Member Article

The current health emergency has called for the introduction of derogating and temporary rules on public procurement, both in the field of awarding and executing public contracts, given the current difficulties of enterprises and other economic operators to carry out their services and contracts normally in a period of containment.

In public procurement law, Ordinance No. 2020-319 of 25 March 2020 on various measures to adapt the rules for the award, procedure or performance of contracts subject to the Public Procurement Code and public contracts not covered by it during the health crisis caused by the Covid-19 epidemic (hereinafter the “CCP Ordinance”), includes various measures to relax the rules applicable to the performance of public contracts.

These rules, which temporarily derogate from ordinary law, confirm certain guidelines resulting in particular from the agreement between the Building Federations and the Government, following a press release of 21 March 2020, adopting a common position in favor of the continuation of the activity, subject to the implementation of specific procedures essential to the preservation of the health of employees.

 

A BOARD SCOPE OF APPLICATION

This mainly concerns contracts subject to the French Public Procurement Code, mainly public procurement contracts, partnership contracts as well as concessions and public service contracts, but also, more generally, public contracts that are not subject to this code, such as contracts for the occupation of the public domain, long leases, or contracts concluded by local public companies (SPL) and semi-public companies (SEM).

The notion of “public contracts” mentioned in the enabling law (“loi d’habilitation”) is therefore not limited to administrative contracts. As regards to its material scope, the Department of Legal Affairs of the Economic and Financial Ministries (DAJ) specifies, in its fact sheet published on 6 April 2020, that it is not limited to administrative contracts but includes “all contracts which fall within the public sphere, i.e. contracts of legal persons governed by public law as well as those concluded by legal persons governed by private law which meet the definition of a contracting authority or contracting entity”.

Presented the previous day to the Council of Ministers, the CCP Ordinance was then published in the Official Journal of the French Republic (“Journal Officiel de la République Française”) on 26 March. Its scope of application is retroactive; in accordance with the enabling law, the CCP Ordinance applies to all public contracts “in progress” or “concluded” between 12 March 2020 and the end of the duration of the state of health emergency, plus two months, according to its Article 1.

This CCP Ordinance was adopted on the basis of f of 1° of I of Article 11 of Law n°2020-290 of 23 March 2020 as an emergency measure to deal with the covid-19 epidemic; following the corresponding report to the President of the Republic published on the same day (NOR: ECOM2008122P), it meets the twofold objective of protecting economic operators against the consequences of the covid-19 epidemic, while ensuring the continuity of current contracts.

Firstly, it should be noted that Article 1(2) of the CCP Ordinance states that its provisions “shall be implemented only to the extent that they are necessary to deal with the consequences in the conclusion and execution of such contracts, of the spread of the covid-19 epidemic and the measures taken to limit this spread”, the report to the President of the Republic stating that “the application of these provisions requires a case-by-case analysis of the situation in which the contracting parties find themselves, who will have to justify the need to resort to them”.

In any event, this CCP Ordinance is only supplementary, and is intended to apply in principle only in the event of less favorable provisions, including contractual provisions.

 

POSSIBILTY OF LONGER CONSULTATION PERIODS AND ADJUSTMENT OF PROCUREMENT PROCEDURES

Due to the current health crisis, companies may encounter difficulties in formalizing their application and offer within the deadlines set in normal times. Considering that many firms are not able to respond normally to calls for tenders, Article 2 of the CCP Ordinance provides for an extension of the time limits for the receipt of applications and tenders, “of a sufficient duration, fixed by the contracting authority, to allow economic operators to submit their applications or tenders”, but without setting an imperative deadline. It should be specified that the duration of the extension must be assessed by the purchaser.

Moreover, where the arrangements for competitive tendering in the documents for consulting undertakings cannot be complied with by the contracting authority, it may adjust them during the procedure, but always in accordance with the principle of equal treatment of candidates.

In addition, in the event of an extension of the examination of tenders submitted, prolongation of the negotiations and delay in the decision to award contracts, the contracting authority may ask all tenderers to extend the period of validity of their tenders, provided that it obtains the agreement of the candidates which have submitted a tender on the extension and its duration.

Finally, it should be reminded that, in the matter of awarding of public contracts, in cases of urgency, Article R.2161-8 (3°) of the French Public Procurement Code may first be applied in order to reduce the time limits for advertising.

In this respect, in cases of urgent need, Article R. 2122-1 CCP allows for dispensing with advertising and prior competitive bidding. Thus, the procurement rules may be set aside in the name of “pressing emergency”, which must be limited to “external, unforeseeable and irresistible circumstances” (Article R. 2322-4 of the French Public Procurement Code), but “where appropriate, such purchases must be made only for the amounts and duration strictly necessary to meet urgent needs. They may be renewed if the freeze situation were to continue”.

