public contract;
- amendments that change the economic balance in favour of the contractor (not provided for in the original tender documents and contract);
- amendments that significantly extend the scope of the public contract; or
- a change of contractor.
Only a few substantive criteria (not necessarily the main ones) are listed above. It furthermore applies to most of the options that the nature of the contract may not change, for instance from services to supplies, or vice versa. Also, formal rules apply in some cases, such as the obligation to publish the amendment via TenderNed.
Question 3: The corona pandemic is preventing me from performing the agreements made with the contracting authority. What now?
The basic rule is that existing commitments must be honoured. If either of the parties is unable to do so, the agreements recorded in the contract must be considered: do they regulate the consequences of events beyond the parties’ control, such as the corona pandemic? If so, the contractual agreements made between the parties apply.
A contractor is furthermore advised to (digitally) negotiate with the contracting authority: in light of these extraordinary times it may be realistic for both parties to lower their expectations. But the agreements made may not be substantially amended.
If the parties fail to reach agreement in consultation, the law offers various possibilities of changing the consequences of a contract or dissolving (ontbinden) the agreement at either of the parties’ request:
- In the event of unforeseen circumstances within the meaning of Article 6:258 of the Dutch Civil Code. The contractor must then demonstrate the existence of unforeseen circumstances and their specific impact on the contract. The standard applied in “unforeseen circumstances” in civil law (the Dutch Civil Code) is stricter than that in procurement law (the Public Procurement Act). The consequences are also different: in civil law it goes to the heart of contract law, because agreements made are then amended; in procurement law, the consequence is “merely” that an existing contract may be expanded without the need to complete a new tender procedure.
- If applicable, a contractor may also rely on force majeure under Article 6:75 of the Dutch Civil Code to ward off claims for damages. That article provides that failure to perform obligations or breach of contract cannot be attributed to a contracting party (i.e. the contractor) if it “is not to blame for it and is not accountable for it by virtue of law, a juridical act or generally accepted principles”.
- By relying on the restrictive effect of reasonableness and fairness under Article 6:2 of the Dutch Civil Code. A party may then argue that a rule that applies between the parties does not apply insofar as it “would be unacceptable, in the circumstances, by standards of reasonableness and fairness.” That may be the case, for instance, if extreme and expensive efforts would be required to perform an obligation this week and it would not make much difference to the other party if the obligation were performed a month later, for instance.
The outcome or advice may of course be different depending on the contract or the nature of the agreements made, but also on the sector and the parties in question.
Question 4: The corona pandemic is forcing us to make unforeseen purchases. Can we now put those contracts out by private tender, i.e. without following a tender procedure?
Assuming that modifying contracts with current suppliers or service providers is impossible or undesirable, and a new contract must therefore be entered into, the following rules apply.
In principle, contracts subject to procurement rules must be awarded via a standard procedure, unless the conditions for following a special procedure are met. In the latter case a special tender procedure may be followed, but that is not obligatory.
In light of the corona pandemic, the Public Procurement Act offers various possibilities of awarding contracts otherwise than via a standard procedure with normal time limits.
One of those possibilities is the accelerated procedure. Article 2.74 of the Public Procurement Act provides that in an urgent situation a contracting authority may reduce the statutory minimum time limits even further. In that case it is important that the contracting authority is not to blame for the urgent situation. In European public procedures, a minimum period of 15 days then applies from the date of the announcement until the date of the tender. That minimum period is a total of 25 days for European non-public procedures or in competitive procedures with negotiation: 15 days for the selection of tenderers and 10 days for submitting tenders.
The Public Procurement Act furthermore offers the option of privately awarding contracts, known as the “negotiated procedure with prior publication of a contract notice”. Article 2:32(1)(c) of the Public Procurement Act provides that that is possible:
“insofar as it is strictly necessary, if the time limits of the public procedure, the non-public procedure or the competitive procedure with negotiation cannot be followed due to the urgency required as a result of events that the contracting authority could not have foreseen and for which it is not to blame”.
In this regard, Article 32(2)(c) of Directive 2014/24/EU on Public Procurement is also relevant:
“in so far as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the time limits for the open or restricted procedures or competitive procedures with negotiation cannot be complied with. The circumstances invoked to justify extreme urgency shall not in any event be attributable to the contracting authority.”
Urgency, an unforeseen event and a causal relationship are therefore required. As apparent from the wording of the Act, this is an exceptional situation that must be very strictly interpreted. That is also confirmed by European case law: if contracting authorities have sufficient time to follow an accelerated procedure, such a procedure must be organised and followed, rather than the contract being privately awarded. Dutch case law allows the private awarding of temporary bridge contracts. But also in Dutch case law, the main rule is still that this exception must be very strictly interpreted.
Question 5: What does the corona pandemic mean for the awarding of upcoming contracts?
This pandemic should not have any consequences for upcoming contracts, because tender procedures are usually fully digitalised anyway: both the publication of the tender documents and the actual tender and its assessment. If elements such as presentations, interviews and POCs are desirable, alternatives should be considered beforehand.
The question is of course whether the required supplies and services are indeed still required or whether they can be obtained in the planned manner. But that question depends on the circumstances involved.
On a final note
The world is changing by the day, in light of the rapid developments surrounding the coronavirus and the impact of the decisions made by governments and trade and industry. We will be pleased to assist you if you have specific questions or are faced with one of the issues addressed above.