For the first time the European Court has expressed its views on matters relating to the reduction of an already signed contract. This may involve a so-called significant change. According to Danish jurist experts, the court pronounces itself as seemingly not aligned with the new procurement rules when it comes to certain issues related to the decision of whether there is such a change.
A decision by the European Court in September 2016 (Case C–549-/14, Finn Frogne) has generated a stir in Denmark. This entails the opportunities to make subsequent changes in a public contract as a result of a settlement.
The cases origin was from an acquisition in 2007, in which the Danish government was intending to purchase a software to a common, cross-sector radio communication system. At some point, during the delivery, keeping the deadline was a problem that occurred. Neither of the parties took responsibility for the circumstances, however in 2010 a final agreement was decided after negotiation – on a settlement agreement by the Danish government. The contracts values was approximately reduced from €32M to €8M, additionally a number of other changes was made.
Significant changes
A supplier who did not ask for a prequalification in the competition for this contract, sued for court. The Danish Supreme Court referred the issue of contract changes for the European Court, which for the first time had the opportunity to comment on a reduction of the contract. The court concluded that a reduction of contracts could be regarded as significant and thus require a new competition.
In a comment, Professor Michael Steinicke and lawyer Peter Lund Meyer on udbudsportalen.dk that the court does not relate the case to the new EU directives. Possibly, it concerned the basic principles and are not changed in the new procurement rules.
The new procurement rules
The new directives, however, contains very specific rules for opportunities to change public contracts. It would have been appropriate if the court had said something about the relationship between principles and these decisions. As it has not taken place, this leaves some uncertainty about how to interpret the Court’s signals. The mentioned decisions accept to some extent which relations the Court have rejected.
An example is whether it should take into account the intentions behind a contract amendment. The court settles that the subject is completely irrelevant for determining if there is a significant change. The Court states that the subject is completely irrelevant for determining whether there is a significant change. But the Danish constitution stated that it must be considered whether a change is sufficiently big, that a change after a concrete review considered for the parties willingness to renegotiate the agreement basic elements. Thus in the opposite direction of what the court says.
Also, the court states that unforeseen circumstances should not have an impact on whether the change is significant. Several decisions on the directive, according to the comment on udbudsportalen.dk, expresses that it should take into consideration whether the need for change could not be anticipated.
The two authors of the article thus concludes that consideration of intent and predictability can not be accorded any importance when assessing whether there is a significant change except in those situations where these conditions expressly mentioned in the present procurement rules.
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This article frist appeared at Anbud 365, Norway's leading online newspaper for public procurement. Published by Lennart Hovland 24. October 2016. The full article can be read in Norwegian here.