Perform the public contract

Verified 15 December 2023 - Legal and Administrative Information Directorate (Prime Minister), Ministry of Finance

Once the contract has been signed, the contractor must perform it in accordance with the conditions set out in the contract documents. Running changes are possible in some situations. In particular, the market price may be revised to take account of economic variations. Finally, in the event of delay or difficulty in implementation, the holder shall be liable to penalties.

Amendments provided for in the contract

The buyer can change the market running without a new competitive tendering procedure where amendments have been provided for in consultation documents .

The possibility to review certain conditions of implementation is provided for in a review clause. These may be price variation clauses or clear and precise options.

This clause must be clear and precise. It must indicate the scope and nature of any changes (deliverables, timetable for implementation, financial regulation of the contract, etc.).

The review clause may be triggered when a specific event occurs:

  • or it entails a modification provided for in the original contract (for example, the modification of the price variation clause). The scope of the change was accepted by the holder at the time of signature of the contract. It can therefore be implemented directly. This implementation decision is evidenced by the sending of a letter.
  • or it leads the parties to renegotiate the terms of the contract. This amounts to a “rendezvous clause.”

If the buyer and the company agree on the modification of the contract, it is necessary to materialize this agreement of will in a specific act (formerly called “additional agreement”).

Example :

A public procurement contract for the acquisition of supplies provides for an appointment to be held between the supplier and the purchaser to discuss the updating of equipment offered in the context of a framework agreement one month before the birthday. This meeting will allow to discuss possible substitutions from one model to another, within the limits of performance and price evolution provided for in the initial contract.

Other possible changes

The buyer may also modify the market running in the following situations:

  • Additional works, supplies or services have become necessary and a change of ownership is impossible for technical or economic reasons. Changes made shall not result in an increase in the contract amount of more than 50 % of the original amount. If several successive amendments are made, this limit shall apply to each amendment.
  • Changes are necessitated by unforeseen circumstances that the buyer could not foresee. For example, the proposed amendment is intended to substitute a product or material that has become unavailable or too expensive.
  • A new contractor replaces the original contractor, for example under a review clause.
  • The amendments are not "substantial", i.e. they do not change the nature of the contract. Where the amendment extends the contract to a significant extent to services not initially provided for, it shall be considered to be substantial.
  • The amount of change is small. This is the case where this amount is below the European thresholds and 10% of the initial contract amount for public service and supply contracts or 15% for public works contracts.

The market price is either farm, or revisable.

A firm price is a fixed price throughout the duration of the contract. The price fixed in the tender submitted by the candidate will be that paid. It can be updated under certain conditions.

A revisable price is a price that can be adjusted to take account of economic changes during the performance of the contract.

Firm price update

A firm price can be updated.

The update allows the initial price set in the offer to change to take account of economic changes between the fixing of that price and the commencement of implementation the amenities. It therefore transforms the initial firm price into a new updated firm price.

An update clause is needed. It involves resetting the price set in the market if a period of more than three months elapsed between the date on which the applicant fixed his price in the tender and the date on which performance of the services commenced.

She's obligatory for some types of contracts and optional for others.

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Standard supply contracts and services

This contract concerns services for which the buyer does not impose specific technical specifications.

In this case, the refresh clause is optional. The buyer decides whether or not to update before the launch of the consultation.

Other markets

For works contracts, supply contracts and service contracts other than ordinary contracts, the update clause shall be obligatory.

This obligation exists even if the buyer thinks he should not use it.

FYI  

Refresh can only be performedonce only for a contract in question if the date on which performance commences is three months longer than the date on which the price is fixed by the tenderer.

For a works contract, the update clause is mandatory. If no update is foreseen, Article 9.4.3 of the CCAG works provides for the following formula:

Discounted price = initial price x (indices or index at the start date of performance of the services - 3 months) / (indices or index of the date of fixing the price in the offer)

Revisable Price Change

A contract must obligatory be concluded at a revisable price where the buyer and the candidate are exposed to major risks as a result of the reasonably foreseeable development of economic conditions during the performance of the contract. This is the case, for example, with contracts for the purchase of agricultural and food raw materials or for the purchase of energy (certain gas and electricity supply contracts).

Where the price is revisable, the terms of the contract shall lay down the following:

  • Date of establishment of initial price
  • Arrangements for calculating the revision
  • Periodicity of implementation

The price review clause must be included in the specific contract clauses (CCAPs).

Please note

The update compensates for a lag between the date of price fixing and the start of execution, while the revision of prices compensates for economic price changes throughout the execution of the contract.

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Service and supply contracts

The calculation of the revisable price shall be determined in one of the following three ways:

  • Based on a benchmark (index, index, contract holder scale or price list) price mercurial) from which the price of the service or supplies is adjusted
  • By means of a formula representative of the development of the cost of the service
  • Combining the 2

In contracts with a duration of performance of more than three months which require the use of a significant proportion of supplies, in particular of raw materials affected by fluctuations in world prices, the revision clause shall include at least a reference to the official indices for fixing those prices.

FYI  

Public contracts for the purchase of agricultural and food raw materials must be concluded at revisable prices.

Works contracts

The general administrative terms and conditions for public works contracts (CCAG-Works) provides that prices shall be deemed to be firm, except in cases where the regulation provides for revisable prices or where the particular contract documents provide for such prices and include a price revision formula.

