Can You Amend A Contract After Selection Of The Final Bidder?

Author:Mr Michael O'Connor
Profession:Matheson Ormsby Prentice
 
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Originally Published March 2009

Michael O'Connor and Nicola Dunleavy of Matheson Ormsby

Prentice look at the impact of the turbulent credit markets on the

delivery of Public Private Partnership (PPP) projects and explain

that in the negotiated and competitive dialogue procedures,

amendments to the contracts with the final bidders are allowed,

provided certain criteria are met and provided that the competition

is set up correctly.

The current turbulence in the credit markets has raised many

questions about the future of public private partnerships as an

instrument for delivering public infrastructure. In the short to

medium term it is hoped that public authorities will start to

incorporate a degree of flexibility into procurements to enable

projects to react to the ongoing market disruption during the

procurement phases without the need to restart the procurement

process. This approach will not however address the challenges

faced by projects currently in procurement and which are struggling

to reach financial close. The answer for these projects lies in the

decided case law.

THE TRADITIONAL APPROACH

Public authorities believe that they have narrow rights to

change the contract after bids are in, even in the negotiated

procedure but particularly under competitive dialogue. On its face,

this belief is in line with the European Commission's views in

its Explanatory Note1 (which is not legally binding)

that once the preferred bidder has been identified, the

"room for manoeuvre... is fairly limited" and

the clarification process with the preferred bidder "does

not entail any negotiations solely with this economic operator

– amendments aimed at authorising such negotiations were

proposed and rejected by the Community legislative process. It

relates to something much more limited, specifically

'clarification' or 'confirmation' of undertakings

already appearing in the final tender itself".

THE REALITY OF CHANGE

The reality is that the procurement of a complex project can

take many months if not years. Many things change during that time.

The current credit crisis is a prime example.

In the recent past there was the impact of 9/11 on the insurance

markets. Changes can flow from planning permissions granted after a

final bidder is selected or from financial due diligence. The cost

and time involved in the financial due diligence means that lenders

do not usually engage until a final bidder is selected. Amendments

to the contract become essential to...

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