COVID-19: Public procurement contracts in France

Faced with the health crisis currently affecting the country, the French Government published an Order (n° 2020-319) to adapt the award and certain rules for the performance of public contracts. Here is a summary of the Government's contributions.

Contracts subject to the Public Procurement Code and public contracts that do not fall under it (a priori, agreements for the occupation of the public domain are therefore also covered), in progress or concluded during the period from 12 March 2020 until the end of the state of health emergency increased by two (2) months.

The measures provided for in the Order are applicable only "insofar as they are necessary to deal with the consequences, in the conclusion and performance of these contracts, of the spread of the COVID-19 epidemic and the measures taken to limit this spread". A case-by-case assessment will therefore have to be made in order to determine the applicability of any particular adaptation measure provided for in this Order.

About the adaptation of the rules concerning the public tender processes:

• Postponement of deadlines to submit applications/offers- Only for contracts subject to the Public Procurement Code: The time limits for the submission of applications and tenders in ongoing procedures may be extended by a sufficient period, fixed by the contracting authority, to allow economic operators to submit their applications or tenders, except where the services covered by the contract cannot be delayed.
• Adjustment of the tendering procedures - In the same spirit (and for the same contracts), if the competitive tendering procedures laid down in the consultation documents cannot be complied with by the contracting authority (it is understood that the contracting authority is the purchaser within the meaning of the Public Procurement Code), the order provides that the contracting authority may adjust them during the procedure in accordance with the principle of equal treatment of candidates. This measure is defined in a very general way and pre-contractual disputes can be anticipated from now on, particularly with regard to compliance with the principle of equal treatment of candidates (and the other fundamental principles of public procurement: freedom of access and transparency of procedures).

About the adaptation of the rules for the performance of public contracts:

• The Government announced in early March 2020 that the COVID-19 outbreak would be treated as a case of force majeure for public contracts awarded by the State and that, as a result, for all public contracts awarded by the State, penalties for delays would not be applied.

• To be noted: The Conseil d'Etat admits that a case of force majeure allows the holder of an administrative contract to suspend its execution (CE, sect., 8 Oct. 2014, No. 370644). However, this does not dispense with examining on a case-by-case basis whether the conditions of force majeure are actually met. The “unforeseeability” theory or the theory of the "fait du prince" could also have been contemplated and would have led to the administration compensating its co-contractors for the extra-contractual charges they had to bear in order to cope with the difficulties created by the COVID-19 epidemic.

The Order confirms and specifies, among other things, that :

• The parties may extend, by means of an amendment, the duration of contracts expiring during the abovementioned period (12 March - end of the state of health emergency + 2 months) when the organisation of a competitive tendering procedure cannot be implemented, without this extended duration being able to exceed the end of the said period, increased by a the time required to re-open the competition after its expiration.

To be noted: In the case of framework agreements, this extension of duration may exceed the maximum duration provided for in the Public Procurement Code (four (4) years for the contracts outside the field of defence or security, seven (7) years for defence or security contracts).

In addition, this provision of the Order seems to refer to the extension of contracts already expired during the relevant period, where under normal circumstances, it is not allowed to extend by amendment a contract already expired.

This measure will therefore mainly be of interest to public contract holders, but will be of little interest to concessionaires, even though the duration of their contract (sometimes long) is determined by the investments they have to make and considering the increased risk of exploitation during the period of the COVID-19 epidemic may not allow them to amortise these investments with a return on the capital invested.

Extension of deadlines for performance - Where the holder cannot meet the deadline for performance of one or more obligations under the contract or where such performance would require means representing a manifestly excessive burden on the holder, the contractual time limits shall be extended at the request of the holder by a period at least equivalent to that of the above mentioned period (12 March - end of the state of health emergency + 2 months), provided that the holder has so requested before the expiry of the contractual time limit concerned.

Non-application of late penalties and no contractual liability of the holder in case of proven impossibility to execute a contract (or an order form). The purchaser may enter into substitute contracts for requirements that "cannot be delayed" and "without the holder of the original contract being able to engage the contractual liability of the purchaser on this ground". Any such substitute contract will not be executed at the cost and risk of the holder.

One could observe that, even under normal circumstances, where a holder is indeed facing an impossibility to perform the contract for reasons not attributable to a contractual fault, no penalties should be applied and the reference documents (CCAG) allow for extension of contractual deadlines in such cases. The relevance of this provision of the Order could therefore be questioned.

If a contract (or purchase order) is terminated as a result of the measures taken during the state of health emergency, the holder is only compensated for the expenses incurred, thus apparently excluding any losses incurred as a result of the event.

To be noted: If this provision were to be ratified as it stands by Parliament, it would result in a major amendment of the general principle of full compensation for the loss suffered in the event of termination for reasons of general interest or in application of the theory of the "fait du prince".

In the event of suspension of the performance of a concession, the payment of any fee due by the concessionaire to the contracting authority would be suspended. If the economic situation of the concessionaire justifies it and "to the extent of its needs, an advance on the payment of the sums due by the licensor may be paid to it".

To be noted: The notion of "suspension" of the execution of a concession and the possible impact of such a measure on the concession's duration should be clarified.

Unilateral modification of concessions – A contracting authority would be authorized to "significantly modify the terms and conditions for the execution of a concession", subject to paying the concessionaire "an indemnity intended to compensate for the additional cost resulting from the execution, even partial, of the service or works, where the continued execution of the concession requires the use of additional means not provided for in the initial contract and which would represent a burden that is manifestly excessive in relation to the financial situation of the holder".

The absence of full compensation for the consequences of this change (only an "additional cost" is compensated) leaves one in doubt. Moreover, the reference to the financial situation of the concessionaire is hard to understand in a situation of epidemic and unilateral modifications of its contract over which the holder has, by definition, no control.

The new provisions concerning the execution of public contracts apply "notwithstanding any stipulation to the contrary, with the exception of stipulations which would be more favourable to the holder of the contract". The Conseil d'Etat had in fact considered that: "the general interest in preventing business failure caused by the current health crisis is likely to justify an infringement of current contracts".

Our sources:
Legifrance
Ministère De L'économie Et Des Finances
Ministère De L'économie Et Des Finances

See our coronavirus (COVID-19) feature for more information generally on the possible legal implications of COVID-19.