Most of the amendments to the Public Procurement Law Act of 29 January 2004 (the “PPL”), as provided for in the Act amending the Public Procurement Law Act and certain other acts, dated 22 June 2016 (the “Amendment”), came into force on 28 July 2016. One of the most interesting elements of this Amendment, which can be called truly revolutionary, are the new rules for modifying already concluded public contracts.
The current Article 144 of the PPL, which remained in effect until 28 July 2016, ruled out any significant changes to be made to the provisions of any previously signed contract in relation to the contents of the tender, based on which the contractor was selected, unless the contracting authority provided for the possibility of such modification in the contract notice or in the terms of reference, and set out the conditions for permitted changes. That wording led to difficulties in interpreting the concept of “significant change” and made it necessary to specify, separately in each case, in what circumstances and to what extent it is possible to amend a public contract. What is more, given the wording of Article 140 of the PPL (not possible to extend the performance beyond its scope defined in the tender), there were serious doubts whether it was possible, for example, to even minimally reduce the supply of one product while increasing the scope of supply of another product.
The new wording of Article 144 of the PPL indicates that any changes in relation to the contents of the tender, and not just significant ones, are prohibited, while providing for very important and numerous exceptions to this rule.
First, any changes contemplated in the contract notice or in Terms of Reference (ToR) and expressed in clear contractual provisions that define their scope (in particular, the possibility to change the amount of remuneration of the contractor) and nature, as well as the conditions for introducing any changes, are allowed. Second, permitted are amendments having to do with the performance of additional supplies, services, or works by the same contractor when they are necessary and it would be uneconomic, impractical, cause significant inconvenience, or result in unreasonable costs to change the contractor, and provided that the value of each consecutive change does not exceed 50% of the value of the contract. Third, the content of the contract may be amended if the need to change the same is due to circumstances which the contractor, acting with due diligence, could not have anticipated and the value of such change does not exceed 50% of the value of the contract as originally specified therein. The Amendment also allows changing a party to the contract, i.e., to replace the chosen economic operator with another entity where the possibility of such change is contemplated in the original contract or in a situation where the contracting authority assumes the operator’s obligations to subcontractors. Changing the contract will also be permitted in the event of a merger, de-merger, transformation, bankruptcy, restructuring, or acquisition of the current contractor or its business, provided that the new contract meets the conditions for participating in the procedure, no reasons for excluding a specific contractor exist, and such change does not entail any other material changes to the contract.
Yet another independent circumstance allowing for the modification of the contract is any change the value of which is less than the sums specified in the regulations issued on the basis of Article 11(8) of the PPL and which is lower than 10% or 15% of the value of the contract as originally specified in the contract in the case of, respectively, a contract for services or a supplies and works contract. Likewise, this Amendment allows for any non-significant changes to be made without any restriction, and defines “non-significant change” as any modification not affecting the general nature of the contract or the framework agreement, relative to the original wording of the same, and furthermore not having any adverse effects such as a significant change to the scope of performance, compromising the economic equilibrium, or the introduction of any terms which, had they been imposed under the procurement procedure, would result in the participation, or could have resulted in the participation, in the procedure of some other economic operators or would have allowed for the acceptance of a tender with different content.
It should be added that the new wording of Article 140 of the PPL does not preclude the scope of the contractor’s performance to be modified by way of an annex to the contract.
The new rules providing for the modification of public contracts by annex should be regarded as a positive development, despite the fact that some of them (such as the definition of significant change) actually amount to nothing more than a codification of the ruling practice of the European Court of Justice. Particularly welcome is the admissibility of modifying the scope of the contractor’s performance by way of an annex, as mentioned above. In special circumstances (as in the case of large construction projects which have failed abysmally as a result of the bankruptcy of the general contractor), the possibility of changing the person of the contractor and “replacing” it with subcontractors can save important public projects. The new wording of Articles 140 and 144 of the PPL will make it possible to loosen up the rigid strictures that the PPL imposes on the contracting authority and the economic operator who are bound by the signed public contract.