EPISODE 21 - Transcript

Willem Janssen 0:00

Welcome to Bestek, the public procurement Podcast. Today, we'll be talking about modification of construction contracts: A contract or procurement perspective?

About Bestek 0:15

Welcome to Bestek, the public procurement podcast. In this podcast, Dr Willem Janssen and Dr Marta Andhov discuss public procurement law issues, their love of food and academic life. In each episode, Willem, Marta and their guests search for answers to intriguing public procurement questions. This is Bestek. Let's dish up public procurement law.

Willem Janssen 0:40

So quite an episode today again. It's three of us again. Welcome Ole to the podcast.

Ole Hansen 0:46

Thank you.

Willem Janssen 0:47

Welcome Marta.

Marta Andhov 0:48

Hello, hello.

Willem Janssen 0:49

This is a very formal way of doing this. Let's get started. At least all the listeners who have gotten used to our rambling and our voices. And it's a pleasure actually to have Ole here today. We're talking to Ole Hansen, he is the co-founder of the Centre for Private Governance, CEPRI , if I pronounced that correctly, at the University of Copenhagen where we're still recording on-site here today and he's conducting research within private law with a special focus on private actors undertaking public tasks. And we're talking to him today, as a Danish construction law expert. I'm sure you do a lot more things but that was the reason partially why we invited you here today. So, it's a pleasure to have you. And, we'll be digging into modification of construction contracts and we'll be looking at how EU public procurement law and the concept of modification can sometimes cause tension with national construction practices, but also construction law. So that's what's on the menu for today's episode. And of course, we will also be looking at dessert. I think dessert's a little bit different than what it is normally today, but I'll leave that as a teaser. So, just to get you off to a good start, although, of course, Marta and I agree that public procurement is the nemesis, the starting point, the epicentre of the world; but in your research on contract and construction law, is public procurement the entree, the main or the dessert, or is it just an appetizer?

Marta Andhov 2:25

Or something that you try to stay away as much as you can?

Ole Hansen 2:29

Yeah. Well, as for my sake, I've been specialized in construction contract law. And of course, that's about how transactions between employers and contractors are entered into and carried through during the construction process. That leaves out the question of actually how, what were the pre-contractual aspects and what was the pre-contractual regulation. This difference between public entities and private entities where private entities can enter into even major construction contracts as they want to, whereas public entities underlie the procurement law regime. The most tempting part for a construction contract lawyer is trying to avoid the question of whether there's actually an interplay between the procurement law rules, the public law rules, and contract law rules. But you can't really avoid it, can you? Because evidently, procurement law kind of frames or underlines the public contracts. So, you have, at least in my opinion, you have to some extent to consider whether there is in fact an interaction between public procurement law and private law.

Willem Janssen 4:08

It sounds like we're talking to someone that has had come to terms with the fact that you have to deal with public procurement law, whether you like it or not. I heard words of like, you can't avoid it, or something like that. So that means that it's kind of maybe perhaps a side dish, but not often the most delicious side effect. Is that a fair conclusion?

Ole Hansen 4:28

If you can leave it out and not order it.

Marta Andhov 4:31

You probably want to do that.

Willem Janssen 4:34

Alright.

Ole Hansen 4:36

At least from a theoretical point of view, I think the practitioners, the corporate lawyers see it another way.

Willem Janssen 4:44

All right. Thank you so much for that. Let's wait and we'll see if we can make that dish a bit more tasty, I think, during the episode, right? So, let's buckle down a bit more on content, but not before I actually introduced that a little bit in terms of the reason why we're here with three of us today. Because Marta and you're working on a research paper concerning the intersection between construction law, contract modification and procurement law. In today's episode, we'll be highlighting some of those topics that you'll be addressing in the paper. So, it's kind of like a teaser, right? It's more of an appetizer, a teaser to whatever will come in the future. And on top of that, it's also, I think, a lead-up to a project that Marta is leading, the PurpLE Project , in which I'm also involved, and Ole as well. So perhaps, why this topic? Maybe we can talk about relevance a little bit. Why did you start this research paper? And why are we, the three of us, endeavouring on this, this bigger research project?

