Home | Pressetext case set to be landmark
Pressetext case set to be landmark
12 November 2008
When do changes to an existing public contract amount to the award of a new contract under EU procurement rules?
The Pressetext case will probably come to be viewed as a major, oft-referred to landmark, and its real importance lies in answering the question above.
Pressetext concerned the supply of press agency services by the Austrian Press Agency (APA) to the Austrian Government, including the issue of press releases and a text service known as OTS.
The original contract was dated some time prior to 1994, but was followed by Supplemental Agreements in 2001and 2005, plus the transfer, during 2000, of the OTS part of the overall arrangement to a wholly-owned and controlled subsidiary of APA.
Pressetext was an APA rival, and offered its news agency services to the Austrian Government, but was repeatedly rejected. It sued, and sought a declaration from the Austrian Federal Procurement Office that:
"...the re-structuring of APA in 2000 and the two Supplemental Agreements signed in 2001 and 2005 each gave rise to unlawful de facto awards of new contracts which ought to have been put out to tender."
The Procurement Office referred certain questions to the ECJ for a preliminary ruling. On the facts as set out in the Pressetext judgment the ECJ decided that what had happened did not give rise to a new contract award.
The overall question of when amendments to an existing agreement are to be regarded as constituting a new award of a public contract has not come before the ECJ before. This is odd, since parties to an ongoing contract from time to time want to adapt its terms to reflect changed circumstances and the passage of time, particularly where that contract is complex and runs for many years.
In its judgment, the ECJ stated the following key principle:
"In order to ensure transparency of procedures and equal treatment of tenderers, amendments to provisions of a public contract during the currency of the contract constitute a new award of a contract ... when they are materially different in character from the original contract and, therefore, are such as to demonstrate the intention of the parties to renegotiate the essential terms of that contract."
The Court added that for this purpose an amendment to a public contract may be regarded as ‘material’ when:
- it introduces conditions which, had they been part of the initial award procedure, would have allowed for the admission of tenderers other than those initially admitted, or would have allowed for the acceptance of a tender other than the one initially accepted
- it extends the scope of the contract considerably to encompass services not initially covered
- it changes the economic balance of the contract in favour of the contractor in a manner which was not provided for in the terms of the initial contract
Lesson
This largely reflects UK practice, which has developed over the years following the Banaco Builders case in the mid-1990's. But this is an important issue. Changes to an existing contract need to be treated carefully.
It is a good idea to anticipate the need for changes by including change control mechanisms based on objective criteria, removing the need for renegotiation.
However, where the effect falls within one of the three bullet points set out above, Pressetext suggests that you now need to pause and think before committing yourself to a course of action. Does what is proposed demonstrate an intention to renegotiate the essential terms of the contract?
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