On Friday, 28th March 2014, Directive 2014/24/EU on public procurement (“the New Directive”) was published in the Official Journal of the European Union. The New Directive will repeal Directive 2004/18/EC (public works, supplies and service contracts) when it comes into force today (17th April 2014). Member States will then have two years to implement the New Directive into national legislation.
Following review of the final text of the New Directive, the content of our previous articles “Procurement Changes on the Horizon – Parts 1 and 2” remain unchanged, save in respect of the provisions relating to the modification of contracts during their term, which we highlighted in Part 2 of our article. To assist the reader, an overview of the final text of Article 72, which deals with these provisions, is set out below.
Article 72 of the New Directive specifies that a contract or framework agreement can be modified without the need for a new procurement procedure in the following circumstances:
- Where the modification has been clearly and expressly provided for in the initial procurement documents and does not alter the overall nature of the contract or framework agreement
- Where additional works, services or supplies are required from the original contractor and were not foreseen in the initial procurement, the appointment of a new contractor will not be required in specific and limited circumstances, such as, where a change of contractor would cause significant inconvenience or substantial duplication of costs for the contracting authority. The value of the additional works, services or supplies resulting from the modification should not exceed 50% of the value of the original contract
- Where all of the following conditions are met:
- The need for modification has been brought about by circumstances which a diligent contracting authority could not foresee
- The modification does not alter the overall nature of the contract
- Any increase in price is not higher than 50% of the value of the original contract
- Where a new contractor replaces the original contractor to whom the contract was originally awarded in specific circumstances, such as, where the contracting authority assumes the main contractor’s obligations
- Where modifications are not deemed to be substantial under subsequent provisions set out in Article 72 of the New Directive (detailed below)
Where a contract or framework agreement is modified post completion in accordance with paragraphs (b) or (c) above, the contracting authority must issue a notice in the Official Journal of the European Union in the form prescribed by the New Directive.
Article 72 contains further provisions for identifying whether a modification to a contract post completion will be deemed to be a substantial change requiring a new procurement process to be undertaken, as follows:
- The modification will not be considered substantial where the value of the change is below both (i) the relevant financial thresholds used to identify whether the New Directive applies to the procurement process; and (ii) below 10% of the initial contract value for service and supply contracts and below 15% of the initial contract value for works contracts. The modification must not alter the overall nature of the contract or framework agreement.
- A modification shall be substantial where one or more of the following conditions are met:
- The modification includes 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;
- 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;
- Where a new contractor replaces the contractor initially awarded the contract in circumstances other than those specifically provided for under paragraph (d) above, which is Article 72(1)(d) of the New Directive.
In the event readers wish to discuss the amendments detailed in this article or our previous articles, please contact a member of our team.