Mandatory clauses in the public procurement contract

Author:Mihaela V. Carausan
Position:PhD, Associate professor
Pages:237-257
SUMMARY

The article aims to show the crucial role of the European Union public procurement Directives and European Court of Justice case law in all the dimensions of the contract clauses in the field of classic sectors. We have addressed the contract clauses through the lens of European Union and Romanian public procurement law. First, we emphasized that the secondary European Union law emanates from the core regimes of the TFEU and pass by the European institutions in a set of detailed procurement Directives which after all must be transpose by the Member States. Second, we followed the relevant Directive’s provisions which limits or allows the contracting authority to choose different public procurement contract clauses. Third, we discussed the crucial contribution of the case law of the European Court of Justice to European Union public procurement law. Even if, the public procurement Directive for the classic sector, does not provide detailed rules for the contracts, it establishes some limits and obligations. We have highlighted these last elements in the article through the lens of the Romanian new laws.

 
CONTENT
Mandatory clauses in the Public Procurement contract 237
MANDATORY CLAUSES IN THE PUBLIC
PROCUREMENT CONTRACT
Associate professor Mihaela V. CRUȘAN, PhD1
ABSTRACT
The article aims to show the crucial role of the European Union public procurement Directives
and European Court of Justice case law in all the dimensions of the contract clauses in the field of
classic sectors. We have addressed the contract clauses through the lens of European Union and
Romanian public procurement law. First, we emphasized that the secondary European Union law
emanates from the core regimes of the TFEU and pass by the European institutions in a set of
detailed procurement Directives which after all must be transpose by the Member States. Second, we
followed the relevant Directive’s provisions which limits or allows the contracting authority to
choose different public procurement contract clauses. Third, we discussed the crucial contribution of
the case law of the European Court of Justice to European Union public procurement law. Even if,
the public procurement Directive for the classic sector, does not provide detailed rules for the
contracts, it establishes some limits and obligations. We have highlighted these last elements in the
article through the lens of the Romanian new laws.
Keywords: internal market, administrative contracts, public interest, contract modification
and termination.
1. Introduction
The public authorities, like any other legal entity, enter into contracts2 in order
to procure goods, services and works of public interest. The public procurement
contract in Romanian law system is established as administrative contract which is
signed among a public authority and third parties with the scope of solving, or for
better accomplishment of, the public needs. The contract is for the achievement of
public interest objectives and is governed by the public law provisions which draw
imbalanced position of the contracted parties. Originating from the public interest
the public authorities have exorbitant clauses privilege under the Romanian law.
1 National University of Political Studies and Public Administration, Faculty of Public
Administration. Email: mihaelacarausan@gmail.com
2 In the article the concept contract denotes the contracts and the framework agreements
concluded under the public procurement rules.
Law Review vol. III, Special issue 2017, pp. 237-257
238 MIHAELA V. CĂRĂUȘAN
Within the paper we will emphasis the EU law on public procurement and
Romanian national procurement law which transpose it. As with any public rule
inevitably a number of questions are addressed once the Directives are enacted,
implemented and clarified through European Court of Justice. These includes: how
should the public authorities use the procurement procedures under the EU
Directives; which are the attractive tenders to bidders and the cost effectiveness; how
should select the final tender; to what extent the procedure was transparent and
lawful; what flexibility gives the new regulations to the public authority in
establishing the contract clauses; how do we avoid to over-engineering the contracts;
which are the contract management instruments and mechanisms?
The public procurement process is extensively affected by EU law. At the
question „to who you should conclude the contract”, in the European Union idea of
public procurement, the answer might be „to a provider from another Member
State”, and this makes the procedure relevant for the internal market. But, our aim is
to answer only to those questions aroused from the Romanian public law system,
mainly about the clauses of the public contract. Moreover, the hypothesis which lead
us in this research was that under the EU Directives, and subsequently the national
rules, there are some limits and clauses which must be in the public procurement
contracts. For this reason, the entire research was done with references to the case law
of the European Court of Justice which clearly stated the necessity that you should
have a clause in the contract if you want to have a modification or unilateral
termination of it. Furthermore, in the Romanian procurement system the National
Agency for Public Procurement searches to establish framework contracts and to
restrict, to some extent, the public authorities’ discretionary power to decide on
mandatory and specific clauses, and this drives us in this research.
2. The new, but old laws on Public Procurement
As any Member State of the European Union, Romania has to implement and
transpose the European public procurement Directives. Currently, the Public
Procurement Directives are 2014/23/EU [10], 2014/24/EU [4], 2014/25/EU [11] and
2009/81/EC [12]. The first relates to the concession contracts, the second relates to the
goods, services and works (known as the Directive of the classic sectors), the third
shapes the award of contracts of entities of water, energy, transport and postal services
sectors (called the special sector Directive) and the last one is on defence and security
procurement. The public procurement remedies Directives are 89/665/EEC [13] and
92/13/EEC [14] as they were thoroughly amended by the Directive 2007/66/EC [15]
and by the above mentioned ones. The standardization of procurement and contract
matters within the European Union have aimed to harmonize the legal systems of
public procurement and to amplifying the Treaty regimes on the free movement of
Mandatory clauses in the Public Procurement contract 239
goods and free movement of services through a rule with, at least, direct effect [1]. All
Directives dedicate a substantial part of their provisions to their types of entities that
have to follow them and the types of procedures and contracts to which they apply to.
Treaty on the Functioning of the European Union (TFEU) does not include any
explicit provisions relating to public procurement. It establishes a number of
fundamental principles that underpin all the secondary EU rules. The most relevant
in terms of public procurement are the following: prohibition against discrimination
on grounds of nationality; free movement of goods; freedom to provide services;
freedom of establishment. In addition to, some more are emerged from the case law
of the Court of Justice of the European Union (CJEU) such as: equality of treatment;
transparency; mutual recognition; proportionality. All the principles will apply
independently of the Directives even if the Directives do not apply.
