Public procurement contracts in the context of the Covid-19 crisis in France

France

This article has been updated following the publication of Ordinance No 2020-560 of 13 May 2020, which specifies the temporal scope of application of the exceptional measures provided for by Ordinance No. 2020-319 of 25 March 2020 in view of the extension of the state of public health emergency by Law No. 2020-546 of 11 May 2020 [the updates appear in bold in the text of the article].

Has specific legislative or regulatory provisions been adopted by the Government in the context of Covid-19?

Yet, it has: emergency Law No. 2020-290 of 23 March 2020 to deal with the covid-19 epidemic declared a state of public health emergency for a period of two months from its entry into force, i.e. until 23 May 2020 included. Law No. 2020-546 of 11 May 2020 has extended this state of public health emergency until 10 July 2020 included.

Law No. 2020-290 of 23 March 2020 has also authorized the Government to issue a series of ordinances to adapt the existing legislation to the Covid-19 crisis.

Among these ordinances, one is related specifically to the award and performance of public procurement contracts: Ordinance No. 2020-319 of 25 March 2020 to adapt the rules of public procurement contracts (hereinafter referred to as the “Ordinance of 25 March 2020” or the “Ordinance”), amended by Ordinance No. 2020-460 of 22 April 2020 and Ordinance No. 2020-560 of 13 may 2020.

Article 1 of the Ordinance very clearly delimits its temporal scope: it applies to contracts in force or concluded during the period from 12 March 2020 - and is therefore retroactive - up to 23 July 2020 included, i.e. the date of the end of the initial duration of the state of public health emergency, set by Article 4 of the above-mentioned Law of 23 March 2020 to two months from its publication, on 24 March, in the Official Journal of the French Republic, increased by two months.

The choice was thus made in Ordinance No. 2020-560 of 13 May 2020 not to impact the temporal scope of application of the provisions resulting from Ordinance No. 2020-319 of 25 March 2020 by the extension of the state of public health emergency up to 10 July 2020 included (by Law No. 2020-546 of 11 May 2020). The report to the President of the French Republic on Ordinance No. 2020-560 justifies this choice by stating that given the prospects of economic recovery, measures relating to extensions of deadlines, contractual penalties and the suspension or extension of contracts are no longer justified beyond this date. By way of exception, only the possibility of increasing the amount of advances beyond the limits set by the French Public Procurement Code, provided for in Article 5 of the Ordinance, may be implemented until two months after the end of the state of public health emergency extended by Law No. 2020-546 of 11 May 2020 up to 10 July 2020 included, i.e. up to 10 September 2020 included.

In addition, the Legal Affairs Division of the French Ministries of Economy and Finance has issued guidelines and Q&As regarding the award and performance of public procurement contracts during the state of public health emergency period following the initial version of the Ordinance of 25 March 2020. The provisions of the Ordinance dated 22 April 2020 relating to public contracts have also given rise to a short – but interesting – presentation from the Legal Affairs Division of the French Ministries of Economy and Finance..

 

Are public procurement procedures automatically suspended due to the Corona pandemic?

The Ordinance of 25 March 2020 does not lay down any principle of automatic suspension of public procurement procedures. The Legal Affairs Division only considers abandoning a pending procedure when the tender rules cannot be adapted at all to the circumstances relating to Covid-19.

That being said, the Ordinance provides that the time limits for the receipt of candidatures and tenders in ongoing procedures are to be extended by a sufficient period, fixed by the contracting authority, to allow economic operators to submit candidatures and tenders. However, this extension may be excluded where the services covered by the contract cannot be delayed.

Does the current situation allow for extended use of simplified procurement procedures (direct award or negotiated procedure without notification)?

The Ordinance of 25 March 2020 has not extended the possibilities to directly award contracts or to resort to the negotiated procedure without prior publication.

However, these award procedures may be resorted to if the usual conditions – reminded by the European Commission in the guidance it published on 1 April 2020 on using the public procurement framework in the emergency situation related to the Covid-19 crisis – to this end are fulfilled.

Direct award to a preselected economic operator may in particular be used provided that the latter is the only one able to deliver the required supplies within the technical and time constraints imposed by the extreme urgency.

Negotiated procedure without prior publication may be used under restrictive conditions set forth by article R.2122-1 of the same code, which implies notably that it be limited to the purchase of services, supplies or public works that are strictly necessary to deal with the emergency situation, such as personal protective equipment and medical equipment (e.g., masks, protective gloves, ventilators…), hospital and IT infrastructure needed to deal urgently with the crisis situation.

Does the current situation allow for special measures during a procurement procedure (shortening of deadlines)?

