Modification of public procurement contracts: Unchanged, appearances to the contrary notwithstanding | In Principle

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Modification of public procurement contracts: Unchanged, appearances to the contrary notwithstanding

The planned amendment to the Public Procurement Law only seems to revise the rules for modification of public contracts. The decisive role will still be played by the rules outlined in the case law of the Court of Justice and codified in Directive 2014/24/EU.

Control of the process of amending public contracts arises from the necessity to ensure that changes in the contractual relations of the parties do not lead to de facto awarding of a new contract, circumventing the procedures designed to guarantee fair competition, equal treatment of entities seeking public contracts, and transparency in the actions of the contracting authority.

The prior law at the EU level, i.e. the previous Classic Directive (2004/18/EC), did not contain provisions governing amendment of contracts. However, the rules for modification of public contracts (and more specifically the rules distinguishing between permissible amendments and amendments requiring a new tender to be held) were developed some time ago in the case law of the Court of Justice. The most significant ruling in this respect is Pressetext (Case C-454/04).

In 2014, the rules and guidelines governing modifications of public contracts, as stated in Pressetext and other cases, were codified in Art. 72 of the new Classic Directive (2014/24/EU).

Under current Polish law, the permissibility of changes in public contracts is governed by Art. 144 of the Public Procurement Law, in the wording from 22 December 2009. This provision will generally continue to apply to contracts concluded before entry into force of the proposed amendment.

Before 2009, the current Art. 144 was amended twice because of objections by the European Commission that it did not comply with directives 2004/17/EC, 2004/18/EC and 89/665/EEC and the Treaty on European Union, and, as expressly stated in the justification for the amendment at that time, to bring the act into compliance with the case law of the Court of Justice of the European Union.

The importance of these rules was described by the Parliament in 2009: “Currently Art. 144(1) of the Public Procurement Law prohibits introduction of changes in a public contract as compared to the content of the offer, unless the contracting authority provided for the possibility of making such change in the contract notice or the terms of reference, and specified the conditions for such amendment. To make the process of awarding public contracts more flexible and efficient, and at the same time to reflect the case law of the European Court of Justice, i.e. in cases C-496/99 Succhi di Frutta and C-454/06 Pressetext Nachrichtenagentur, it is proposed that the prohibition on changes in public contracts apply only to substantial changes to the contract. Thus changes that are not substantial will be permissible, understood to mean that if they had been known at the stage of the contract award procedure they would not have affected the set of entities seeking the contract or the result of the procedure.”

In consequence, even though the wording of Art. 144 of the Public Procurement Law is sparse as compared to the current detailed rules in Directive 2014/24/EU (despite being described by the drafters as introducing “unambiguous conditions for permissible modification of a public contact”), the Polish regulations must be interpreted in light of the rules for modification of contracts codified in Art. 72 of Directive 2014/24/EU, based on the existing case law of the Court of Justice.

In describing the permissible scope of amendments to a procurement contract, the European lawmakers focused on the substantiality of the given amendment. It should be determined whether the change will create a situation where there should be found to be essentially a new procurement, requiring commencement of a procedure for award of the contract. Consequently, Art. 72 of Directive 2014/24/EU expressly confirms the general rule of substantiality established in the Pressetext case.

Art. 72(1) of the directive lists the grounds for permissible modification of a procurement contract, which emphasise the insubstantiality of the change. They include changes based on review clauses, necessary additional orders, unforeseeable external factors, and replacement of the contractor by its legal successor or other entity capable of performing the contract.

Art. 72(2) governs instances where the relatively small scope of the change allows the contracting authority to dispense with a new procurement procedure. These include situations where the change falls within 10% or 15% of the original value and the value of the change does not exceed the thresholds for application of the directive.

The directive further clarifies that a change is “substantial” “where it renders the contract or the framework agreement materially different in character from the one initially concluded” (Art. 72(4)), and provides that a change is deemed substantial in any of these instances:

  • 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 acceptance of a tender other than that originally accepted or would have attracted additional participants in the procurement procedure.
  • The modification changes the economic balance of the contract or the framework agreement in favour of the contractor in a manner which was not provided for in the initial contract or framework agreement.
  • The modification extends the scope of the contract or framework agreement considerably.

The proposed new Art. 144 of the Public Procurement Law greatly expands on these conditions for permissibility of modification of public contracts. Consistent with the tradition of the Polish procurement system, the national provisions begin by saying that modifications of contracts are prohibited (unless the permissible grounds exist), where the directive provides that contracts may be modified in the instances given, but it is nonetheless clear that the amendment is intended to codify in Polish law the rules established for many years for permissible changes to procurement contracts.

Under the interim provisions in Art. 18 of the proposed amending act, contracts concluded under the “old” Art. 144 of the Polish act can benefit from the new regulations, but limited to necessary additional orders, changes caused by external factors, and changes within 10% or 15% of the original value of the procurement.

This wording could suggest that the Polish law currently excludes changes in existing contracts based on review clauses, does not permit a contractor to be replaced by its legal successor, and refuses to apply the codified grounds for determining the substantiality of a modification.

But Art. 18 of the amending act could not achieve this apparent purpose. Interpretation of national law is made in light of the wording and purpose of the directive and must reflect the interpretation of the directive presented in the case law of the Court of Justice. Under Art. 267 of the Treaty on the Functioning of the European Union, the Court of Justice is vested with jurisdiction to issue preliminary rulings on the validity and interpretation of acts issued by EU institutions and bodies. Judgments by the Court of Justice are binding. As indicated in International Chemical Corporation (Case 66/80), the competencies vested in the Court of Justice under the treaty should first and foremost encourage uniform application of Community law by the national courts. The binding nature of judgments from the Court of Justice is confirmed by the fact that issuance of a ruling by a national court in clear violation of a judgment of the Court of Justice may expose the member state to liability for injury to individuals for infringement of Community law (Köbler, Case C-224/01, par. 56–57).

Consequently, Art. 144 of the Public Procurement Law must always be interpreted in light of the case law from the Court of Justice. This is helped by codification in the directive of the principles developed by the Court of Justice on modifications to procurement contracts. This means that bodies applying Art. 144, in its wording either before or after the amendment, should reach the same conclusions on whether contract modifications fall within the permissible scope.

Thus it may be said that neither Directive 2014/24/EU nor the proposed amendment to the Public Procurement Law introduces any revolutionary changes in this respect. The principles developed in recent years by the Court of Justice, and codified in Art. 72 of Directive 2014/24/EU, will be fully applicable to contracts concluded under the Polish act prior to amendment, while the legislative process is still underway, and also later.

Mirella Lechna, Infrastructure, Transport, and Public Procurement & Public-Private Partnership practices, Wardyński & Partners