The secondary EU legislation on public procurement of goods, services and
works is created based on the art. 53 (2), 62, and 114 TFEU as Directive. The EU
Directive created a model law agreed at EU level which settled out the basic
objectives, mechanisms and instruments necessary to be transposed in the Member
States law system for a better functioning of the internal market. Until the 18 April
2016, the Members States were free to choose the method of transposition as long
as it is fully compliant with the EU Directive.
Romania, along with other states, such as: Poland, Belgium, Finland, Czech
Republic, Estonia and Spain3, at 18 April 2016, did not fully transpose the EU
Directives. The Parliament approved on 10 May 2016 (entered into force on 26 May
2016) four new laws regulating the public procurement framework in Romania
and transposing the EU Directives. The new laws are more and less a copy of the
Directives and they were modified and completed on December 2017. A Directive
is binding the Member States to its objective but not to the means, a lot of
discretion is given in how to apply it [1]. An efficient transposition law formulates
implementing provisions best suited to the national context. Considerable analysis
has to be done and it should not be transposed literally.
More than any other public sector issue the public contract supports the influence
of the EU law to varying degrees, depending on the ‘phase’ the contract is in. The
public procurement contract’s strategy can be divided into three phases: (1) the
definition of a need for a good, service or work, (2) the procurement procedure leading
to the award of the contract, and finally (3) the contract management. Our interest for
this paper is at the intersection of these phases, meaning the contract clauses, the
binding rules of the contract parties.
3 National transposition measures communicated by the Member States concerning: Directive
2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public
procurement and repealing Directive 2004/18/EC Text with EEA relevance available at http://eur-
lex.europa.eu/legal-content/EN/NIM/?uri=celex:32014L0024 retrieved on December 7, 2017.
240 MIHAELA V. CĂRĂUȘAN
Figure 1. The contract within the procurement process
As Medeiros [2] stated within the framework of a global assessment of the
Directives, it is possible to identify, two main objectives, namely: (a) the flexibilisation
and simplification of the procurement procedures at the European level; (b) the
reinforcement of the instrumental use of public contracts to pursue secondary
policies, especially in the areas of environmental policies, social policies and the
promotion of jobs and innovation. Also, it is possible to unveil a wide set of
secondary objectives: to facilitate procedural access to small and medium enterprises;
an increased openness of procedures to foreign operators; the reinforcement of
electronic public procurement mechanisms and tools; the prevention of corruption
and the reinforcement of the guarantees of impartiality; the professionalization of the
contracting activity of the contracting authorities; to clear interpretation doubts as to
the interpretation of the defining concepts within the subjective ambit of the public
procurement regime through the incorporation of the judicial contributions of the
Court of Justice of the European Union.
3. The public procurement contract clauses
As we stated before nowadays a public procurement contract can be develop
only under the provisions of European Union Directives and Member States national
rules. The new laws support economic growth and deficit reduction by making the
process faster, less costly and more effective for small and medium enterprises.
Many constraints have been removed and the Member States have the flexibility to
design their light touch rules. The contracting authority are bind by the principle of
transparency in choosing contract clauses which were not clearly identified in the
procedure documents. Even more, the public authority shall not provide for
modifications or options something that could alter the overall nature of the contract
or the framework agreement - art. 72(c)(ii) Directive 2014/24/EU.
Mandatory clauses in the Public Procurement contract 241
Figure 2. Public procurement contract: rules and clauses
European Union
Treaty on Functioning of EU,
consolidated version, Official Journal of
the European Union C 326 of October 26,
2012 [3]
Directive 2014/24 of the European
Parliament and of the Council, of 26
February 2014, on public procurement and
repealing Directive 2004/18/EC, Official
Journal of the European Union L 94/65 of
March 28, 2014 [4]
Court of Justice of the European Union -
jurisprudence on public procurement [5]
Romania
Constitution of Romania as amended and
supplemented, republished in the Official
Journal of Romania no. 767 of October 31,
2003 [6]
Law no. 98/2016 on public procurement,
Official Journal of Romania no. 390 of
May 23, 2016 [7]
Law no. 101/2016 on remedies and appeals
concerning the award of public
procurement contracts, sectorial contracts
and of works concession contracts and
service concession contracts, and for the
organization and functioning of the
National Council for Solving Complaints,
Official Journal of Romania no. 393 of May
23, 2016 [8]
Law no. 554/2004 on the contentious
administrative, Official Journal of Romania
no. 1154 of December 7, 2014 [9]
Public Procurement Contract
General and Mandatory Clauses Specific Clauses
The scope and
parties of the
contract
The subject matter
and the value of the
contract
Transport,
delivery and other
life-cycle
conditions
Communication
between/among the
parties
Rights and
obligations of the
parties
Subcontracting and
withdraw
conditions
Force majeure Payment(s) and
indexation
Conflict of interest Quality and
performance
requirements
Contract
monitoring
Contract modification
and termination
We have grouped the contract clauses based on the required steps to be followed
when a modification of them might be necessary. Besides this, the Law no. 98/2016 in
242 MIHAELA V. CĂRĂUȘAN
article 221 (11) states that the overall nature of contract means the main objectives
pursued by the contracting authority in making the initial procurement, the main
subject matter of the contract and the main rights and obligations of the contract,
including the main quality and performance requirements.
