In this case, it is important to inform the client as soon as possible in order to find a solution for the unforeseen price increases.

This issue is relevant to both public (public procurement) and private contracts.

Private contracts

In this regard, the B2B-Act (Loi modifiant le Code de droit économique en ce qui concerne les abus de dépendance économique, les clauses abusives et les pratiques du marché déloyales entre entreprises) stipulates that terms that allow the company to unilaterally change the price of the contract without good reason are presumed to be abusive.

Furthermore, as far as private agreements are concerned, Article 57 of the Economic Recovery Act (Loi relative aux mesures de redressement économique) is relevant.

First, this article stipulates that the revision is only allowed up to an amount of maximum 80% of the final price. Consequently, the fixed factor in the price revision formula must be at least 20%.

Secondly, this article provides that contracts may contain price revision clauses only if they refer to parameters that represent actual costs. If the price revision clause provided for in the contract does not reflect the current price increase, it seems possible to request a revision of the provided (unadjusted) price revision clause on the basis of the aforementioned article.

If the contract does not provide for a price revision clause, but the inclusion of such a clause is nevertheless desirable to ensure the economic equilibrium of the contract, it seems to us that it could be requested, on the basis of good faith and the hardship theory (théorie de l’imprévision), to renegotiate the contract, including the inclusion of a price revision clause. In this respect, reference is made to the future article 5.74 of the new civil Code concerning hardship (codifying recent case law of the Court of Cassation).

Public contracts

Article 38/7 of the EXECUTION DECREE (Arreté Royal établissant les règles générales d’exécution des marchés publics) makes it compulsory to include a price revision clause for contracts for works and services listed in Annex 1 of this DECREE, except for contracts with an estimated value of less than EUR 120,000 and with an initial execution period of less than 120 working days or 180 calendar days. For the latter contracts, this is not an obligation, but only an possibility.

For supply of goods and services contracts that are not included in Annex 1 of the EXECUTION DECREE, the inclusion of a price revision clause is not an obligation either, but it is a possibility.

Pursuant to Article 10 of the Public Procurement Act (Loi relative aux marchés publics), the aforementioned Article 57 of the Economic Recovery Act does not apply to public contracts. For public contracts, therefore, there is no need to provide for a fixed factor of 20% and a price revision formula covering 100% of the price can be provided.

If a price revision clause is already provided for in the contract and if it adequately covers current price increases, it goes without saying that the existing price revision clause can be applied.

If the price revision clause provided for does not sufficiently absorb the current price increases, it seems to us that could be asked to renegotiate the price revision clause on the basis of Article 38/11 of the EXECUTION DECREE. The fact that the contracting authority has included an inappropriate price revision formula in the specifications constitutes negligence. Furthermore, Article 38/7 EXECUTION DECREE stipulates that the price revision must reflect the actual price evolution. Eventually, Article 38/9 EXECUTION DECREE could also be invoked to request the renegotiation of an inappropriate price revision formula. The damage suffered would then be the difference between the price calculated according to the defective formula and that calculated according to a “correct” formula.

Even if no price revision formula was provided, it seems to us that Article 38/9 EXECUTION DECREE could be invoked to include a price revision formula in the contract.

As regards the latter article, in order to request a revision of the contract, the contractor may invoke unforeseeability to request a revision of the contract only if he can prove that the revision has become necessary because of circumstances which could not reasonably have been foreseen at the time of submission of his tender, which could not be avoided and the consequences of which could not be remedied despite all efforts to do so.

In the context of current high price increases due to the war situation in Ukraine, these conditions must therefore be specifically met and a right to a review of the contract cannot be automatically decided. It will therefore be necessary to prove, on a case-by-case basis, that these conditions have been met. Although the unforeseeable nature of the war and the resulting price increases seems a priori defensible, it will also be necessary to examine the extent to which the consequences of this war in a specific sector for a specific contract could have been avoided and, in addition, whether everything necessary has been done to remedy the consequences.

The revisions may consist of an extension of the deadline, a compensation due to a very significant disadvantage or the cancellation of the contract.

In order to claim damages, the damage must reach one of the thresholds provided for in Article 38/9 EXECUTION DECREE.

