The outbreak of COVID-19 and the measures to limit the outbreak also affect public procurements. In this blog (update) we therefore discuss the current aspects of the most frequently asked procurement law questions and aspects that now arise – a few months after the outbreak of COVID-19 – in light of the COVID-19 crisis.
Have all procurement procedures been put on hold?
With a few exceptions, procurement procedures are still ongoing. This has been confirmed by public authorities such as the Department of Public Works and Water Management [Rijkswaterstaat] and the Central Government Real Estate Agency [Rijksvastgoedbedrijf]. In this context, the national government and the construction and engineering sectors have also agreed, for example, that they will continue to invest jointly to meet the construction and sustainability challenges for the future. They have also made arrangements to prevent the construction industry coming to a standstill. The Dutch Government recently announced (20 May 2020) that it is putting short-term measures in place so as to enable construction to continue during the crisis. This includes an investment incentive. In addition, investment must continue and, where possible, be accelerated (i.e. brought forward).
Can deadlines be extended?
Yes. The 2012 Public Procurement Act [Aanbestedingswet 2012] (“Aw”) provides the possibility for extending deadlines because it often prescribes minimum periods. This also applies to the “Alcatel period” (i.e. the standstill period after announcement of an award decision), as is made clear in Section 2.127 Aw:
“A contracting authority shall observe a standstill period before concluding the contract envisaged in the award decision. …
3. The standstill period within the meaning of the first subsection shall be at least 20 calendar days.”
The extension of minimum statutory deadlines also follows from Section 1.10 Aw and Rule 3.6 of the Proportionality Guide (Proportionaliteitsgids). The deadlines in procurement procedures must, after all, be proportionate. When the COVID-19 outbreak began, PIANOo called on contracting authorities to extend any deadlines that had been set. According to reports from PIANOo, many authorities have in fact complied with that requirement.
Can deadlines also (even now) be brought forward?
Yes. If a contracting authority now urgently needs certain supplies (again) for a reason not attributable toit and it is not possible to adhere to the normal deadlines under procurement law, then this is an “urgent situation”, for which an accelerated procedure (pursuant to Section 2.74 Aw) can be applied. The European Commission refers to this as the primary option in its Guidance from the European Commission on using the public procurement framework in the emergency situation related to the COVID-19 crisis. In highly exceptional cases, it is even possible to refrain from putting the contract out to tender (see below). The contracting authority must properly substantiate the urgent need for using the accelerated procedure. This will now become increasingly difficult given that society has already been familiar with the pandemic for some time. The accelerated procedure means that deadlines for submitting tenders and requesting to participate can be brought forward, resulting in a reduction in the overall time taken to complete the procurement procedure.
Does the COVID-19 crisis mean the contracting authority is allowed to refrain from putting the contract out to tender?
In the short term, an accelerated procurement procedure will not always offer a solution, especially when there is an imperative and urgent need to purchase supplies, services or even works. That was the case, for example, regarding the purchase of protective equipment, ventilators, and laboratory supplies (including test kits). There was understandably such an urgent need for these that no deadlines for submitting tenders – even with the accelerated procedure – could be complied with because they simply took too long. In that case, the contracting authority may apply the negotiation procedure without prior publication of a notice (i.e. it can refrain from putting the contract out to tender). The Public Procurement Act (Section 2.32(1)(c) Aw) only permits the application of this procedure in cases of extreme urgency, for events which could not have been foreseen by the contracting authority, and not attributable to it and if the accelerated procedure does not offer a solution either.
The European Court of Justice interprets this exception to tendering strictly. For example, the Italian authorities were not allowed to purchase fire-fighting helicopters to fight forest fires in Italy without a call for tenders being issued. The reasoning was that forest fires are a frequent occurrence throughout southern Europe in the summer, and the authorities should therefore have foreseen the need for fire-fighting equipment. However, nobody will argue that the Dutch government could have foreseen the present COVID-19 epidemic. This has also been confirmed by the EC in the aforementioned Guidance from the European Commission on using the public procurement framework in the emergency situation related to the COVID-19 crisis. The EC states in that context:
“These events and especially their specific development has to be considered unforeseeable for any contracting authority. The specific needs for hospitals, and other health institutions to provide treatment, personal protection equipment, ventilators, additional beds, and additional intensive care and hospital infrastructure, including all the technical equipment, could, certainly, not be foreseen and planned in advance, and thus constitute an unforeseeable event for the contracting authorities.”
The Commission emphasises – of course – that this option is only intended to make it is possible to meet urgent needs. It is intended to be used in order to cover the gap until more stable solutions can be found, such as framework contracts for supplies and services, awarded through procurement procedures (including accelerated procedures).