As an innovation of the Directive is the contract management, concretely the
modification of the contracts, which essentially codifies the C-454/06 pressetext
Nachtrichtenagentur and Republik Osterreich Bund judgement4. The Regions of
Committee was the one which reacted and in its Opinion concluded „the current
directives include procedural rules for carrying out procurement. They do not include
provisions on the modification of contracts during their term, and nor should the new
directives, as these provisions impose an unnecessary administrative burden on contracting
authorities and reduce flexibility. If the Commission wants to provide information on case law
in this area, an interpretative communication would be a better solution”5. The intervention
of European Parliament over the art. 72 of the Directive 2014/24/EU established
objective modification of contract during their performance, but in specific cases.[2]
By any circumstance, the contract clauses must not be written so as to restrict or
distort competition among economic operators within the European Union internal
market. Contracts covered by the Directive6 must be established for pecuniary
interest (money or money’s worth), in writing, among at least two parties7 – the
contracting authorities and the economic operator.
The significant improvements brought by the Directive 2014/24/EU and
Romanian Law no. 98/2016 provisions about the contracts modifications with
references at the CJEU and the recitals of the Directive are underlined in the
following analysis. We have grouped under six categories the modifications, and
by each category we identified the European and national provisions, the legal
requirements and limits in short explanations and the case law of CJEU and
recitals of the Directive for better understanding. We will not do any reference to
the Romanian courts’ jurisprudence because it is not considered source of law, and
it binds to the execution only participating parties.
1. Modification of the monetary value
Legal provisions:
Directive 2014/24/EU, art. 72 (1): „Contracts and framework agreements
may be modified without a new procurement procedure in accordance with this
Directive in any of the following cases: (a) where the modifications, irrespective of
4 Case 454/06 pressetext Nachtrichtenagentur and Republik Osterreich Bund http://curia.europa.
eu/juris/document/document.jsf?text=&docid=69189&pageIndex=0&doclang=en&mode=lst&dir=&
occ=first&part=1&cid=651775 retrieved on December 11, 2017.
5 Opinion of the Committee for Regions, p. 75.
6 Directive 2014/24/EU, art. 2(5) „public contracts – means contracts for pecuniary interest concluded
in writing between one or more economic operators and one or more contracting authorities and having as
their object the execution of works, the supply of products or the provision of services”.
7 The parties are understand as they were defined by the Directives and the Laws no. 98 and 99 of 2016.
Mandatory clauses in the Public Procurement contract 243
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. Such clauses shall state the scope and nature of possible
modifications or options as well as the conditions under which they may be used.
They shall not provide for modifications or options that would alter the overall
nature of the contract or the framework agreement”;
Law no. 98/16, art. 221(1)(a) – the same content as the one from the Directive.
Explanations on the legal requirements and limits:
This modification must accomplish one or more conditions:
(a) it has to ensure the principle of transparency and entails the risk of unequal
treatment by being provided in all the initial documents.
(b) it has to be clear, precise and unequivocal and not as a general clause – for
all possible changes.
(c) it has to specify the scope and nature of possible modifications or options as
well as the conditions under which they may be used.
(d) does not alter the overall nature of the contract.
The monetary value of the modifications done under this provision does not
support a limit. But, an increase of the original value of the contract due to the
modifications should not alter the overall nature of the contract.
Case law and/or recitals:
C-454/06 pressetext Nachtrichtenagentur and Republik Osterreich Bund established
the meaning of the material character of a modification:
- paragraph 34: „In order to ensure transparency of procedures and equal
treatment of tenderers, amendments to provisions of a public contract during the
currency of the contract constitute a new award of a contract ... when they are
materially different in character from the original contract and, therefore, are such as to
demonstrate the intention of the parties to renegotiate the essential terms of that
contract”.
- paragraph 35: „An amendment to a public contract during its currency may
be regarded as being material when it introduces conditions which, had they been
part of the initial award procedure, would have allowed for the admission of
tenderers other than those initially admitted or would have allowed for the
acceptance of a tender other than the one initially accepted”.
- paragraph 36: „Likewise, an amendment to the initial contract may be
regarded as being material when it extends the scope of the contract considerably to
encompass services not initially covered”.
- paragraph 37: „An amendment may also be regarded as being material when
it changes the economic balance of the contract in favour of the contractor in a
manner which was not provided for in the terms of the initial contract”.
- paragraph 76: „As is apparent …, in determining whether the conclusion of
such a clause constitutes a new award of contract, the relevant criterion is whether
that clause must be regarded as being a material amendment to the initial contract”.
244 MIHAELA V. CĂRĂUȘAN
In C-160/08 Commission and Germany8, the CJ applied the principles established
in C-454/06 pressetext Nachrichtenagentur with regard to the extension of a services
contract. It decided that the extension to the contract was a material change
constituting a new contract award. The contract was extended to cover a significantly
increased geographical area, and the contract value was increased by more than 15%.
- paragraph 99: „In that regard, it must be observed that an amendment to the
initial contract may be regarded as being material and, therefore, as constituting
the new award of a contract for the purposes of Directive …, inter alia, when it
extends the scope of the contract considerably to encompass services not initially
covered (see, to that effect, Case C-454/06 pressetext Nachrichtenagentur [2008] ECR
I-4401, paragraph 36)”.