Both in the context of Article 38/11 and Article 38/9 EXECUTION DECREE, the conditions for lodging complaints contained in Articles 38/14 to 38/16 EXECUTION DECREE must be respected.

Find out more? The Racine team is at your disposal to answer your concrete questions.

The post Price increases due to the war in Ukraine – revision of private and public contracts first appeared on Racine.

The fact that this tank station would only supply fossil fuels was a problem for the Council, given the fact that the municipality of Boechout had imposed some climate objectives on itself by signing a Covenant of Mayors on 1 June 2015. Moreover, the municipality of Boechout had refused the permit in the first instance for this reason, and also issued a negative opinion in the framework of the administrative appeal procedure. Reference is also made to the Paris Agreement.

Central to the discussion is article 4.3.4. of the Flemish Codex on Spatial Planning (hereafter VCRO) which stipulates:

“A permit may be refused if an obligatory opinion shows that the application is undesirable in the light of objectives or duties of care that are applied in other policy areas than spatial planning. For the application of the first paragraph, “objectives or duties of care” are understood to mean: provisions of international law, European law, regulations or decrees that oblige the government, when implementing or interpreting regulations or pursuing a policy, to take account of a certain objective or of certain precautions, without these being in themselves sufficiently clear in legal terms to be able to be implemented immediately.” (free translation)

This is by no means a recent legislative provision, nor one that has caused much controversy in the past. Indeed, since the word ‘may’ is mentioned in the first paragraph, this provision only provides for an optional ground for refusal. In other words: the deciding authority decides for itself whether the breach of the objective or duty of care should lead to the refusal of the permit.

It goes without saying that this provision can have a very broad scope. Every possible policy field can be involved. Until now, this provision has remained rather a dead letter.

Despite what is reported by certain media sources, the Council for Permit Disputes did not rule that the permit application had to be refused in that context. The Council did rule that the Antwerp Provincial Executive could not limit itself to stating that it did not consider the negative advice from the municipality to be “a valid legal reason for refusing the application from an environmental point of view”.

Such reasons may indeed, given the reading of Article 4.3.4. VCRO, constitute a valid ground for refusal. By ruling that the incompatibility with the objective could not be a valid reason for refusing the permit, the Province indeed violated the VCRO. However, it is important to point out that the Council for Permit Disputes already ruled in other cases that an authority granting a permit is not subject to a special duty to state reasons if it does not apply an optional ground for refusal (see, for example, the optional possibility of taking policy-driven developments into account in the assessment of good spatial planning).

However, the VCRO leaves the choice entirely up to the deciding authority. The question therefore arises as to what the Council for Permit Disputes would consider if the Antwerp Provincial Executive were to state in the decision after annulment that the application of article 4.3.4. VCRO is only an optional ground for refusal and that, in the light of certain concrete facts, it considers that this incompatibility does not outweigh the impact on the economy and fuel supply. In that context, the deciding authority would recognize the possibility of refusal, but would explicitly indicate why it does not wish to make use of it in this case.

Let’s wait and see, for less severe measures are usually applied than announced.  However, one can expect Article 4.3.4. VCRO to be encountered much more frequently in permit cases in the near future.

Do you need specific assistance in applying for or contesting permits?

Contact our public law team!

The post A new climatic evaluation in permit procedures? first appeared on Racine.

According to the public procurement regulations (more specifically article 44, § 1, of the royal decree of 18 April 2017 on the award of public procurement in the classic sectors), a tender must be signed by the person(s) authorised to bind the tenderer.

This case concerned the actual signing of an offer by a group of economic operators (temporary partnership) whereby one person from the various participating companies received a power of attorney to sign the tender on behalf of the temporary partnership. However, one special power of attorney was signed by the managing director of one of the participating companies.

Or, to be even more accurate, the person signing the tender received, amongst others, a power of attorney from another company which in turn received a power of attorney from a limited liability company, itself one of the participating companies, signed by the managing director of this limited liability company.

However, in order to understand the reasoning of the Council of State, it is sufficient to know that one power of attorney was thus issued within the framework of the daily management of one of the participating companies.

