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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 [email protected], 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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