- paragraph 100: “In this instance, it is apparent from the information in the
documents before the Court that the value of the contract relating to the operation
of the ambulance station at Bad Bevensen amounts to EUR 673 719,92, which is
considerably higher than the thresholds set under Article 7 of Directive …”
2. Modification for foreseeable works, services or goods with high inconvenience
for contracting authority
Legal provisions:
Directive 2014/24/EU, art. 72 (1): „Contracts and framework agreements
may be modified without a new procurement procedure in accordance with this
Directive in any of the following cases: (b) for additional works, services or
supplies by the original contractor that have become necessary and that were not
included in the initial procurement where a change of contractor: (i) cannot be
made for economic or technical reasons such as requirements of interchangeability
or interoperability with existing equipment, services or installations procured
under the initial procurement; and (ii) would cause significant inconvenience or
substantial duplication of costs for the contracting authority. However, any increase
in price shall not exceed 50 % of the value of the original contract. Where several
successive modifications are made, that limitation shall apply to the value of each
modification. Such consecutive modifications shall not be aimed at circumventing
this Directive”;
Law no. 98/16, art. 221(1)(b): „when the following conditions are met
cumulatively: (i) it becomes necessary to purchase from the original contractor
additional products, services or works that were not included in the original contract
but which have become strictly necessary to meet it; (ii) change of contractor is
impossible; (iii) any increase in the contract price representing the value of the
additional products/services/works will not exceed 50% of the value of the original
contract;”
8 Case 160/08 Commission and Germany available at http://curia.europa.eu/juris/document/document.
jsf?text=&docid=84478&pageIndex=0&doclang=en&mode=lst&dir=&occ=first&part=1&cid=664592 retrieved on
December 9, 2017.
Mandatory clauses in the Public Procurement contract 245
Law no. 98/16, art. 221(6): „Contracting authorities amending a public
procurement contract or framework agreement in the cases provided in paragraph
(1) lit. b) … have the obligation to publish a notice in this respect in the Official
Journal of the European Union and at national level, in compliance with the
standard form established by the European Commission under the provisions of
Art. 51 of Directive 2014/24/EU of the European Parliament and of the Council of
26 February 2014.”
Law no. 98/16, art. 221(9): „In the situation stipulated in paragraph (8), if
several successive modifications are made, the amount of the changes shall be
determined on the basis of the cumulative net value of the successive changes.”
Law no. 98/16, art. 221(10): „For calculating the price mentioned in par. (1)
lit. (b) (iii), (c) (iii) and f) Use the updated price of the public procurement/framework
agreement, which is the reference value when the public procurement contract
includes an indexing clause”.
Explanations on the legal requirements and limits:
This legal provision is a cumulative one for additional works, services or
goods and any increase in costs should not exceed 50% of the value of the original
contract (where more than one modification is made, the 50% limit applies each
time). If the contract includes an indexation clause, based on the above legal
provision, the updated cost shall be the reference value. Moreover, „significant
inconvenience” and „substantial duplication of costs” must be strictly interpreted.
The principle of transparency institutes for the contracting authorities the
obligation to publish a modification notice. For the European Commission’s
procurements a standard modification notice was established, but is not valid for
the Romanian system.
Case law and/or recitals:
Recital 108 of the Directive 2014/24/EU clarifies this provision:
„Contracting authorities may be faced with situations where additional works,
supplies or services become necessary; in such cases a modification of the initial
contract without a new procurement procedure may be justified, in particular where
the additional deliveries are intended either as a partial replacements or as the
extension of existing services, supplies or installations where a change of supplier
would oblige the contracting authority to acquire material, works or services having
different technical characteristics which would result in incompatibility or
disproportionate technical difficulties in operation and maintenance”.
In the Opinion of Advocate General Trstenjak delivered on 15 November
20079, Case C-404/06 Quelle AG and Bundesverband der Verbraucherzentralen und
Verbraucherverbände the significant inconvenience were clarified as follows:
9 Opinion of Advocate General Trstenjak delivered on 15 November 2007, Case C-404/06 Quelle AG
v Bundesverband der Verbraucherzentralen und Verbraucherverbände available at http://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62006CC0404 retrieved on December 10, 2017.
246 MIHAELA V. CĂRĂUȘAN
- paragraph 47: „Clarification is also required as to whether the claim for
payment of compensation for use causes the consumer ‘significant inconvenience
within the meaning of the third subparagraph of Article 3(3) of Directive 1999/44.
In that regard, I agree with the Austrian Government’s view that paying
compensation for use entails ‘significant inconvenience’ within the meaning of the
Directive. The term ‘significant inconvenience’ covers not only practical obstacles
to replacing goods but also inconvenience in general, and financial ‘inconvenience’
is an additional inconvenience which, to my mind, can be even more significant
than the practical obstacles facing the consumer where the goods are replaced.”
3. Modification because of unforeseeable events
Legal provisions:
Directive 2014/24/EU Article 72 (1)(c): „where all of the following conditions
are fulfilled: (i) the need for modification has been brought about by circumstances
which a diligent contracting authority could not foresee; (ii) the modification does
not alter the overall nature of the contract; (iii) any increase in price is not higher
than 50 % of the value of the original contract or framework agreement. Where
several successive modifications are made, that limitation shall apply to the value
of each modification. Such consecutive modifications shall not be aimed at
circumventing this Directive;”
Law no. 98/16, art. 221 (1)(c), (6), (9) and (10) – the same content as the one
from the Directive.
Explanations on the legal requirements and limits:
This legal provision is a cumulative one, also, and even if the circumstances
for modification could not have been foreseen by a diligent contracting authority
they must be proven.
Furthermore, on the grounds of substantiality and alteration of the nature of
contract, the risk that a new contract will be required is very high. It is better to
incorporate carefully negotiated and tailor-made force majeure clauses to reduce the
risks associated with such events.
Likewise, the rules of maximum 50 % of the original value or reference value
and the one on transparency principle are maintained as above.
Case law and/or recitals:
Recital 109 of the Directive 2014/24/EU clarifies this provision:
“The notion of unforeseeable circumstances refers to circumstances that could
not have been predicted despite reasonably diligent preparation of the initial
award by the contracting authority, taking into account its available means, the
nature and characteristics of the specific project, good practice in the field in question
and the need to ensure an appropriate relationship between the resources spent in
preparing the award and its foreseeable value”.