The calculation of a revisable price is determined in one of the following three ways:

  • On the basis of a reference (index, index, contract holder scale or mercurial price list) from which the price of the service or supplies is adjusted
  • By means of a formula representative of the development of the cost of the service
  • Combining the 2

The updating shall be carried out by applying coefficients established on the basis of reference indexes fixed by the particular contract documents.

If these coefficients have not been fixed, the following shall be updated:

  • Based on index BTP01 for work mainly concerning the building
  • Based on index TP 01 for works mainly concerning public works.

The index is published for a given month (value date) with a lag of 3 months (publication date): the index for the month of December is published at the end of March for example.

The value initial of the index or indexes to be taken into account is the date of submission of the tender by the holder.

The value final the references used for the application of this clause must be assessed at the latest at the date of performance of the services concerned as provided for in the particular contract documents, or at the date of their actual performance if earlier (CCAG-Works, Art. 9.4(4).

When the work is allotted, the buyer must take into account the execution schedule set for the intervention of each of the trades.

FYI  

Where the award procedure has given rise to negotiation or competitive dialog, the date to be taken into account shall be the date of submission of the final tender by the supplier.

In the event of a delay in the performance of services, the company may have to pay penalties to the public purchaser. The public buyer also has the possibility to terminate the contract early (termination) in case of fault or non-compliance with the obligations laid down in the contract.

Financial penalty (penalties)

Penalties are lump sums payable by one of the parties when an obligation is not met. In practice, they are paid by the contract holder to the public purchaser. They shall be provided for in the initial contract or by subsequent act, but this shall not be compulsory.

Such penalties penalize delays in the performance of services, but they may be provided for to penalize other obligations to which the administration attaches particular importance, such as the communication of a subcontract.

Where penalties are provided for, the mere finding of non-performance of the contract is sufficient to trigger the full payment of the penalty due. The contract holder cannot escape the payment of a penalty by demonstrating that the buyer has not suffered any damage. In practice, they are deducted from payments of invoices or down payments.

The General Administrative Clauses (GAC) organize the system of penalties. However, public purchasers may decide not to take the GACs into account and to include a specific provision in the contract.

Example :

Article 19 of the CCAG works organizes penalties for work. It provides for the implementation by the buyer of an adversarial (dialog) procedure when the buyer intends to apply penalties for delay.

Termination of contract

The public purchaser can terminate the contract early: it is called “termination”.

The circumstances in which the buyer may terminate the contract and the procedure to be followed are specified in the General Administrative Clauses (GAC).

In the absence of a clause to that effect, a fault of sufficient gravity is necessary to justify the termination of the contract at the fault of the supplier. There are 2 types of termination for serious misconduct:

  • Simple termination where the public purchaser bears the consequences of the termination. Services performed before termination are paid but the holder is not entitled to compensation.
  • Termination of the costs and risks in the event of the holder company's failure to comply with one of its obligations. The buyer will be able to find a replacement to perform the contract and enter into a replacement contract. It shall have the possibility of asking the supplier to bear the additional costs associated with this new contract.

Where the holder is definitively convicted for certain infringements in the course of the contract, he must inform the purchaser of this change of situation.

These include drug trafficking, fraud, breach of trust, money laundering, tax evasion, concealed work, etc.

The holder is then excluded from public procurement and the public purchaser may then terminate the contract on that ground.

FYI  

The buyer may not terminate the contract on the ground that the contract holder has been the subject of a judicial redress procedure.

What is Security Deduction?

The retention money guarantee provides protection to the public purchaser.

This guarantee allows it to to withhold amounts from payments made to the holder when making reservations:

  • either to the reception of the services of the market
  • or during the ‘ guarantee period ”. This period must be provided for in the public contract. It allows the buyer to express reservations about defects that were not apparent or whose consequences were not identifiable at the time of receipt.

All general administrative clauses CCAG provide for a guarantee period. For works contracts, this is a one-year guarantee of perfect completion. For routine supply and service contracts, the CCAG provides a guarantee for the restoration or replacement of defective services for a minimum period of one year.

Deduction of security is a means of requiring the holder to fulfill all his obligations and to repair the defects which have been the subject of reservations.

The buyer is free to provide or not to provide for a retention money guarantee in the financial clauses of the contract. It is not compulsory but is very common in public works contracts.

FYI  

The contract holder shall have the possibility, throughout the duration of the contract, of replacing the retention money guarantee by a first demand guarantee or, if the buyer does not object, by joint and several guarantee and personal.

What is the amount of the retention money?

Withholding amount cannot be greater than 5% of the original amount of the contract.

In the case of public contracts concluded with an SME, the maximum amount of the retention money is 3%. An SME is defined as a company employing less than 250 employees and having an annual turnover of less than €50 million, or a balance sheet total of less than €43 million.

The initial amount of the contract shall be the amount indicated in the undertaking. It may be increased in the case of modifications in progress.

These rates are ceilings: the contract can freely set a lower retention rate.

Deduction of security shall be charged in fractions on each payment due to the public contract holder by the purchaser. These payments may be:

  • Deposits
  • Final Partial Settlements
  • Balance

FYI  

The retention money guarantee does not apply to the subcontractor, only to the public contract holder.

How is the retention money refunded?

The guarantee shall be refunded in a 30-day period from the date of expiry of the guarantee period.

If the reservations notified to the company holding the contract have not been withdrawn before the expiry of that guarantee period, the deduction shall be refunded within 30 days after these reservations have been lifted.

As long as the reserves are not withdrawn, the retention money guarantee is not returned.

Who can help me?

The public service accompanying companies

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