The applicant (a tenderer whose tender was declared irregular) obviously did not fail to refer to the “constant case law” of the Council of State which does indeed confirm that the signing of a tender – and by extension the signing of a power of attorney in view of the signature of a tender – cannot in principle be considered as an act of daily management.

The Council of State did not follow the applicant’s argument and rejected the ground of appeal.

In its assessment of the ground of appeal, the Council of State was guided by the fact that there has been a reform of company law. The Act of 23 March 2019 (Official Gazette 4 April 2019) introduced the Code of Companies and Associations (CCA) and, as of 1 January 2020, the mandatory provisions of the CCA also apply to companies that already existed on 1 May 2019, the day on which the CCA entered into force.

Under the old Companies Code, the concept of “daily management” was not defined. The Court of Cassation retained two hypotheses and defined them in its decision of 26 February 2009 (TRV, 2009, 444) as follows (free translation): “The acts of daily management are [1] those necessitated by the needs of the company’s daily life and [2] [a] those which, both because of their minor importance [b] and because of the need for a quick solution, make the action of the board of directors itself unnecessary“. The urgency and the minor importance of the act were cumulative conditions for the second hypothesis.

The Court of Cassation’s interpretation of the concept of “daily management” formed the basis for the definition of “daily management” in the CCA, with the significant difference that the condition of urgency and the condition of minor importance were retained in the CCA as alternative conditions and not as cumulative conditions.

According to the definition in the CCA (article 7:121 CCA for the limited liability companies), 3 acts fall under the concept of “daily management”, namely (1) the acts and decisions which do not go beyond the needs of the daily life of the company, (2) the acts and decisions of minor importance and (3) the acts and decisions of an urgent nature.

Because the applicant had based its ground of appeal on the old case-law interpretation of the concept of “daily management”, which is no longer entirely accurate in the light of the CCA and can therefore be challenged, and because the applicant had only argued during the pleadings, and thus belatedly, that the power of attorney did not comply with the criteria of article 7:121 CCA, its ground of appeal was rejected.

Consequences of this decision

It seems premature to regard this decision as a (definitive) change in the case law of the Council of State on this matter.

The Council of State ruled that the jurisprudential interpretation of the concept of “daily management” in the field of public procurement litigation is no longer entirely accurate and appears to be open to legal dispute, but did not further examine the discussion in the context of this procedure of extreme urgency. The Council of State limits itself in such proceedings to a prima facie examination.

We must therefore wait for the further interpretation of this concept in the case law of the Council of State.

How to deal with this case law in practice

Of course the question remains how contracting authorities and tenderers should deal with this case law.

The message here remains to be careful.

For tenderers it is advisable, given the uncertainty that has now arisen, to err on the side of caution and not simply submit tenders that have only been signed by the managing director. After all, the risk remains that a contracting authority – possibly still followed in this by the Council of State – will consider this insufficient. If there is no alternative, such signature can be attempted, with reference to the parameters emphasized by the Council of State and arising from article 7:121 of the CCA (for limited liability companies). It may be recommended for the managing director himself to include a justification of the applicability of one or more of the criteria of the notion of “daily management” in the signed tender, which will also provide the contracting authority with arguments to accept the tender (on that point) in a reasoned manner. In our opinion, however, this remains a very risky approach.

For contracting authorities, this decision certainly does not simplify matters. When a contracting authority is confronted with a tender that has only been signed by the managing director, it is advisable to make a concrete assessment and ask itself, on the basis of the new definition of the concept of “daily management“, whether the signing of the tender can (in this concrete case) be considered an act of daily management for the company concerned. A thorough motivation of both the acceptance and the irregularity of the tender is required.

Do you require specific assistance?

Contact our public law team!

The post Recent case law of the Council of State regarding the signature of a tender for a public procurement contract first appeared on Racine.

De onregelmatigheid vloeide volgens de aanbestedende overheid onder meer voort uit het opnemen in de offerte van een voorbehoud. Concreet gaf de inschrijver in zijn offerte aan dat er voor de levering van een bepaald product (rijnzand) een minimale afname diende gerespecteerd te worden (minimum 10 ton). Dit was niet zo voorzien in het bestek. De inschrijver verklaarde voor de Raad van State dat het hier slechts om een verduidelijking van de leveringswijze ging. Ondergeschikt, met name als het hier daadwerkelijk over een voorbehoud zou gaan, argumenteerde de inschrijver dat het voorbehoud slechts betrekking had op een dermate gering aandeel van de opdracht (nog geen 0,4%) dat het onmogelijk tot de substantiële onregelmatigheid kon leiden.

