Since the first half of 2021, supply difficulties, rising raw material prices and transport costs have reached such a level that a large number of companies have seen, and continue to see, their financial situation severely affected.
This economic context, which is the result of the health crisis linked to Covid-19 and which has been amplified by the security situation in Ukraine, is particularly affecting certain sectors, notably the energy and materials industries.
This situation is all the more problematic for the government’s co-contracting companies as the price initially set by the parties is deemed final.
This means that the prices set when the contract is concluded remain the same throughout the performance of the services and constitute the settlement prices, subject to their updating or revision as provided for in the contract.
However, in an opinion issued on 15 September 2022, the Conseil d’Etat recognised the possibility of “dry” modification of the contract price.
In other words, it is now possible to modify the contract price independently of any other modification to the conditions of its performance. However, this requires compliance with certain rules set out in the French Public Procurement Code.
By their very nature, performance problems arise during the course of a contract, but they should be anticipated at the award stage.
For this reason, Cabinet Goldwin works alongside its clients from the contract award stage onwards.
Whether you are a local authority or a company, our lawyers will work with you at every stage of the award and performance of the contract to defend your interests, both as advisers and in litigation.
What changes can be made to the contract?
- Changes provided for in the contract
The price can be changed if the parties agreed to this when they signed the contract, by means of a review clause.
- Changes made necessary by unforeseeable circumstances
The price and duration of the contract may be modified if they are justified by unforeseeable events and their financial consequences.
Unforeseeable events are those which could not reasonably have been foreseen by the parties at the time of entering into the contract.
The public authority’s co-contractor is necessarily subject to a risk, even a minimal one, when it concludes the contract.
Accordingly, the price or duration of the contract may only be modified on the basis of unforeseeable circumstances if the additional costs generated exceed the limits that could reasonably have been envisaged by the parties when the contract was entered into.
Such changes must comply with certain rules:
- They must be directly attributable to unforeseeable circumstances
- Not exceed what is necessary to respond to these unforeseeable circumstances
- Not exceed 50% of the value of the initial contract awarded by a contracting authority
- Not change the overall nature of the contract
- Small modifications
The parties may amend the price, duration or other financial clauses of the contract by means of an amendment if the amendment is for a small amount and relates to matters that could not have been foreseen when the contract was signed.
An amendment is considered to be small if it is less than :
- The European thresholds
- 10% of the initial amount
- Non-substantial amendments
The parties may make so-called “non-substantial” changes, i.e. changes that would alter the economic balance of the contract in favour of the contractor in a way that was not foreseen when the contract was awarded.
The economic balance refers to the essential elements of the contract, i.e. the price, rates, duration or volume of services.
In addition, the amount of these non-substantial modifications may not exceed 50% of the amount of the initial contract.
However, two points need to be made:
- Firstly, while it is possible to amend the contract price and rates to remedy a situation resulting from unforeseeable circumstances, the administration’s co-contractor hasno vested right to amend the contract price.
- Secondly, the contracting authority has considerable leeway to negotiate changes to the contract. Nevertheless, its contractual freedom remains limited, since it must comply with the principles of proper use of public funds and the prohibition of gifts.
- If the contract is not amended, is it possible to obtain compensation?
If the contract cannot be amended, the government’s co-contractor can only claim compensation for the additional costs incurred as a result of unforeseeable circumstances.
This compensation results from :
- either an indemnity agreement drawn up in advance
- Or a simple, substantiated request from the co-contractor for compensation for unforeseeable circumstances.
However, the co-contractor will have to justify the elements by preparing a solid file demonstrating the extent to which the unforeseeable circumstances in question have had an impact on its financial situation.
Where appropriate, this compensation will be awarded by the administrative judge.
Please note that, unlike compensation awarded for unforeseen circumstances, compensation for unforeseen circumstances does not have to be included in the general and final account.
Goldwin’s lawyers will assist and support you throughout the procedure for awarding and performing public procurement contracts.