According to the French Public Procurement Code, contracting authorities may apply reduced submission deadlines in case of duly justified urgency that makes it impossible to meet the minimum time limit set for the relevant open or restricted public procurement procedure under normal circumstances.

This option may be used when these conditions are met, which needs to be examined on a case-by-case basis. In the current situation, as the immediate needs of hospitals and health institutions have to be met with great speed, it is likely that these conditions will be met in the current context in a number of cases as short-term needs arise alongside with the increase in the infection curve.

Is it possible to use electronic means for presentations or rounds of negotiations?

The Ordinance allows purchasers to adapt the tendering rules of ongoing procedures to the current circumstances related to the Covid-19 epidemic.

In particular, due to the containment measures ordered by the French Government, the Legal Affairs Division of the Ministries of Economy and Finance has confirmed that face-to-face negotiation meetings could be replaced with video conference meetings.

However, it is up to the contracting authorities and entities to ensure beforehand that the new arrangements put in place are not likely to affect the equal treatment of candidates. Therefore, all candidates must be informed, and the buyer must ensure that they all have the opportunity to continue the procedure under the new arrangements.

Are the deadlines for remedies automatically suspended?

The Ordinance itself does not provide for any automatic suspension of deadlines for remedies.

However, two other ordinances, respectively No. 2020-305 of 25 March 2020 adapting rules applicable before French administrative courts and No. 2020-306 of 25 March 2020 relating to the extension of deadlines that expired during the period of health emergency and to the adaptation of procedures during the same period, contain provisions on appeals to be filed before French courts. These Ordinances were respectively amended by Ordinance No. 2020-558 of 13 May 2020 amending Ordinance No. 2020-305 of 25 March 2020 adapting rules applicable before French administrative courts and Ordinance No. 2020-560 of 13 May 2020 laying down the time limits for various procedures during the period of a health emergency.

In particular, a moratorium is declared regarding appeals prescribed by law or regulations whose deadline is to expire between 12 March 2020 and 23 June 2020 included; it gives rise to an extension of deadlines up to two months as of 24 June 2020.

For some reasons – notably as deadlines may not be regarded per se as “prescribed by law or regulations” –, it is in our view not clear whether this moratorium on deadlines may apply to interlocutory procedures before and after the execution of a public contract (référé précontractuel and référé contractuel) or the “Tarn-et-Garonne” action opened by a decision from the French Conseil d’Etat (French highest administrative court) concerning contracts of a public nature only (CE, Ass., 4 April 2014, Département de Tarn-et-Garonne, n° 358994).

Does the specific legislation contain provisions on the modification of existing contracts during the health crisis?

In the first place, the Legal Affairs Division of the Ministry of Economy points out that changes to public procurement contracts in progress may be envisaged if they fall within one of the hypotheses usually provided for in the French public procurement code. In particular, the health crisis due to the Covid-19 outbreak may constitute an unforeseen circumstance justifying, under certain limits, the modification of the contract to include additional works, supplies or services.

In addition, the Ordinance of 25 March 2020 provides for the possibility of modifying the conditions of payment advances in public procurement contracts, and even of increasing them beyond the maximum of 60% provided for in the French Public Procurement Code. The requirement of a guarantee on first demand above 30% is, similarly, made optional. In order to be implemented, such measures must be made necessary by the epidemic. The aim is to provide companies with cash flow that would otherwise lack sorely. Contrary to the other provisions of the Ordinance, those of Article 5 are applicable until the end of the extended state of public health emergency, plus two months, i.e. until 10 September 2020 included.

Also, the Ordinance allows contracts that expire during its period of implementation to be extended under specific conditions (please see question 8 below).

Is the prolongation of the duration of contracts due to expire during the health crisis provided for by this specific legislation?

The Ordinance of 25 March 2020 provides that contracts expiring during its period of implementation (i.e., from 12 March 2020 until 23 July 2020 included, subject to an extension of the health state of emergency) may be extended by means of an amendment beyond the period provided for in the contract when a new procurement procedure cannot be implemented, within the limit of the duration of the period of implementation of the Ordinance plus the time required to launch a tendering procedure following its expiry. This extension must, however, be made necessary by the Covid-19 outbreak, which may not always be the case.

9. The Legal Affairs Division of the Ministries of Economy and Finance has also reminded that the prolongation of the duration remains subject to the conditions set our in articles R.2194-1 and seq. of the French Public Procurement Code, which are aimed, in particular, at limiting the increase in the initial amount of the contract. In this legislation and/or in the existing case law, is there any provision or general principle allowing the private operator to preserve an economic equilibrium under the public procurement contract in the context of Covid-19?

