Home / News / Covid-19 and public contracts

Covid-19 and public contracts

Dealing with emergency

08/04/2020

In the field of public procurement, positions were quickly stated by the French public authorities in response to the health crisis related to the Covid-19 epidemic. However, there was no specific legal framework for this period of crisis. This is now the case with the Ordinance of 25 March 2020 on public procurement in the emergency situation related to the Covid-19 crisis.

Firstly, the Ordinance of 25 March 2020 applies to contracts subject to the French Public Procurement Code, i.e. essentially to public contracts (including partnership contracts) and concession contracts covered by the French Public Procurement Code, including those that are partly governed by other texts (public service delegations or development concession contracts, for example). Secondly, it also concerns public contracts that are not covered by the French Public Procurement Code, which undoubtedly include the other - rare - public procurement contracts not covered by the Code (for example, global contracts related to works carried out in relation to the 2024 Olympic and Paralympic Games).

Moreover, as the Ordinance does not introduce any distinction on this aspect, it is equally clear that it concerns all contracting authorities and contracting entities, whether governed by French public or private law. Therefore, local public companies, certain semi-public companies, semi-public companies with a single purpose and parapublic associations are concerned.

Article 1 of the Ordinance very clearly delimits its temporal scope: it applies to contracts in progress or concluded during the period from 12 March 2020 until the end  of the health state of emergency – which is for the moment two months from the publication in the French Official Journal (i.e. 24 March) of the law of 23 March 2020 containing various measures applying during the Covid-19 crisis – increased by two months, i.e. until July 24th. The provisions of the Ordinance shall only be implemented to the extent that they are necessary to deal with the consequences of the spread of the epidemic and the measures taken to limit it, i.e. in particular the decisions and texts taken by the Government relating to containment.

It should be noted that these new provisional arrangements do not fully replace the pre-existing rules which continue to apply, including the theories of force majeure and unforeseeability (imprevision theory) or, where appropriate, the contract clauses.

Public Procurement related measures

Article 2 of the Ordinance provides that, for contracts subject to the French Public Procurement Code, the time limits for the receipt of candidatures and tenders in ongoing procedures are, if necessary, extended by a sufficient period to be fixed by the contracting authority, in order to allow economic operators to submit their candidatures or tenders. This measure does not, however, apply when the services which are subject of the contract cannot suffer any delay; also, it should only be used where this is made necessary by the epidemic, which is not always the case.

It is recommended that the extension of the deadlines for the receipt of candidatures and tenders should be made by means of a published correction notice giving reasons for the extension of the deadline, possibly accompanied by an information message sent to all the economic operators concerned (those who have got the tender documents and those who have submitted a candidature or  a tender) and published by the contracting authority on its buyer’s profile.

Article 3 provides that, where the rules set forth in the tender documents pursuant to the French Public Procurement Code cannot be complied with by the contracting authority, these rules may be adjusted provided that the principle of equal treatment of candidates is observed. However, only non-substantial amendments are possible. Such a possibility may be very interesting, particularly where the physical transmission of certain documents or models was required or where an electronic signature was imposed at the tender stage (and not, as it is the principle, for the successful bidder), while certain economic operators do not or no longer have access to their electronic signature certificate. Other examples are the face-to-face negotiation meetings provided for in the tender rules, which may be replaced by videoconference meetings, the adjustment, removal or postponement of the obligation to carry out an on-site visit, the waiver of the obligation to sign the candidature or tender, or the acceptance of a scanned handwritten signature instead of an electronic signature of the contract.

In addition, of course, the other derogatory provisions of the French Public Procurement Code that may be usually applicable remain available. Thus, in order to meet their urgent needs, and only these, buyers may either apply reduced submission deadlines, as permitted by Article R.2161-8, paragraph 3, of the French Public Procurement Code, or resort to a negotiated contract without prior publication as provided for in the case of an overriding emergency by Article R.2122-1.

Contract performance measures

Extension of contracts

Article 4 of the Ordinance allows contracts that expire during its period of implementation - i.e. from 12 March 2020 and until two months after the end of the health state of emergency - to be extended by amendment beyond the duration currently provided for in the contract when a competitive tendering procedure cannot be implemented, within the limit of the duration of the period of implementation of the Ordinance plus the time required to launch a tendering procedure following its expiry.

Amendments concerning advances

In public contracts (since the text refers to "buyers"), Article 5 of the Ordinance provides for the possibility of modifying the conditions of payment advances, and even of increasing them beyond the maximum of 60% provided for in Article R.2191-8 of the French Public Procurement Code. The requirement of a guarantee on first demand above 30% is, similarly, made optional. In order to be implemented, such measures must, again, be made necessary by the epidemic. The aim is to provide companies with cash flow that would otherwise lack sorely.