Mandatory clauses in the Public Procurement contract 247
In Case 11/70 Internationale Handelsgesellschaft mbH and Einfuhr- und
Vorratsstelle für Getreide und Futtermittel10 the Court established the meaning of force
majeure as not been limited to absolute impossibility:
- paragraph 23 The concept of force majeure adopted by the agricultural
regulations takes into account the particular nature of the relationships in public law
between traders and the national administration, as well as the objectives of those
regulations. It follows from those objectives as well as from the positive provisions of
the regulations in question that the concept of force majeure is not limited to absolute
impossibility but must be understood in the sense of unusual circumstances, outside
the control of the importer or exporter, the consequences of which, in spite of the
exercise of all due care, could not have been avoided except at the cost of excessive
sacrifice. This concept implies a sufficient flexibility regarding not only the nature of
the occurrence relied upon but also the care which the exporter should have exercised
in order to meet it and the extent of the sacrifices which he should have accepted to
that end.
Case 284/82 Acciaierie e Ferriere Busseni SpA and Commission of the European
Communities11 continues the above mentioned ideas about the concept force
majeure:
- paragraph 8: „It must be stated that the period for bringing an action must be
strictly observed and cannot be extended save on grounds of distance as provided
in the second paragraph of Article 39 of the Statute of the Court of Justice of the
ECSC. Nevertheless the third paragraph thereof provides that no right shall be
prejudiced in consequence of the expiry of a time-limit if the party concerned
proves the existence of unforeseeable circumstances or of force majeure”.
- paragraph 11: „It is apparent from the established case-law of the Court that
apart from special cases in specific areas in which it is used, the concept of force
majeure essentially covers unusual circumstances which make it impossible for the
relevant action to be carried out. Even though it does not presuppose absolute
impossibility it nevertheless requires abnormal difficulties, independent of the will
of the person concerned and apparently inevitable even if all due care is taken”.
In the Romanian new Civil Code art. 1351 (2)12 force majeure is defined “as
any external, unpredictable, absolutely invincible and inevitable event”. Also, in
the next paragraph of the same regulation the Romanian legislator gives the
meaning of the forcible case as” an event that could be predicted or prevented by the
person who have been called on to respond if the event have not been occurred”.
10 Case 11/70 Internationale Handelsgesellschaft mbH and Einfuhr- und Vorratsstelle für
Getreide und Futtermittel available at http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=
CELEX:61970CJ0011&from=RO retrieved on December 10, 2017.
11 Case 284/82 Acciaierie e Ferriere Busseni SpA and Commission of the European Communities
available at http://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX:61982CJ0284 retrieved on
12 December, 2017.
12 Law no. 287/2009 on Civil Code republished in Romanian Official Journal no. 505 of July 15, 2011.
248 MIHAELA V. CĂRĂUȘAN
4. Modification for the replacement of the contractor
Legal provisions:
Directive 2014/24/EU Article 72 (1)(d): „where a new contractor replaces the
one to which the contracting authority had initially awarded the contract as a
consequence of either: (i) an unequivocal review clause or option in conformity with
point (a); (ii) universal or partial succession into the position of the initial contractor,
following corporate restructuring, including takeover, merger, acquisition or
insolvency, of another economic operator that fulfils the criteria for qualitative
selection initially established provided that this does not entail other substantial
modifications to the contract and is not aimed at circumventing the application of
this Directive; or (iii) in the event that the contracting authority itself assumes the
main contractor’s obligations towards its subcontractors where this possibility is
provided for under national legislation pursuant to Article 71;”
Law no. 98/16, art. 221 (1)(d) – the same content as the one from the Directive.
Explanations on the legal requirements and limits:
As a general rule, the replacement of a contractual partner constitutes a
substantial modification of the contract. Nonetheless, the Directive establish three
specific situations for this modification:
- the contract has a unequivocal review clause or option that:
(a) is clear, precise and unequivocal; and
(b) sets out the scope, the nature and the conditions under which the replacement
may be used e.g. „step-in” rights exercised by a funder.
- the legal identity of the contractor supports a structural change, but in fact
the contractor remains the same.
- the contracting authority itself assumes the main contractor’s obligations
towards its subcontractors.
Case law and/or recitals:
Recital 110 of the Directive 2014/24/EU clarifies this provision:
„In line with the principles of equal treatment and transparency, the successful
tenderer should not, for instance where a contract is terminated because of
deficiencies in the performance, be replaced by another economic operator without
reopening the contract to competition. However, the successful tenderer performing
the contract should be able, in particular where the contract has been awarded to
more than one undertaking, to undergo certain structural changes during the
performance of the contract, such as purely internal reorganisations, takeovers,
mergers and acquisitions or insolvency. Such structural changes should not
automatically require new procurement procedures for all public contracts
performed by that tenderer”.
The above situation occurred in the C-454/06 pressetext Nachrichtenagentur
case, where the contract was transferred on the same terms to a new legal entity,
which was a company within the same group as the original contractor.
Mandatory clauses in the Public Procurement contract 249
- paragraph 40: „As a rule, the substitution of a new contractual partner for the
one to which the contracting authority had initially awarded the contract must be
regarded as constituting a change to one of the essential terms of the public
contract in question, unless that substitution was provided for in the terms of the
initial contract, such as, by way of example, provision for sub-contracting”.
- paragraph 41: „According to the order for reference, APA-OTS is established
as a limited liability company and therefore has separate legal personality from
APA, the initial contractor.
- paragraph 42: „It is also common ground that, since the OTS services were
transferred from APA to APA-OTS in 2000, the contracting authority makes
payment for those services directly to APA-OTS, and no longer to APA.”
- paragraph 43: „However, some of the specific characteristics of the transfer
of the activity in question permit the conclusion that such amendments, made in a
situation such as that at issue in the main proceedings, do not constitute a change
to an essential term of the contract”.