Since 1916, French administrative case law has recognized the application of the theory of unforeseeability (imprévision) in public contracts (essentially concession contracts as they have a long duration). According to this theory, when an unforeseeable situation arises which is external to the party invoking it and which temporarily upsets the economy of the contract, that party is entitled to compensation. This right is now recognized in article L.6 of the French Public Procurement Code, which provides that "When an event that is external to the parties, unforeseeable and temporarily upsetting the balance of the contract occurs, the contracting party, who continues to perform the contract, is entitled to compensation".

In the specific context related to the Covid-19 crisis, the Ordinance of 25 March 2020 has introduced more flexible conditions of implementation than those set up by case law under the theory of unforeseeability for concession contracts. It provides that when, without suspending the concession contract, the contracting authority is compelled to significantly modify the performance conditions provided for in the contract, the concessionaire is entitled to compensation for the additional cost resulting from the performance, even partial, of the service or works, when the continued performance of the concession requires the use of additional means not provided for in the original contract and which would represent a manifestly excessive burden in view of the concessionaire’s financial situation. Thus, the concessionaire could be compensated without having to demonstrate any disruption in the economics of the contract, but only the existence of a manifestly excessive burden.

Will delays or failures to perform a public procurement contract in the context of Covid-19 lead to sanctions imposed on economic operators?

In the event that the holder of a contract can demonstrate that he is prevented from performing this contract by a force majeure event, then they will be exempted from any sanctions, including penalties or early termination of its contract. Nevertheless, this requires demonstrating, on a case-by-case basis, either that the conditions set forth by the relevant clauses of the public contract on this subject are fulfilled, or – failing a specific clause in the contract – that three conditions are met: the event must be unforeseeable, external to the parties, and its consequences must be irresistible, i.e. it must be absolutely impossible for the holder of the contract to pursue their obligations.

However, should the situation not be regarded as a force majeure event, the Ordinance of 25 March 2020 contains specific provisions related to the context cause by the Covid-19 crisis. Indeed, it provides that when the contract holder is unable to comply with the time limit for performance of one or more obligations under the contract or where such performance in due time would require to mobilize means which would impose a manifestly excessive burden on the contract holder, this time limit shall be extended by a period at least equivalent to the period of application of the Ordinance, at the request of the holder before the expiry of the contractual time limit.

In addition, the contract holder may not be sanctioned, nor have contractual penalties imposed on him, nor have its contractual liability incurred on that ground.

Does the specific legislation contain any particular provisions in relation to concession contracts?

The Ordinance of 25 March 2020 provides for two types of measures relating to concession contracts, depending on whether or not the execution of the concession is suspended:

  • when the contracting authority or entity is compelled to suspend the performance of a concession contract, or the suspension is the result of an administrative police measure (e.g. closure of a facility, such as an early childhood centre or a sports or recreation centre), any payment in its favour is suspended. Moreover, an advance on the payment of the sums due by the contracting authority or entity may be paid to the concessionaire if its situation justifies it and up to its needs: this concerns, of course, on the one hand, the fees due to the contracting authority or entity and, on the other hand, advances on any “price” paid by the contracting authority or entity. At the end of the suspension, an amendment shall determine, where appropriate, the amendments to the concession contract which appear necessary.
  • when the concession contract is not suspended, but the contracting authority or entity is compelled to make significant changes to the terms and conditions of performance provided for in the contract, the concessionaire is entitled to compensation for the additional costs resulting from the performance, even in part, of the service or works, if the continued performance of the concession contract requires the use of additional resources that are not provided for in the original contract and which would represent a burden that is manifestly excessive in relation to the concessionaire’s financial situation. As stated above, this is an alternative to the theory of unforeseeability, which remains nevertheless applicable if all its conditions are fulfilled. In the event of a real upheaval in the economy of the contract, it might be worth determining whether the theory of unforeseeability could take over these provisions. Above all, they will have to be interpreted flexibly in order to be fully effective: concessionaires are not always faced with the implementation of additional resources per se, but rather with the need to adapt them to ensure a minimum continuity of service, sometimes with hardly any operating revenue.

For concession contracts involving the occupation of the public domain, it is also provided that when the operating conditions of the occupant’s activity have deteriorated to an extent that is manifestly excessive in relation to their financial situation, the payment of occupancy fees is suspended for a period that may not exceed the period of implementation of the ordinance. These provisions should in our view apply when the condition relating to the deterioration of operating conditions is fulfilled, including when the performance of the concession contract is not suspended. At the end of such suspension, an amendment shall determine, where appropriate, the amendments to the contract that appear necessary.