De Raad van State volgde deze redenering niet.

De Raad van State was immers van mening dat er sprake is van een voorbehoud en verwijst daarvoor naar artikel 76, § 1, van het koninklijk besluit van 18 april 2017 plaatsing overheidsopdrachten in de klassieke sectoren, dat letterlijk stelt dat een offerte substantieel onregelmatig is wanneer ze “de verbintenis van de inschrijver om de opdracht onder de gestelde voorwaarden uit te voeren onbestaande, onvolledig of onzeker [maakt]”.

Concreet is de Raad de mening toegedaan dat er met deze specifieke bepaling in de offerte van de inschrijver een bijkomende (eigen) voorwaarde werd opgelegd en, minstens, dat dit de verbintenis van de inschrijver “op dat punt onduidelijk” maakt, zodat er niet langer sprake is van een akkoord zonder voorbehoud met de voorwaarden van het bestek.

Het argument dat het hier een verwaarloosbaar aandeel in de opdracht betreft, wordt verworpen. De Raad stelt in dat opzicht vast dat artikel 76, § 1, van het koninklijk besluit van 18 april 2017 “geen marge [toelaat] in functie van het aandeel van deze onzekerheid ten aanzien van de totaliteit van de opdracht”.

De boodschap is hier aldus duidelijk: een voorbehoud (het concreet voorzien in de offerte van een bijkomende voorwaarde ten opzichte van het bestek) leidt tot de onregelmatigheid van de offerte, hoe klein het voorbehoud in vergelijking tot de totale opdracht dan ook mag zijn.

Het vervolg van het arrest en meer bepaald het 2de ingeroepen middel en de beoordeling ervan door de Raad van State is niet minder interessant: zo werd de aanbestedende overheid alsnog teruggefloten door de Raad van State in het kader van een “verbetering” van de offerte van de concurrent van de verzoekende partij.

De aanbestedende overheid had de offerte van deze concurrent namelijk “verbeterd”. Er deed zich immers een probleem voor met de eenheidsprijzen van deze concurrent: een aantal producten werden aangeboden in een ander volume, gewicht, lengte, breedte of aantal stuks per doos dan gevraagd in de opdrachtdocumenten. De aanbestedende overheid gaf daarbij zelf toe dat dit de vergelijkbaarheid van de offertes in het gedrang bracht door de concrete verbetering van de eenheidsprijzen te laten voorafgaan door de melding “Teneinde de ingediende offertes onderling vergelijkbaar te houden”. De eenheidsprijzen werden vervolgens door de aanbestedende overheid met toepassing van de regel van drie omgerekend in functie van de in het bestek vereiste maatvoering.

De Raad van State straft deze handelswijze af. De Raad van State stelt hier vast, op aangeven van de aanbestedende overheid zelf, dat dit de vergelijkbaarheid van de offertes in het gedrang bracht, hetgeen perfect aansluit bij de definitie van een substantiële onregelmatigheid in artikel 76, § 1, van het koninklijk besluit van 18 april 2017. De Raad van State verduidelijkt ook nog dat dergelijke “herrekening” niet kan beschouwd worden als een toegelaten “verbetering van hoeveelheden”.

De conclusies die hieruit getrokken kunnen worden, zijn dan ook duidelijk: het bestek wordt best strikt gevolgd. Het toevoegen van een extra voorwaarde, hoe miniem ook, leidt tot de onregelmatigheid van de offerte. Het niet respecteren van de maatvoering zoals het bestek die oplegt, leidt net zo goed tot de onregelmatigheid van de offerte.

Het belang van de (door de aanbestedende overheid) opgelegde spelregels wordt daarmee nogmaals in de verf gezet.

Het volledige arrest van de Raad van State treft u op de website van de Raad van State aan:

http://www.raadvst-consetat.be/

Heeft u nog vragen?

