Public Procurement in the time of COVID-19
News    ·   23-03-2020
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AUTHOR: Steve Decesare; Katya Gatt

The COVID-19 outbreak (the “Outbreak”) has effects on, alongside many other legal sectors, the public procurement sector. The below seeks to highlight the most pertinent issues of interest in that respect to private and public parties alike.

Force majeure and public contracts

The consequences of the Outbreak on contractual obligations between private parties is also applicable to contracts awarded pursuant to public procurement procedures by the public administration. A defence that obligations will not be met due to the Outbreak will, therefore, depend on the terms of the contract in question and the general position under Maltese law (for more information on this, please refer to http://www.camilleripreziosi.com/en/news-resources/1/4612/the-impact-of-covid-19-on-commercial-contract).

In the case of contracts governed by the Department of Contract’s General Conditions for services, supplies and works contracts (the “GCs”), force majeure is expressly regulated. The GCs state that neither party shall be considered to be in breach of its obligations under the contract if their performance is “prevented by any event of force majeure arising after the date of notification of award or the date when the contract becomes effective, whichever is the earlier.” The definition of force majeure in the GCs includes “epidemics”, amongst other specific events, and includes a reference to other similar unforeseeable events which are beyond the parties’ control and which cannot be overcome by due diligence.

Depending on the circumstances of the case, therefore, a party to a contract governed by the GCs may invoke the force majeure clause as a defence if its obligations are impacted by the Outbreak. The GCs, nevertheless, include requirements such as issuing of notices of a force majeure event and the employment of all reasonable alternative means to perform obligations where directed to do so.

The GCs also delve into a contractor’s right to request an extension to the period of execution of a contract if its performance is delayed, or expected to be delayed, due to force majeure and regulate the consequences of continuance of the force majeure event for a long period of time, amongst others.

Since the position will vary depending on the circumstances of each case, and any special conditions which alter the position set out in the GCs, parties to public contracts are advised to seek legal advice in order to ascertain their rights and options. 

Procurement in times of emergency

An often-used criticism of the EU public procurement regime is that it does not allow for enough flexibility for speedy procurement when required. This is not exactly true in times like these.

Directive 2014/24/EU, as reflected in the Public Procurement Regulations which transpose it into national law, allows for the use of a negotiated procedure without prior publication – that is, negotiations for public procurement of services, works or supplies through direct negotiations with one or more operators of the contracting authority’s choice without the requirement that they are selected in accordance with an award procedure – in a few limited scenarios.

One of the circumstances in which this exceptional procedure is expressly permitted is “in so far as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the time limits for the open or restricted procedures or competitive procedures with negotiation cannot be complied with [and where the] circumstances invoked to justify extreme urgency [are not] attributable to the contracting authority”.

If extremely urgent procurement of services, works or supplies is required due to the Outbreak and, because of this urgency, it is strictly necessary to forgo other procurement procedures, a contracting authority may submit a request to the Director of Contracts (the “Director”) for the carrying out of a negotiated procedure without prior publication. The use of this procedure would require, of course, that even accelerated proceedings (as allowed by law in cases of urgency) be insufficient. The Director must approve the use of such procedure.

Decrees sanctioning (to varying degrees) the forgoing of usual procurement requirements have been passed in countries like Italy and Portugal to cope with the effects of the Outbreak. No amendment to the regulations set out above has so far been made for Malta.

The requirements set out at law must be strictly interpreted. Contracting authorities unsure about a justification of the use of a negotiated procedure without prior notification are advised to seek legal advice on the matter.

The Emergency Procurement Regulations also cater for emergency competitive calls with an estimated value which is less than €135,000 for the  procurement of supplies, services or work “which becomes necessary either due to an unforeseen surge in the use of supplies resulting in a month stock level, or which are otherwise necessary due to issues of national health, security or strategic importance”.

Procurement proceedings and remedies today

The introduction of Legal Notice 65 of 2020 due to the Outbreak brought about the closure of, amongst other things, the Courts of Justice of Malta and their registries with effect from 16th March 2020 until the order is lifted by the Superintendent of Public Health. The Public Contracts Review Board (the “Board”), as a board established by law in Malta, falls within the definition of ‘court’ under the Legal Notice and is therefore caught by this order.

Legal Notice 61 of 2020, to be read together with the former, has also suspended all legal and judicial times and any other time limits including peremptory periods applicable to proceedings. The initial result of all this was that any remedies applicable to bidders and interested parties under Maltese procurement law, including the filing of (i) applications for remedies before closing date of a call for competition; (ii) appeals from decisions taken after closing date of a call for competition; (iii) applications claiming ineffectiveness of a contract; and (iv) appeals from a decision to cancel a contract, were suspended until the expiry of a period of seven days from the repeal of these orders. The same applies to appeals made from decisions of the Board to the Court of Appeal.

However, subsequent to the publication of Legal Notice 61 of 2020, the Board notably posted a communication (https://mfin.gov.mt/en/The-Ministry/Departments-Directorates-Units/pcrb/Pages/Schedule-of-Public-Hearings.aspx)  invoking its right under the said Legal Notice to order the opening of its registry in the public interest. As opposed to physical filings, due to the Outbreak the procedure for filing appeals has been revised; appeals are to be filed via email to info.pcrb@gov.mt, with payments relating to appeals to be made by bank transfer according to the details set out therein.

The result of this appears to be that all applicable periods relating to the procedure before the Board will run as usual. It is not yet clear whether physical hearings will proceed.

This decision by the Board solves issues which would have otherwise arisen in the procurement field, namely the questions as to whether suspension of legal and judicial times result in any ongoing procurement procedures, or contract awards or contracts entered into as a result of completed procurement procedures the period of appeal from which did not lapse before the coming into force of these orders, also being suspended.

However, it creates another complication. Since the Court of Appeal is closed and all legal and judicial times in relation to proceedings before it have been suspended, appeals from decisions of the Board to the Court of Appeal are not possible, in the absence of a Court of Appeal order to the contrary. This means that any decision of the Board is not definitive for the duration of the suspension and could be challenged once the above-mentioned orders are lifted. This brings about a degree of uncertainty to the conclusion of any competitive procedure. One shall therefore have to wait and see whether the issue is solved through the Court of Appeal making an exception for public procurement matters.

Since ongoing procurement procedures appear to not be suspended, one might question whether an interested party might have a valid force majeure argument for not meeting any related deadlines where it is impeded from doing so as a result of the Outbreak. Additionally, one may wish to consider whether the same argument may be used as possible ground to release a party from the obligation to maintain a bid submitted for ongoing procurement procedures. The questions seem to be largely untested.

As a side note, the Contracting Authority’s General Rules Governing Tenders (V4.0) state that a contracting authority may cancel a tender procedure where “exceptional circumstances or force majeure render normal performance of the project impossible”.

This all results in an unclear situation for public procurement in Malta today. Any interested parties who are affected by this situation are encouraged to seek legal advice.

 

Camilleri Preziosi continuously assists and advises a number of private parties and public entities on public procurement. Please do not hesitate to reach out on steve.decesare@camilleripreziosi.com to discuss any of the above, or other, issues.

 

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