- paragraph 44: „According to the information in the case-file, APA-OTS is a
wholly-owned subsidiary of APA, APA has the power to instruct APA-OTS in the
conduct and management of its business and the two companies are bound by a
contract under which profit and loss are transferred to and assumed by APA. The
case-file also shows that a person authorised to represent APA assured the contracting
authority that, following the transfer of the OTS services, APA was jointly and
severally liable with APA-OTS and that there would be no change in the overall
performance experienced”.
- paragraph 45: „Such an arrangement is, in essence, an internal reorganisation
of the contractual partner, which does not modify in any fundamental manner the
terms of the initial contract”.
- paragraph 47: „If the shares in APA-OTS were transferred to a third party
during the currency of the contract at issue in the main proceedings, this would no
longer be an internal reorganisation of the initial contractual partner, but an actual
change of contractual partner, which would, as a rule, be an amendment to an
essential term of the contract. Such an occurrence would be liable to constitute a
new award of contract within the meaning of Directive ...”
5. Modification where the value is below 10% for service and goods, and 15%
for works
Legal provisions:
Directive 2014/24/EU art. 72 (2): „Furthermore, and without any need to
verify whether the conditions set out under points (a) to (d) of paragraph 4 are
met, contracts may equally be modified without a new procurement procedure in
accordance with this Directive being necessary where the value of the modification
is below both of the following values: (i) the thresholds set out in Article 4; and
250 MIHAELA V. CĂRĂUȘAN
(ii) 10% of the initial contract value for service and supply contracts and below 15
% of the initial contract value for works contracts. However, the modification may
not alter the overall nature of the contract or framework agreement. Where several
successive modifications are made, the value shall be assessed on the basis of the
net cumulative value of the successive modifications”.
Law no. 98/16, art. 221 (1)(f), (9) and (10) – the same content as the one from
the Directive.
Explanations on the legal requirements and limits:
This provision permits the modification of a contract where the financial
value of the modification is low and the modification does not alter the overall
nature of the contract.
The financial value of the modification must satisfy both financial conditions,
which means that it must be:
(a) below the relevant EU financial threshold for the contract in question, and
(b) less than 10% of the initial contract value of a services/supplies contract or
less than 15% of the initial contract value of a works contract.
This provision does not apply to the value of each modification, but to the
cumulative value of all modifications. When the contract includes an indexation
clause, for the purpose of calculating the price, the updated price, increased
according to the indexation clause, will be the reference value.
Case law and/or recitals:
The Directive generally reiterates the rules laid down in the C-454/06 pressetext
Nachrichtenagentur case, and it states that contracts may be modified where the
modifications are not substantial.
- paragraph 34: „In order to ensure transparency of procedures and equal
treatment of tenderers, amendments to the provisions of a public contract during the
currency of the contract constitute a new award of a contract within the meaning of
Directive … when they are materially different in character from the original contract
and, therefore, such as to demonstrate the intention of the parties to renegotiate the
essential terms of that contract (see, to that effect, Case C-337/98 Commission of the
European Communities and French Republic13, paragraphs 44 and 46)”.
13 Case 337/98 Commission of the European Communities and French Republic available at
http://curia.europa.eu/juris/document/document.jsf?text=&docid=45714&pageIndex=0&doclang=
EN&mode=lst&dir=&occ=first&part=1&cid=762346 retrieved on December 10, 2017. Paragraph 44:
„Accordingly, it must be considered whether the negotiations opened after 22 September 1995 were
substantially different in character from those already conducted and were, therefore, such as to
demonstrate the intention of the parties to renegotiate the essential terms of the contract, so that the
application of the provisions of Directive 93/38 might be justified”, and paragraph 46: „It follows that,
in the present case, it is for the Commission to adduce all such evidence as is necessary to prove that
fresh negotiations were commenced after 22 September 1995 and were such as to demonstrate the
intention of the parties to renegotiate the essential terms of the contract, which would justify the
application of the provisions of Directive 93/98”.
Mandatory clauses in the Public Procurement contract 251
6. Any other modification will be allowed if it is not substantial
Legal provisions:
Directive 2014/24/EU art. 72 (1)(e): „where the modifications, irrespective of
their value, are not substantial within the meaning of paragraph 4”.
Directive 2014/24/EU art. 72 (4): “A modification of a contract or a framework
agreement during its term shall be considered to be substantial within the meaning of
point (e) of paragraph 1, where it renders the contract or the framework agreement
materially different in character from the one initially concluded. In any event, without
prejudice to paragraphs 1 and 2, a modification shall be considered to be substantial
where one or more of the following conditions is met:
(a) the modification introduces conditions which, had they been part of the
initial procurement procedure, would have allowed for the admission of other
candidates than those initially selected or for the acceptance of a tender other than
that originally accepted or would have attracted additional participants in the
procurement procedure;
(b) the modification changes the economic balance of the contract or the frame-
work agreement in favour of the contractor in a manner which was not provided for
in the initial contract or framework agreement;
(c) the modification extends the scope of the contract or framework agreement
considerably;
(d) where a new contractor replaces the one to which the contracting authority
had initially awarded the contract in other cases than those provided for under
point (d) of paragraph 1”.
Law no. 98/16, art. 221 (1)(e) and (7) – the same content as the one from the
Directive.
Explanations on the legal requirements and limits:
Therefore, in addition to the modifications permitted specifically to the contract
described above, all other modifications that are not substantial are also permitted,
regardless of their value. When the needs of a contracting authority can no longer be
satisfied and substantial modifications to the contract are highly needed, the only
option is to terminate the contract and to do a new procurement procedure.
In order to consider a modification as being substantial few conditions must
be reached:
- the new conditions would have allowed the admission of other candidates,
the acceptance of another tender, or would have brought additional participants to
the initial procurement procedure.