It should be noted that the Communication “Guidelines of the European Commission on the use of public procurement in the emergency situation related to the Covid-19 crisis”, published on 1 April in the Official Journal of the European Union (2020/C 108 I/01) also specifies “[…] which options and flexibilities are available under the EU public procurement framework for the purchase of the supplies, services, and works needed to address the crisis”.

 

DELAYS IN PERFORMANCE, UNFORSCREEN CIRCUMSTANCES AND FORCE MAJEURE

Various measures have been envisaged in order to prevent, in particular, contractual clauses relating to the penalties which may be imposed by the contracting authority on the contracting holder.

Thus, the CCP Ordinance provides first of all in its Article 6, 1° that the execution deadlines are extended by a period at least equivalent to the duration of the health crisis.

And in order to compensate for this type of failure, the purchaser can thus have a third party perform the services which cannot suffer any delay by means of a “substitution contract” with a third party to satisfy those of his needs which cannot suffer any delay even though the initial contract would contain an exclusivity clause (Art. 6, 2° b).

In the area of public service agreements (Delegation de service public – DSP), the CCP Ordinance also adapts the legal regime applicable to concession contracts.

Thus, when the contractor (concessionaire) is unable to perform all or part of the contract, Article 6(2)(a) provides that he may not be sanctioned, nor have contractual penalties applied to him, nor be held contractually liable on this ground.

In such a case, the payment of the sums due by the concessionaire to the licensing authority – royalties, rents, etc. may be suspended pursuant to Article 6, 5° of the CCP Ordinance.

Finally, it should be noted that the concessionaire is entitled, under Article 6, 6°, to the payment of compensation for the additional costs resulting from the performance, even partial, of the service or works.

Adapting de facto the theory of “unforeseen circumstances”, the concessionaire must thus establish that the continuation of the performance requires the use of additional means not provided for in the original contract, and representing a burden manifestly excessive in relation to his financial situation, in order to be entitled to benefit from this compensation for additional costs.

It should be noted that the DAJ recommends that public purchasers should not “hesitate to acknowledge that the difficulties encountered by their co-contractors are attributable to a case of force majeure”.

(https://www.economie.gouv.fr/files/files/directions_services/daj/fiche-passation-marches-situation-crise-sanitaire.pdf).

However, the DAJ’s explanatory sheet of the CCP Ordinance of April 6, 2020 states that “The ordinance does not establish a presumption of force majeure, which can only be qualified on a case-by-case basis. It is up to the contracting authorities and economic operators to demonstrate that the difficulties they are encountering as a result of the epidemic do not make it possible to continue the procedures or the execution of contracts under normal conditions”.

For the performance of contracts, it therefore encourages purchasers to apply the force majeure arrangements, reminding the conditions for its application, subject to any contractual clauses which may have modified them:

– unforeseeable event;

– events outside the parties’ control;

– absolute impossibility for the service provider or the public purchaser to continue, temporarily or definitively, the execution of all or part of the public contract (deadlines, quantities, compliance with certain specifications of the services to be provided, etc.), being specified that this last condition will have to be checked on a case-by-case basis.

 

EXTENSION OF THE TERM OF THE CONTRACT

Another objective for contracts whose performance period expires during this period is to avoid supply disruptions for public purchasers.

Thus, where the organization of a competitive tendering procedure cannot be implemented, Article 3 of the CCP Ordinance allows the extension of public contracts that have expired.

Article 4 of the CCP Ordinance then authorizes public entities to extend by way of an amendment contracts in progress which would come to an end during this period of health crisis.

Public procurement contracts and concession contracts expiring during the period from 12 March 2020 until the end of the state of health emergency – fixed, to date, at 24 May 2020 – increased by a period of two months, may be extended, according to Article 4 of the CCP Ordinance, by means of a rider beyond the planned duration, when the organization of a competitive tendering procedure cannot be implemented.

It should also be noted that the duration of concession contracts in the field of drinking water, household waste and other waste is in principle limited to 20 years, and may be extended in this case, and by way of derogation from the provisions of Article L. 3114-8 of the French Public Procurement Code, beyond this 20-year duration, with exemption from prior examination by the competent State authority.

In any event, for these public contracts, the duration of this extension is not unlimited, as the CCP Ordinance sets a cut-off date; the extension of the term of the contract may not exceed that of the period of the health crisis – i.e. the period from 12 March 2020 until the end of the state of health emergency, plus two months – plus the period required for re-competition at the end of its expiry.

 

RELAXATION OF THE FINANCIAL IMPLEMENTING RULES

Finally, the rules for the financial execution of public procurement contracts have been made more flexible, allowing purchasers to pay advances in excess of the maximum rate of 60% in principle provided for in the Public Procurement Code (Article 5, paragraph 1).

In addition, purchasers are not required to require the provision of a security on first demand for advances in excess of 30 % of the contract amount (Art. 5(2)).