COVID-19 and public contracts : Which difficulties private operators may encounter during the performance of public contracts?

By Raphaël Weiss, Jean-Michel Communier

04-2020

The containment measures taken by the French government in response to the COVID-19 situations severely disrupts the performance of public contracts.

In order to help companies, the French Government issued an Ordinance No. 2020-319 dated 25 March 2020 (hereafter the "Ordinance") to facilitate the performance of public contracts and concessions during the COVID-19 situation.

The Ordinance applies to public procurement contract, to concessions and to other public contracts, which are in effect on 12 March 2020 and will be signed up to two months after the end of the COVID-19 state of health emergency (Art. 1 of the Ordinance). We provide you with practical answers to the questions that could be raised by companies, which holds a public contract or a concession.

1. Is it possible to extend the term of a public contract?

YES, but under certain conditions. The public contract shall expire during the period of health emergency covered by the Ordinance. This extension shall only be validated by an amendment to the initial public contract, in case a new Tender procedure competitive procedure cannot be launched by the public purchaser before the contract’s term.

The term extension may not exceed the health emergency period increased by two months and the time necessary for signing a new contract (Art. 4 of the Ordinance). The final duration of the extended contracts could then be longer than the maximum duration for some contracts provided for in the Public procurement code.

2. May a private operator request financial help measures from the public purchaser?

YES, a public purchaser may grant by contractual amendment an advance payment to the private operator, which may exceed 60% of the procurement contract amount. The public purchaser may not request from the private operator to provide a first demand guarantee for advance payment, which exceeds 30% of the procurement contract amount (Article 5 of the Ordinance).

Finally, in case the public purchaser cancels a purchase order or terminates a procurement contract during the health emergency situation, the private operator shall be compensated for its directly incurred costs (Article 6 3° of the Ordinance).

3. May an economic operator request from the public purchaser to extend the duration of a public contract?

YES, in case a private operator does not comply with the performance deadline, it may request a time extension for the contract equal to the health emergency time period. However, it shall submit its request to the public purchaser before the contract’s term (Article 6 1° of the Ordinance).

In practice, the containment measures decided by the French government would probably compel certain public purchasers to extend the duration of contracts, in order for example to achieve the works to within new. Such time extension shall be anticipated and provided for in contractual amendment.

4. Is a public purchaser entitled to sanction a private operator, which is unable to perform a public contract?

NO, a public purchaser may not sanction its contracting party, if it may not perform the contract due to the COVID-19 situation (he may not impose penalties or claim for compensation).

However in case of non-performance, the public purchaser could sign another public contract to perform the services before the end of the health emergency. Its previous contracting party may not engage the public purchaser liability on this ground (Art. 6 2° of the Ordinance).

In practice, the private operator shall demonstrate that the performance of the services is no longer possible (e.g. no teleworking possible).

5. Does the COVID-19 pandemic impact the delays of payment of public purchasers?

NO, the private operator shall be paid from the amount within the legal delays, even if the contract has been suspended due to the health emergency (Article 6 4° of the Ordinance). In the event of late payment of the public purchaser, the contracting party may also claim additional default interests.

6. What about the performance and suspension of concession contracts? 

If the Concédant decides to suspend the performance of a concession, the Concessionnaire may suspend the payment of any amounts owed to the Concédant, if such mechanism is provided in the contract.

During the health emergency period, the Concessionnaire may (i) benefit from an advance payment (e.g. an investment subsidy) and (ii) request to suspend its payment to the Concédant (e.g. rents, public property fee, and other fees) (Article 6 5° of the Ordinance).

In case the performance of the concession is not suspended during the health emergency period, the Concessionnaire may be compensated for any related incurred additional costs. The Concessionnaire shall prove that these incurred costs leads to important unbearable extra costs.