- the modification changes the economic balance (e.g. price or risks of incurring
penalty payments) of the contract in favour of the contractor in a manner which
was not provided for in the initial contract. If the modification is in favour of the
contracting authority, than it will not be substantial.
252 MIHAELA V. CĂRĂUȘAN
- the modification extends the scope of the contract considerably to encompass
quantitatively or qualitatively goods, works or services which were not covered by
the initial contract.
- when a new contractor replaces the one to which the contracting authority
had initially awarded the contract in other cases than those provided in the category
no. 4.
Case law and/or recitals:
Recital 107 of the Directive clarifies this definition:
„A new procurement procedure is required in case of material changes to the
initial contract, in particular to the scope and content of the mutual rights and
obligations of the parties, including the distribution of intellectual property rights.
Such changes demonstrate the parties’ intention to renegotiate essential terms or
conditions of that contract. This is the case in particular if the amended conditions
would have had an influence on the outcome of the procedure, had they been part
of the initial procedure.”
In C-91/08 Wall AG and La ville de Francfort-sur-le-Main and Frankfurter
Entsorgungs - und Service (FES) GmbH14 the CJEU applied the principles established
in C-454/06 pressetext Nachrichtenagentur to a service concession contract that was
subject only to Treaty principles. CJEU decided that a change of sub-contractor
could, in exceptional cases, constitute an amendment to one of the essential
provisions of a concession contract. This exception could be made when the nature
of the contract meant that the use of a particular sub-contractor was a decisive
factor in the award of the contract.
- paragraph 37: „In order to ensure transparency of procedures and equal
treatment of tenderers, substantial amendments to essential provisions of a service
concession contract could in certain cases require the award of a new concession
contract, if they are materially different in character from the original contract and
are therefore such as to demonstrate the intention of the parties to renegotiate the
essential terms of that contract (see, by analogy with public contracts, Case C-337/98
Commission v France, paragraphs 44 and 46, and Case C-454/06 pressetext
Nachrichtenagentur, paragraph 34)”.
- paragraph 38: „An amendment to a service concession contract during its
currency may be regarded as substantial if it introduces conditions which, if they
had been part of the original award procedure, would have allowed for the admission
of tenderers other than those originally admitted or would have allowed for the
acceptance of an offer other than that originally accepted (see, by analogy, pressetext
Nachrichtenagentur, paragraph 35)”.
14 Case 91/08 Wall AG and La ville de Francfort-sur-le-Main and Frankfurter Entsorgungs - und
Service (FES) GmbH available at http://curia.europa.eu/juris/document/document.jsf?text=
&docid=80959&pageIndex=0&doclang=en&mode=lst&dir=&occ=first&part=1&cid=654779 retrieved
on December 10, 2017.
Mandatory clauses in the Public Procurement contract 253
- paragraph 39 „A change of subcontractor, even if the possibility of a change is
provided for in the contract, may in exceptional cases constitute such an amendment
to one of the essential provisions of a concession contract where the use of one
subcontractor rather than another was, in view of the particular characteristics of the
services concerned, a decisive factor in concluding the contract, which is in any event
for the referring court to ascertain”.
In addition C-454/06 pressetext Nachrichtenagentur helps us to understand the
circumstances to replace a contractor:
- paragraph 39: „By its first question, the Bundesvergabeamt is referring to the
transfer to APA-OTS in 2000 of the OTS services hitherto provided by APA. It asks,
essentially, whether a change in the contractual partner, in circumstances such as
those at issue in the main proceedings, is a new award of contract...”
- paragraph 40: „As a rule, the substitution of a new contractual partner for the
one to which the contracting authority had initially awarded the contract must be
regarded as constituting a change to one of the essential terms of the public
contract in question, unless that substitution was provided for in the terms of the
initial contract, such as, by way of example, provision for sub-contracting.”
What constitutes a „considerable extension” of a contract was deliberated by
the CJEU in Case C-160/08, Commission and Germany, which concerned a contract for
ambulance services. The CJEU emphasised that the value of the extension was
considerably higher than the threshold value for a services contract.
- paragraph 42: „The extension of the subject-matter of the proceedings
therefore lies in the fact that a breach of the principle of non-discrimination and the
requirement of transparency, which stem from freedom of establishment and freedom
to provide services, is now also being alleged in connection with the award of
mixed ambulance services where the transport character predominates. In this
respect the present action must be declared inadmissible”.
- paragraph 69: ”Lastly, the argument of the possibility, often provided for
under the law of the Länder, of appointing ambulance service personnel as
administrative enforcement officers cannot be accepted because it is clear from the
Court’s case-law that the extension of the exception allowed by Articles 45 EC and
55 EC to an entire profession is not possible when the activities connected with the
exercise of official authority are separable from the professional activity in question
taken as a whole.”
- paragraph 134: „It is clear from the documents submitted by the German
Government and from its observations that in 2004 the public contract was
extended to include the provision of public ambulance services in the area of the
Bevensen ambulance station, which accounts for around one quarter of the total
area of the administrative district. Furthermore, the Federal Republic of Germany
acknowledges that the value of the contract for the entire administrative district of
Uelzen amounts to around EUR 4 450 000 per year and that the value of the
ambulance services to be provided in the area of operation of Bevensen ambulance
station amounts to at least EUR 670 000 per year.”
254 MIHAELA V. CĂRĂUȘAN
- paragraph 135: „The contractual amendments negotiated between the
Administrative District of Uelzen and the DRK in 2004 have therefore meant that
the contract for the provision of ambulance services has been extended to an
additional area in the administrative district, as a result of which the total area of
operation increased by around 25% and the total value of the contract rose by at
least 15%. The amendments to the contract negotiated in 2004 are therefore to be
regarded as material, with the result that this process is to be seen as a new award
of public ambulance contracts in the entire administrative district which was
subject to Directive 92/50. This assessment is not affected by the – undocumented –
information provided by the Federal Republic of Germany regarding the takeover
of the ambulance service operated by another service provider.”