Ons team publiek en administratief recht staat dagelijks overheden en ondernemingen bij in het kader van overheidsopdrachten. Voor meer vragen hierover kan u ons steeds contacteren.

The post Overheidsopdrachten: de spelregels van de aanbestedende overheid worden best strikt nageleefd first appeared on Racine.

Below you will find an overview of the measures recently adopted by the Flemish government in relation to obtaining permits.

Exemption from the requirement for a permit in case of a civil emergency relating to public health

The COVID-19 virus is having a major impact on existing health infrastructure and the need for additional healthcare facilities, while the production of drugs and medical equipment is increasing.

That is why, by the emergency decree of 20 March 2020, the Flemish government has granted an exemption from the authorisation requirement for the construction and operation of additional hospitals, care facilities, production facilities for medicines and medical equipment and laboratories.

No environmental permit or environmental notification is required if all the following conditions are met :

1. The Flemish government confirms the civil emergency in relation to public health and determines its duration and commencement date;
2. The derogation is valid for a period of maximum 120 consecutive days which comes into force on the commencement date. The Flemish government may extend this period once for a maximum of 120 consecutive days;
3. The derogation is only valid for constructions, modifications in function and operations with the aim of manufacturing medicines and medical equipment, or of extending or improving the capacity of hospitals and other care facilities, care institutions or research units, in order to prevent or manage the effects of the civil emergency on public health;
4. The general and sectoral environmental conditions and obligations and the regulations for their application, notified by or relating to the decree of 5 April 1995 containing general provisions on environmental policy, are complied with.

Measures relating to procedural deadlines or procedural obligations

Furthermore, with the emergency decree of 20 March 2020, it was decided that the Flemish government may suspend or extend certain binding procedural deadlines or temporarily adapt certain procedural obligations.

This additional measure was introduced in case the coronavirus crisis would take on (even) greater proportions and the Flemish and local administrations would lose crucial functions and consequently the deadlines or procedures could not be met.

Among other things, this measure prevents a permit from being automatically refused if the application is not processed within the set time limits. It also provides a solution in the event that it is no longer practically possible to organise public inquiries, to have files consulted, to take advice, etc.

By decree of 24 March 2020, the specific measures mentioned below were adopted by the Flemish government.

• Scope of the measures

The measures listed below apply to the time limits or procedural obligations set out in the Environmental Permits Decree and its execution decree and the EER (Environmental Effect Reporting)-Procedural Decree, but only to the following permit applications and administrative appeals:

1. all permit applications and administrative appeals lodged before 24 March 2020 which, as of 24 March 2020, are pending before the competent licensing authority and in which, at that time, no explicit or tacit decision has yet been taken by the competent licensing authority as the final administrative instance;
2. permit applications and administrative appeals lodged between 24 March 2020 and 24 April 2020, renewable where appropriate.

• Extensions of time limits
  • The time limit for taking a decision on an application for authorisation in the first administrative instance shall be extended by 30 or 60 days respectively, depending on whether the application is dealt with under the simplified authorisation procedure or the normal authorisation procedure.
  • The time limit for taking a decision relating to an administrative appeal shall be extended by 60 days.
  • The time limit for lodging an administrative appeal against decisions taken in first administrative instance or against decisions on an application or official initiative to update the single permit is extended by 30 days.
  • The time limits determining when a single permit granted from 24 March 2020 to 24 April 2020 (period may be extended, if necessary) may be used, shall be extended by 30 days.
  • The Minister may further extend the above-mentioned periods.
• Adjustments to the procedure for public inquiries
  • The public inquiries in progress on March 24, 2020 will be suspended and continued after April 24, 2020.
  • Objections submitted during the period of suspension will be considered admissible.
  • New public inquiries may only be held after 24 April 2020.
  • On the website of the municipality, information on the start and end dates of the public inquiries shall be kept up to date. If, in accordance with Article 67 of the Environmental Permits Decree (Omgevingsvergunningsdecreet), the municipality has been commissioned to conduct a public inquiry, it will keep the competent authority informed of this information regarding the start and end dates of the public inquiries.
  • The Minister may further extend the above-mentioned deadlines.
• Adjustments to the procedure for processing applications for authorisation or administrative appeals
  • Where appropriate, the competent authority, the provincial or regional environmental officer or the chairman of the Environmental Permits Committee may decide to hold the hearings only in writing, by teleconference or by videoconference.
  • Where appropriate, the chairman of the Environmental Permits Committee may decide to hold meetings by teleconference or videoconference when considering permit applications or administrative appeals.
• Amendments to the advisory procedure
  • For administrative applications or appeals, late or unissued advices are not considered tacitly favourable, but the obligation to give advice may be disregarded. However, the possibility of appeal referred to in Article 53, 3° of the Decree on Environmental Permits is maintained, even if an advice is late or has not been issued.
  • Contrary to Article 12 of the EER-procedural Decree, late or non-issued advices are not considered tacitly favourable. However, the obligation to give an advice may be disregarded.

