The EU directives on public procurement determine the conditions further to which public contracts falling within their scope may be subject to modifications during their term. In this context, so-called “substantial modifications” are prohibited unless they are subject to a new procurement procedure.
In the case at hand, the Budapest public transportation company (BKK) concluded a public contract with T-Systems for the transport, installation and operation of transport tickets distributors following a tender procedure. BKK and T-Systems subsequently agreed on several amendments to this contract. The competent Hungarian authorities conducted an ex officio investigation and found that these amendments involved substantial modifications to the initial contract and so should have given rise to a new procurement procedure. As a consequence, they imposed a financial penalty on both BKK and T-Systems.
BKK and T-Systems challenged this decision before the Budapest-Capital Court. This jurisdiction then referred questions to the Court of Justice, seeking clarification as to whether EU law precludes national rules according to which the successful tenderer may be held liable and fined in case of the substantial modification of a public contract. It also requested guidance as to whether the respective conduct of the contracting authority and the successful tenderer should be taken into account in the context of the determination of the amount of the fine.
In its judgment of 14 May 2020 (case C-263/19), the Court of Justice ruled that EU public procurement legislation does not preclude national rules which, in the context of a review procedure initiated ex officio by a supervisory authority, make it possible to attribute an infringement and impose a fine, not only on the contracting authority but also on the successful tenderer, in the event that the rules on public procurement have been unlawfully disregarded.
However, the Court held that, where such a possibility is provided for by national rules, the procedure must comply with EU law, including the general principles thereof, in so far as the public contract at issue falls within the material scope of the public procurement directives, either ab initio or as a result of its unlawful modification.
In this respect, the Court ruled that, in accordance with the principle of proportionality, the amount of the fine imposed on the successful tenderer may not be determined solely in light of the fact that a substantial modification requires a contractual relationship between it and the contracting authority. On the contrary, the respective conduct of each party should also be taken into account.
The Court provided certain examples of circumstances that could be taken into account to this effect. With regard, more particularly, to the successful tenderer, account may be taken of the fact that it took the initiative to propose the substantial modification or that it suggested, or even required, the contracting authority not to organise a procurement procedure to meet the needs requiring an amendment to the contract. However, the amount of the fine imposed on the successful tenderer cannot depend on the fact that a procurement procedure was not organised, since the decision to carry out such a procedure falls within the prerogatives of the contracting authority alone.
Please contact Peter Teerlinck or Raluca Gherghinaru for further information on this case and/or general advice on public procurement law.