In addition to the modification situations stated above, the public procurement
contract, as any other administrative contract, may enclose a contracting authority
withdraw clause. This clause gives the possibility to the contracting authority to
renounce to the contract before the termination of it. But, the Directive 2014/24/EU
in art. 73 establishes conditions under which it can terminate a contract, such as:
(a) the contract has been subject to a substantial modification, which would
have required a new procurement procedure;
(b) the contractor has, at the time of contract award, been in one of the
exclusion situations and should not be accepted to the procurement procedure;
(c) the contract should not have been awarded to the contractor in view of a
serious infringement of the obligations under the Treaties and this Directive that
has been declared by the Court of Justice of the European Union.
As a general rule modification and termination of contract would be legally
allowed only if it was expressly mentioned in the procurement documents. Based on
this assumption, the mandatory, within the above mentioned conditions, and the
specific clauses can be modified if all possible participants could find out about it since
the beginning of the public procurement process. The new laws on the modification
of contracts during their implementation keep a pro-competitive orientation and set a
framework that, when is properly applied, can minimise internal market distortions.
However, when it comes to the issue of contractual extensions and the award of
additional works Directive 2014/24/EU lightens the enactment.
4. Conclusions
European Union laws on public procurement have a fundamental internal
market dimension through the competition regime of the goods and services
established. Even if the free movement of goods and services started since 1960, on
procurement the last three generations of Directives (2004, 2007, 2009 and 2014)
could enact them. However, the European legislator thought on economic operators
when passed them they impacted more contracting authorities.
Within this article we did not aim to provide an exhaustive comparison of all
issues dealt by the public procurement Directives and Romanian law, or to give a
Mandatory clauses in the Public Procurement contract 255
full account of all their provisions; rather, we highlighted some important contract
clauses as key topics in public procurement procedure. We did an analysis of the
necessity to include in the contract some clauses which could help the contracting
authority in the management of it, and to which the interested parties should refer
to if they decide to start a career in public procurement. Public procurement is a
strategic tool for public sector authorities and consequently for the public interest.
Therefore, is in the public sector interest and the wider public to ensure the right
leadership and technical expertise to deal with the public procurements process.
The package of the Directives on public procurement have thereabouts similar
provisions on the contract clauses, moreover we used the case law from all of the EU
provisions in the field. The Directives provided to contracting authorities the
possibility to run procurements faster, with less red tape, and more focused on getting
the right tenderer. Even so, the lack of legal technicity in procurement could be fatal
for the entire process and a new procedure it might be necessary to commence.
Beyond our hypothesis we managed to demonstrate the necessity to distinguish
between mandatory and specific clauses, even if in the article we did not revise the
contract’s specific clauses because we considered that they should be established
by the contracting authority, based on their needs and on the public interest which
they represents. We also consider auspicious the decision of the European legislator
to do not include restrictive provisions about them. But this does not mean the
contracting authorities are legally free to establish clauses about any aspect of goods,
services and works. For example, they have to subside any procurement decision
to the principle of non-discrimination on ground of nationality, the principle of
equal treatment of tenderers and the obligation of transparency (see, to that effect,
C-454/06 pressetext Nachrichtenagentur, paraghraph 32; Case C-275/98 Unitron
Scandinavia15, paragraph 31; Case C-324/98 Telaustria and Telefonadress16,
paragraphs 60 and 61; and Case C-496/99 P Commission v CAS Succhi di Frutta17,
paragraphs 108 and 109). Moreover, for a sustainable environment certain limits
are established e.g. whether or not to take environmental considerations into
account for choosing the economically most advantageous tender overall and
include it as specific clause in the contract was addressed by the CJEU in the Case
15 Case C-275/98 Unitron Scandinavia A/S, 3-S A/S, Danske Svineproducenters serviceselskab,
and Ministeriet for Fødevarer, Landbrug og Fiskeri vailable at http://curia.europa.eu/juris/document/
document.jsf?text=&docid=44849&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&c
id=665566 retrieved on December 15, 2017.
16 Case C-324/98 Telaustria Verlags GmbH, Telefonadress GmbH and Telekom Austria AG,
formerly Post & Telekom Austria AG, joined party: Herold Business Data AG available at
http://curia.europa.eu/juris/showPdf.jsf?text=&docid=45859&pageIndex=0&doclang=en&mode=ls
t&dir=&occ=first&part=1&cid=665823 retrieved on December 15, 2017.
17 Case C-496/99 P Commission of the European Communities and CAS Succhi di Frutta SpA,
established in Castagnaro (Italy), appeal against the judgment of the Court of First Instance of the
European Communities (Second Chamber) in Joined Cases T-191/96 and T-106/97 CAS Succhi di
Frutta v Commission [1999] ECR II-3181 available at http://curia.europa.eu/juris/showPdf.jsf?text=
&docid=49126&pageIndex=0&doclang=en&mode=lst&dir=&occ=first&part=1&cid=666172 retrieved
on December 15, 2017.
256 MIHAELA V. CĂRĂUȘAN
513/99 Concordia Bus Finland Oy Ab, formerly Stagecoach Finland Oy Ab, and
Helsingin kaupunki, HKL-Bussiliikenne, paragraphs 27, 59 and 62-6918.
The purpose of the EU procurement rules reflects the best mix quality and
effectiveness which could be achieved through competition. As it concerns the contract
management and more on the specific clause we will review them in a further article
which will present in detail the monitoring system which any contracting authority
should develop it order to reach public procurement performance.
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