Procedural deadlines for the ‘Raad voor Vergunningenbetwistingen’ (Council for Permit Disputes) and the ‘Handhavingcollege’ (Environmental Protection College)

In addition, the decree of 27 March 2020 also issues specific measures for the procedural deadlines for the ‘Raad voor Vergunningenbetwistingen’ (Council for Permit Disputes) and the ‘Handhavingscollege’ (Environmental Protection College).

• Extensions of time limits
  • Expiry periods referred to in the ‘DBRC’ Decree (decreet van 9 december 2016 houdende wijziging van diverse decreten, wat de optimalisatie van de organisatie en de rechtspleging van de Vlaamse bestuursrechtcolleges betreft) and its execution decree (besluit van de Vlaamse regering van 21 april 2017 tot wijziging van het besluit van de Vlaamse Regering van 16 mei 2014 houdende de rechtspleging voor sommige Vlaamse bestuursrechtscolleges, wat betreft de optimalisatie van de organisatie en de rechtspleging van de Vlaamse bestuursrechtscolleges) which run on or between 27 March 2020 and 24 April 2020 inclusive will be extended by 30 days, with the exception of the expiry periods for requests for suspension of extreme urgency.
  • The time limits for appeals to the ‘RVVB’ and the ‘Handhavingscollege’, which run from 27 March 2020 or which start from 27 March 2020 to 24 April 2020, are extended by 30 days.
  • The Minister may decide to extend the above-mentioned periods by 30 days.
• The processing of the request for suspension of extreme urgency
  • The submission of an application and the exchange of procedural documents can take place from 27 March 2020 up to and including 24 April 2020 by means of an e-mail to the Permit Disputes Board: udn.vergunningsbetwistingen@vlaanderen.be.
  • Notifications by the Council for Permit Disputes (RVVB) are possible from 27 March 2020 to 24 April 2020 by means of an e-mail addressed to the parties concerned.
  • From 27 March 2020 to 24 April 2020 inclusive, the chairman of the chamber may decide to organise the hearing digitally or may immediately take the case into consideration if the parties, in mutual agreement, refrain from handling the case at the hearing. Contrary to Section 40, §4, 2nd paragraph of the DBRC Decree, the application will not be rejected if, in such event, the applicant does not appear or is not represented at the hearing.

With regard to the applications for annulment, the Council for Permit Dispute (RVVB) also invites the parties to the proceedings to refrain from handling the case during the hearings planned in March and April 2020, so that the case can be examined immediately with a view of a decision.

In addition, the Registry is temporarily unavailable by telephone. The Registry can still be reached by e-mail:

– for RvVb via info.vergunningsbetwistingen@vlaanderen.be

– for the HHC via info.handhaving@vlaanderen.be

Modification of deadlines and obligations for planning procedures

Finally, the Flemish government adopted an execution decree implementing the decree regulating environmental planning procedures, environmental development plans, complex projects, assessment of the environmental impact of plans, urban planning regulations and planning certificates.

The post COVID-19 – Licensing measures first appeared on Racine.

Article 59, § 3, of the Act of 17 June 2016 regarding public procurement (“PP ACT”) only provides for an extension possibility of such deadline in the event of missing information or in the event of a significant modification of the tender documents. Thus the PP ACT does not explicitly provide for a possibility to extend the submission deadline in cases of force majeure.

