Presentation given at the "Contract changes in a European perspective" workshop organised by the Danish Public Procurement Association (Dansk Forening for Udbudsret). It discusses the limitations of the approach implicit in Article 72 of Directive 2014/24/EU and the case law of the Court of Justice of the European Union

1. When does competition end? A staged
approach to procurement modifications
Dr Albert Sanchez-Graells
Reader in Economic Law
Contract Changes in a European Perspective,
Dansk Forening for Udbudsret
Copenhagen, 19 September 2017
19 September 2017
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2. Agenda
• Explore the relevance of controlling procurement
modifications from a competition perspective,
with a concentration on contract modifications
• Critically assess the logic(s) behind the rules in
Directive 2014/24/EU (Art 72)
• Critically reflect on the need for a more
commercial approach in recent CJEU case law
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3. Object of the contract, market and competition
– logic and limits
• Tender documentation establishes the object
and limits of competition for a public contract
• Modifications are thus problematic if they either
nullify or distort competition
• But ‘open-ended’ modification possibilities not
seen to alter the competition if they are
transparent and ensure equal treatment
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4. How to interpret this in functional terms?
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5. Commission v CAS Succhi di Frutta,
C-496/99 P, EU:C:2004:236
• ‘No change of rules of the game’ logic
• prohibition of changes that, ‘had [they] been included in the
notice of invitation to tender, would have made it possible for
tenderers to submit a substantially different tender’ (116)
• ‘Flexibility in the rules of the game’ trump
• ability of the contracting authority to introduce modifications
if (and only if) it reserves the possibility and ‘defines the
framework within which the [modification] procedure must
be carried out’ (118)
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6. pressetext Nachrichtenagentur,
C-454/06, EU:C:2008:351
• Material change + ‘No-negotiation’ rule?
• ‘In order to ensure transparency of procedures and equal
treatment of tenderers, amendments to … a public contract …
constitute a new award … when they are materially different
in character from the original contract and, therefore, such as
to demonstrate the intention of the parties to renegotiate
the essential terms of that contract’ (34)
• What if there was a contractual provision on renegotiation?
(is Succhi di Frutta only applicable to unilateral modifications?)
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7. pressetext Nachrichtenagentur,
C-454/06, EU:C:2008:351
• No rebalancing – unless foreseen?
• ‘… changes the economic balance of the contract in favour of
the contractor in a manner which was not provided for in the
terms of the initial contract’ (37)
• Does this mean initial contract, or procurement documents?
(ie is there an obligation for all potential tenderers to have
been informed of this possibility, or would it have sufficed to
insert this clause in the contract with the awardee? Any
intermediate solutions concerning multi-stage procedures?)
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8. What are the consequences of this logic?
• When the game changes, new game
• Most of the remedies that can be obtained in
case of illegal modifications assume a continued
interest in the (revised) object of the contract +
the (reasonably foreseeable) possibility that
there will be interest in supplying it from
undertakings other than the incumbent
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9. Pre-award modifications and impact on
competition (equal treatment, transparency)
• The same logic (broadly) applies to pre-contract
modifications of the procurement documents /
requirements—e.g. qualitative selection
• MT Højgaard and Züblin, C-396/14, EU:C:2016:347
• Double criterion of (a) no modification of procurement
documents (selection criteria) and (b) no distortion of
competition by advantaging ‘modification beneficiary’–
see para 44) [what of broader competition consideration?]
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10. Post-award contract modifications
• Therefore, the logic controlling the (incipient)
regulation of contract modifications rested on
the need to ensure that (a) competition is not
distorted (change of ‘playing field’), (b) the
results of competition are not nullified (change
of economic balance), unless (c) there was a
prior, transparent procedure for such changes
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11. Post-award modifications and
(theoretical) competition for the contract
• The problem with this logic is that it does not
make sense (or is difficult to apply) in
• situations involving long-term contracts
(competition issues fade away with time)
• situations involving very complex contracts
(competition involves a degree of uncertainty)
• situations unforeseen / unforeseeable / unwanted by the
parties (driver for modifications is ‘beyond control’)
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12. When does competition end?
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13. Termination involving modifications –
competition perspective
• The limitations of the logic have become
particularly obvious in situations of unwanted
modification of the contract due to a break up of
the commercial relationship (cfr Finn Frogne)
• Same issues would (potentially) arise in other
situations, such as termination for convenience,
which can introduce significant rigidity
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14. Finn Frogne, C-549/14, EU:C:2016:634
• Unsustainable situation
• disagreement ‘as to which party was responsible for making it
impossible to perform the contract as stipulated’ (10)
• Contract modification implicit in effort to minimise the
damages / losses resulting from the break up of the
commercial relationship and contract
• Public interest? / Urgency? / Sole source?
• All would have been well if ‘contractualised’ (37/40)
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15. Review clauses – competition perspective
• The second part of the underlying logic that hits
the (practical) wall rather quickly concerns the
pre-establishment of clear and ‘automatic’ rules
foreseeing ‘equal for all’ modifications
• Is it really competition-neutral?
• Information asymmetries
• Moral hazard / winners’ curse
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16. Review clauses – contract law perspective
• The standard set in Art 72 Directive 2014/24/EU
may be simply impossible (or too costly)
• 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 ... Such clauses shall state the scope and nature of
possible modifications … as well as the conditions under which
they may be used. They shall not provide for modifications … that
would alter the overall nature of the contract or framework agmnt
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17. What would such a clause look like?
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18. Conclusions
• Competition-preservation remains regulatory goal
• But: need for a more sophisticated approach,
based on a commercially-informed assessment of
justification and proportionality of modifications
• Specially where they are ancillary to other problems
• Revised approach to (or hope for) general contract
modification clauses
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19. Further reading
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20. Thank you for your attention
Be in touch
a.sanchez-graells@bristol.ac.uk
www.howtocrackanut.com
@asanchezgraells
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