Contract variations

The new Public Contracts Regulations 2015 look to codify the law on contract amendments. Katie Bray considers the provisions and principles.

It so often happens that the ink isn’t yet dry on a contract but changes are already being discussed. Change requests may come in various forms: additional services, increased scope, increased value, unexpected changes for example, but the key question is: do they amount to a material change to the contract, because if they are, they could amount to a new contract which needs to be re-competed.

The European Court of Justice in the case of Pressetext gave clear guidance as to when contract amendments could be seen to be materially different and thus would require a new procurement exercise to be run. They include: (1) introducing new conditions which would have allowed for the admission or acceptance of new tenders; (2) extending the scope of the contract considerably to encompass services not initially covered; or (3) amendments which change the economic balance of the contract in favour of the contractor.

OJEU Notices are frequently drafted with a wide scope to capture both existing and potential requirements of the contracting authority during the life of the contract and to potentially avoid the need for a new procurement in respect of such requirements. It is therefore possible that some contract changes will not be seen as material changes and this may include minor amendments to the scope of the contract where this does not substantially increase the price or the services required or adding additional services where these were advertised in the OJEU Notice, provided for in the original procurement and there is a mechanism for bringing these forward in the contract.

This case law will be codified in the new Public Contracts Regulations 2015 following the changes set out in the Public Sector Directive. Regulation 72 of the draft Public Contracts Regulations 2015 (which is out for consultation) clarifies what is considered to be a substantial modification to a contract.

It also sets out six scenarios when contracts and framework agreements may be modified without a new procurement procedure (although which may require a publication in the OJEU). These include:

(a) where the modifications, irrespective of their monetary value, have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses, which may include price revision clauses or options, provided that such clauses - 

(i) state the scope and nature of possible modifications or options as well as the conditions under which they may be used, and

(ii) do not provide for modifications or options that would alter the overall nature of the contract or the framework agreement;

(b) for additional works, services or supplies by the original contractor that have become necessary and were not included in the initial procurement, where a change of contractor -

(i) cannot be made for economic or technical reasons such as requirements of interchangeability or interoperability with existing equipment, services or installations procured under the initial procurement; and

(ii) would cause significant inconvenience or substantial duplication of costs for the contracting authority, provided that any increase in price does not exceed 50% of the value of the original contract;