A solution to extend the submission deadline may be found in article 59, § 1, of the PP ACT which provides  that the contracting authority must take into account the time necessary for the preparation of the tender, when defining the deadline for submission of the tenders.

Furthermore one can seek to appeal to the goodwill of the contracting authority or try to invoke the general concept of force majeure.

In any case we strongly recommend consulting the e-notification website (e-notification website) for possible rectification notices on a regular basis or to swiftly contact the contracting authority with the request to extend the period for submission of the tenders.

Would you like to know more?

The Racine team is at your disposal to answer your specific questions.

The post Impact of Corona virus on submission deadlines for public tenders first appeared on Racine.

Below we will elaborate on the possibilities of avoiding such delay penalties and of obtaining a revision of the contract.

Federal authority:

On 6 March 2020, the Council of Ministers decided that no delay penalties or other sanctions shall be applied to service providers, companies or self-employed persons in the context of federal public procurement contracts, to the extent the delay or non-execution of the contract is related to the current COVID-19 pandemic (communication in Dutch: https://economie.fgov.be/nl/themas/ondernemingen/coronavirus/informatie-voor-ondernemingen/coronavirus-de-economische).

If the contractor, irrespective of such potential penalties and sanctions, suffers losses as a result of the current crisis in the context of a specific public procurement contract, then he can also consider requesting a revision of the contract based on unforeseeable circumstances (also see below).

Other contracting authorities:

This flexibility in respect of penalties is only applicable to federal contracting authorities and is therefore not mandatory for other contracting authorities. As long as the Corona crisis is not generally recognized as a case of force majeure, one has to apply (1) the general rules regarding unforeseeable circumstances as laid down in article 38/9 of the Royal Decree of 14 January 2013 regarding the general rules of execution of public procurement contracts (“RD EXECUTION”) or (2), by way of derogation, a revision clause contained in the tender documents (if any).

How to obtain a revision of the contract?

In pursuance of clause 38/9 of the RD EXECUTION, the contractor is entitled to request a revision of the contract if and only if he is capable of demonstrating that such revision is required due to circumstances which were not reasonably foreseeable at the time of submission of the tender, which could not have been avoided and the consequences of which could not be remedied, although all necessary actions to avoid this were taken.

These general rules also apply in the context of the current Corona crisis and the right to obtain a revision of the contract is not automatic and always subject to these conditions. In any case, the contractor shall therefore have to demonstrate, on a case-by-case basis, that these conditions are met. The demonstration of the unforeseeable nature of the Corona cirsis seems, a priori, feasible, but one must also examine whether or not the consequences thereof were, in a particular sector and in the context of a well-defined contract, avoidable and, furthermore, if all necessary actions were taken in order to remedy the consequences thereof.

A revision of the contract may consist in an extension of the time for execution, compensation for very important losses or the termination of the contract. The entitlement of the contractor to compensation is subject to the condition that the losses suffered exceed one of the following thresholds:

• for public works and manual services: at least 2,5% of the initial contract amount;
• if the contract was awarded based on the sole criterion of price, on a cost basis or by taking into account the best price-quality ratio and provided that the criterion of price represents at least 50% of the total weight of the award criteria, then the RD EXECUTION provides for absolute thresholds ranging between 175.000 EUR and 300.000 EUR depending on the contract;
• for deliveries and white-collar services: at least 15% of the initial contract amount.

Articles 38/14 to 38/16 of the RD EXECUTION set out the conditions which must be met in order to introduce a valid claim in this respect. These conditions can be summarized as follows:

• the alleged circumstances must be notified to the contracting authority in writing within a period of thirty days;
• furthermore, the influence of the alleged circumstances on the progress and the costs of the contract must be communicated to the contracting authority within the same period of time;
• in addition, such request is to be duly justified and estimated (financially), and this justification must be timely submitted to the contracting authority, i.e.:
  • before the expiry of the time for execution of the contract, if the contractor wishes to obtain an extension of time or to terminate the contract;
  • or within ninety days as of the notification of the provisional acceptance report, if the contractor wishes to obtain a revision of the contract or a compensation for losses suffered.

Would you like to know more?

The Racine team is at your disposal to answer your specific questions.

The post Corona virus and the execution of public procurement contracts first appeared on Racine.