Measures that can be taken in the event of difficulties in contractual performance

The following provisions shall apply, notwithstanding any contractual clause stating otherwise, apart from those which would be more favorable to the contract holder. It is therefore necessary, as always, to pay particular attention to the contractual provisions.

For public procurement contracts:

Case 1: When the contract holder cannot meet the time limit for the performance of one or more obligations of the contract or when their performance in due time would necessitate the use of means which would place a manifestly excessive burden on the contract holder, this time limit is extended by a period at least equivalent to the duration of the period of implementation of the Ordinance, at the request of the contract holder, this being specified that contracting parties may agree on a shorter or longer period.

This request must be made before the expiry of the contractual period (Article 6-1° of the Ordinance). If this is the case:

(a) The contract holder may not be sanctioned, nor have contractual penalties imposed on him, nor have its contractual liability incurred on that ground;

(b) The contracting authority may conclude a substitute contract with a third party to meet those of its requirements which cannot be delayed, notwithstanding any exclusivity clause and without the holder of the initial contract being able to incur the buyer’s contractual liability on that ground; the performance of the substitute contract may not be carried out at the expense and risk of the initial holder (Article 6-2° of the Ordinance).

Case 2: When the holder is unable to perform whole or part of a contract, in particular when it demonstrates that it does not have sufficient means or that using them would place a manifestly excessive burden on him, it may not be sanctioned either. A substitute contract may also be concluded.

Case 3: When the cancellation of the contract by the contracting authority results from measures taken by the competent administrative authorities in the context of a health state of emergency, the contract holder may receive compensation for expenses incurred when they are directly attributable to the implementation of a cancelled purchase order or a cancelled contract (Article 6-3° of the Ordinance), even if there is a contractual clause excluding such compensation. However, according to the administrative case-law and failing any contrary provision, if the termination is based on a ground of general interest - and not on a force majeure event - the contract holder will be able to benefit from additional compensation for his loss of earnings.

Case 4: When the contracting authority has to suspend a fixed price contract in progress, it shall without delay settle the contract in accordance with the terms and for the amounts provided for in the contract, derogating from the general rule under which the administration can only pay a sum after a service has been performed (Article 6-4° of the Ordinance).

For concession contracts:

  • When the contracting authority or entity is compelled to suspend the performance of a concession contract, any payment which is due to this contracting authority is suspended. Moreover, an advance on the payment of the sums due by the contracting authority or entity may be paid to the concessionaire if its situation justifies it and up to its needs (article 6-5° of the Ordinance): this concerns, of course, on the one hand, the fees due to the contracting authority or entity and, on the other hand, advances on any "price" paid by the contracting authority or entity (article L.1121-1 of the French Public Procurement Code; they are, in fact, most of the time, public subsidies).
  • When, without suspending the concession contract, the contracting authority or entity is compelled to make significant changes to the terms and conditions of performance provided for in the contract, the concessionaire is entitled to compensation for the additional costs resulting from the performance, even in part, of the service or works, if the continued performance of the concession contract requires the use of additional resources that are not provided for in the original contract and which would represent a burden that is manifestly excessive in relation to the concessionaire’s financial situation (Article 6-6° of the Ordinance). This is an adaptation of the theory of unforeseeability (Article L.6-4° of the French Public Procurement Code), without, however, all of its conditions being fulfilled, in particular the disruption of the economics of the contract.

All of these measures are designed to enable public contract holders to bear the consequences of the health crisis, without however, compromising the performance of the missions for which public authorities are responsible. The Ordinance revisits some of the classical notions of administrative law (force majeure, unforeseeable circumstances), to provide economic operators holding contracts with a more stable legal framework. Nevertheless, those general principles applicable to administrative contracts may, depending on the specific circumstances of each contract, be applied to supplement the provisions of the Ordinance. Some provisions of the Ordinance may be problematic to interpret, but one can think that the administrative judge will be constructive. The situation is exceptional enough for solutions to be adapted to the reality of the economic crisis that companies will be going through.


Report: impacts of Covid-19 (Coronavirus)

Our law firm offers you its legal assistance to address all the impacts of Covid-19 (Coronavirus) on your business. Read our dedicated report below.

coronavirus insight 800x300 anglais

For more information on our law firm:

Our law firm is a leading international business law firm. Its deep roots, unique positioning and highly recognised expertise enables it to deliver innovative, high value-added solutions in all areas of the law.

cabinet avocats cms en france

About our Law Firm in France

expertise droit public - public law 330x220

Expertise : Public law 

contact us 330x220

Contact us

Related people

Picture of Francois Tenailleau
François Tenailleau
Partner
Paris