Given the time that has now elapsed and the knowledge and experience we have gained since the outbreak of COVID-19, the unforeseeability and urgency are becoming less and less self-evident. It is therefore becoming increasingly important, but also more problematic, to demonstrate extreme urgency, unforeseeability, and that circumstances are not attributable to the contracting authority itself.
Can court hearings still take place?
Since 11 May 2020, court buildings have no longer been closed completely. District courts, courts of appeal, and special tribunals are continuing to work, but are still doing so remotely as far as possible and by digital means. Hearings are increasingly taking place again with the parties to the case being physically present. To make these physical hearings possible, all court buildings – including the actual courtrooms and the waiting rooms – have been rearranged so that hearings can be held in a responsible manner and with due observance of the 1½-metre social distancing requirement.
New cases can be brought before the courts and registered as usual. The basic principle is that cases should be dealt with as far as possible while following the guidelines proposed by the National Institute for Public Health and the Environment (RIVM), the temporary arrangements made by the judicial authorities for each court district, and on the basis of the current priorities. This means that hearings will now basically take place physically or online, unless the case can be dealt with in writing. If none of this is possible, then a hearing can also take place over the phone.
The General Regulations on the Handling of Cases [Algemene regeling zaaksbehandeling Rechtspraak] make it clear that priority is still being given to the most highly urgent cases, as well as other urgent cases, over the rest of cases. For the time being, the judicial authorities are interpreting “highly urgent cases” as being those that are really extremely urgent. Other urgent cases are those for which, in the opinion of the court, the oral hearing cannot be postponed and in which no agreement can be reached regarding dealing with the case in writing. Case law shows that it is possible for procurement cases to be classified as urgent (see, for example, Rotterdam District Court 30 April 2020, ECLI:NL:RBROT:2020:4094). Depending on the available capacity of the court concerned, the remaining cases will also be dealt with if they are considered suitable.
If an oral hearing is necessary, it can physically take place again, but it can also take place using Skype or a video connection by phone (see for example Overijssel District Court 3 June 2020, ECLI:NL:RBOVE:2020:1905). How that works is explained here. For the time being, no members of the public are allowed to attend; however, live streaming will be made available if necessary.
What are the risks of not complying with the contract and what can contracting authorities do?
Full compliance with a contract that was put out to tender may be jeopardised by the COVID-19 crisis. Nevertheless, the normal rules and risks regarding such contracts remain in full force. In our opinion, contracting authorities will in any case need to assess each contract as to whether the crisis:
- (adversely) affects performance of the contract, for example because performance requires close physical contact between employees;
- leads to a situation of force majeure within the meaning of Section 6:75 of the Dutch Civil Code [Burgerlijk Wetboek] “DCC”;
- means that there are “unforeseen circumstances” within the meaning of Section 6:258 DCC, on the grounds of which the court could make changes, if so requested, to the consequences of an agreement, or dissolve part or all of it;
- should lead to the contracting authority showing flexibility.
In the event of inability to pay, invoking force majeure (Section 6:75 DCC) does not usually offer a solution. In principle, the risk of being unable to meet the payment obligation is borne by the debtor. In order to successfully invoke Section 6:258(1) DCC, there must be, inter alia, “unforeseen circumstances”. We see reason to assume that the COVID-19 crisis can basically be regarded as an “unforeseen circumstance” within the meaning of Section 6:258(1) DCC, in so far as the agreements were entered into prior to the outbreak of the virus, such circumstances were not taken into account in the agreement, and the changed circumstances are the result of the drastic government measures imposed. For a further more in-depth discussion of this, we refer to the recent article on amending contracts during the COVID-19 crisis by our colleague, Lidewij van Egteren (Wijzigen van contracten in de coronacrisis, VGFC, 2020/8, no. 3, pp. 4–11).
The Rijkswaterstaat website states in any case that in the event of construction delays due to the COVID-19 crisis, government contracting authorities will be flexible as regards contractual penalty clauses.
What practical advice do you have for tenderers and contracting authorities?
Our practical advice to tenderers and contracting authorities is to think hard about how to deal with this situation in the case of ongoing or imminent procurement procedures. Specifically, for example, we mean that consideration should be given to whether and how the contract can take explicit account of situations arising from the crisis. Developments as a result of the crisis (with or without a second wave) could perhaps be a valid reason for delay. We urge contracting authorities to make clear how they intend to deal with this, at least when putting contracts out to tender. We advise tenderers to ask questions about it if things are not yet clear (or not clear enough).
Would you like to keep up to date with our publications regarding COVID-19? Register here. We will send you a weekly update with the latest articles.