How to correctly amend a public procurement contract?

How to correctly amend a public procurement contract?

An amendment of the concluded public procurement contract in comparison with the text of the offer is subject to numerous restrictions. The last amendment to the Public Procurement Law introduced significant modifications to them. Particular controversies are evoked by an option of the amendment to the contract which is conditioned only upon the value of such changes, regardless of the substantive criterion. Will each amendment in this case be consistent with the provisions of law?

 

 

What is the wording of the new provision?

The amendment to the Public Procurement Law of 22 June 2016 significantly modified a possibility of amending the public procurement contract. One of the most interesting aspects of the amendment is the introduction of a new exception to the prohibition of the amendment to the contract, stipulated in Art. 144 section 1 point 6 of the Public Procurement Law.  It provides for an amendment to the provisions of the concluded public procurement contract in comparison with the text of the offer forming the basis for the selection of the contractor if  “(…) a total value of such changes is lower than the amounts specified in the provisions issued on the basis of art. 11 section 8 and is lower than 10% of the value of the contract, as originally specified in the contract, for contracts for services or deliveries, and in the case of contracts for construction work – is lower than 15% of the value of the contract originally specified therein”.

 

 

Prerequisites justifying an amendment to the contract

According to the quoted provision, an amendment to the procurement contract is conditions upon the meeting of two (cumulative) conditions. The first arises when a total value of the changes introduced in the contract is lower than the amount of the so-called “EU thresholds”. The second is met when the amendment to the contract does not exceed 10% of the original remuneration of the contractor in the event that the contract is granted for construction work, and when the contract concerns deliveries or services – 15% of the original remuneration of the contractor.

While commenting upon the prerequisite for an amendment to the public procurement contract based on Art. 144 section 1 point 6 of the Public Procurement Law, we should note that the legislator disregarded in it something that we were very used to in an analysis of a possibility of amending a public procurement contract before the coming into force of the amendment to the Public Procurement Law, namely the substantive condition. Therefore, if the substantive condition is not present in the provision, then the basis for an amendment to the public procurement contract under Art. 144 section 1 point 6 of the Public Procurement Law may, in fact, be any amendment to the contract, provided that its financial consequences (its value) do not exceed the thresholds established in this regard.

 

 

An amendment to the contract in view of the principles of public funds expenditure

The lack of establishment of substantive conditions, and conditioning an amendment to the contract merely on its value has led to the situation in which both contractors and contracting parties approach the application of this provision in quite a “creative” way.

I am aware of a case of  contractor who unjustifiably applied to the contracting party for an increase of his remuneration because Art. 144 section 1 point 6 of the Public Procurement Law simply allows such behaviour. At the same time, the contractor, in exchange for the increased remuneration, did not plan to provide the contracting party with not only an equivalent service, but any service at all. Such cases (although bizarre) do not happen very rarely. In particular in the situation where the contracting party uses EU funds and is vitally interested in the completion of the subject matter of the contract within a time limit which will guarantee that it obtains this type of support. Then it is more willing to compromise with the contractor and Art. 144 section 1 point 6 of the Public Procurement Law becomes the legal basis for such compromise.

Of course, in the aforementioned situation, there are no grounds to amend the public procurement contract. Attention should be paid to the fact that the provision talks about a “value of the changes”, and therefore we should interpret it in such a way that a (possible) increase of the remuneration of the contractor must always be followed by the contractor’s service for the contracting party. It is only then that we can talk about an increase of the contractor’s remuneration.

At the same time, this may not be a virtual or non-equivalent service. We should remember that in addition to the provisions of the Public Procurement Law, contracting parties are bound by the provisions of the Act on Public Finance stipulating the rules of public funds expenditure. One of them, stipulated in Art. 44 section 3 point 1 letter a requires that public funds are expended “in a purposeful and economical manner, subject to the following rules: a) the achievement of the best possible effects of such expenditure”. By the way, an obligation to apply those rules is not predetermined by the fact that a given entity has a status of an entity from the public finance sector, but the fact that public funds are expended. This means that the rules of public funds expenditure apply even to those contracting parties which are from outside the public finance sector, if they expend public funds.

 

Summary

Therefore, if the contracting party agrees to an annex to the agreement, increasing the remuneration of the contractor, and this takes place on the basis of Art. 144 section 1 point 6 of the Public Procurement Law, he should not only make sure that the value of the change does not exceed the thresholds specified in that provision, but also that the value of the change of the remuneration of the contractor constitutes the equivalent to his service performed for the contracting party. Only then will such an amendment be consistent with the binding provisions.

 

The author of the article is Grzegorz Karwatowicz, a lawyer at GWW.