Marta Andhov 5:49

So, to give you context, PurpLE is Purchase Power, Sustainable Public Procurement through Private Law Enforcement.

Willem Janssen 5:56

That was in one go!

Marta Andhov 5:58

That was the long name. But to be honest, to be very honest, the idea for this came out of our many, many conversations with Ole over the years that we had the chance to collaborate. We always, so to speak, buckled heads a little bit in a very obviously friendly way. But pointing out that the contract seems to be such a defining moment because we care so much about what happens before the contract. Ole cares very much about what happens after the contract. Then time and time again starting with our first research project with Professor Steen Treumer and our first publication, we really saw that there are many, many aspects between private law and procurement law, that somehow are in conflict and are not really researched. That led to us being able to obtain the funding for this project and that we'll be working on going forward. Then also having you of course, because the Netherlands is having the same approach, which is that public contract is regulated by private law after the contract is conducted. So that gives you a lot of contexts, I think, for our today’s podcast, but also going forward because it just first is just to kind of get everyone interested in what we will be doing for next two, three years. There'll be many, many more on how all this pre-contractual process impacts and how it can impact, what are also the limitations of what you can do in the post-contractual stage when private contract law rules, the legal framework. But that is a broad context of the project.

Willem Janssen 7:39

It's a project that I'm very excited to be part of. One, because I think it's so fundamental, right? It's a bit of a, well, I wouldn't say traditional because that starts to sound boring, but like, it's this EU law of focus and the influence of EU law on national practices, right? And on national law. So, there's really that dynamic there. Also, because it leads to real-world problems, right? There are problems that come up in construction sites where you bump into, and I think that's also where the not-so-tasty side dish, introduction from Ole came from. So yeah, let's see. So, like I said, a bit of a teaser. Today, we'll be talking about modification of contracts, and particularly focusing on the Danish construction context, but I'm sure actually for those tuning in from other jurisdictions from Europe or from all over the world that these issues would arise in other member states as well. I know for sure that they arise in the Netherlands as well. So, if that's a setup for other countries and relevance…

Marta Andhov 8:38

…let us know.

Willem Janssen 8:38

Yeah, for sure. So, let's move on to our main.

Marta Andhov 8:42

Yes.

Willem Janssen 8:43

Contract modifications under the public procurement rules... Of course, we've talked about it a bit prior to recording, but let's get our listeners in tune as well. We're talking about the modification of the contract. We start with the Directive and maybe I can pass it to you then Marta.

Marta Andhov 8:56

Sure. So, I will lay down in a couple of words the regulatory perspective of procurement and then we will ask Ole to tell us what is really the problem in practice and what are his thoughts on this conflict, somehow this tumultuous relationship. So, the modification of contracts is regulated under Article 72 of the Classic Directive, and we know from 72, which codifies broadly Pressetext case , and Finn Frogne to a certain extent. The opportunity of modifying public contracts without the need to re-tender is fairly limited. We got a catalogue of modifications there are defined as non-substantial and these ones are the ones related to the existence of a very clear and unequivocal (that's a difficult word in English) review clause. We need some additional work or services or supplies from the original contractor and there are terms and conditions we need to fulfil. We also have the force majeure. We have the so-called de minimis change and specific circumstances for the change of the contractor. I think those are all if I remember correctly, and then we have paragraph 4 of Article 72, which is a codification of Pressetext and specifically gives us a definition of what is a material change. So, this is the space in which we are existing, ultimately, leading to the fact that there is a fairly limited opportunity to modify contracts without the need for re-tendering. Ole, tell us from your perspective, from your experience, you also have a very broad experience of collaborating with practitioners, where...