News and developments
Revision of prices in Government Supply Contracts resulting from the war in Ukraine
The first Circular No. 15 and Circular No. 16 concerns compensation claims for public works contracts (“Works Guidelines”). We had issued a circular to break down the procedure in simple terms, which you can read here.
Authors: Clement Mifsud-Bonnici, Calvin Calleja February 3, 2023
Regulations
Both the Supplies Guidelines and the Works Guidelines have been published in terms of the Temporary Suspensions of Certain Provisions Relating to Public Procurement Regulations (S.L. 601.13) (the “Regulations”). This means that any compensation claim for supplies contract must still satisfy the following three cumulative conditions:- the public contract was signed on or before 24 February 2022;
- the public contract was still in force and binding as of 24 February 2022; and
- the supplies must have been delivered between 15 March 2022 and 15 January 2023.
Circular N° 15/2022: General Information
This is equally applicable to works contracts and supply contracts. A request for compensation must contain valid and substantiated justifications for claiming a price increase of the commodities involved.Circular No 2/2023: Compensation Scheme: Claims for Increase in Price of Commodities in Public Contracts Involving Supplies
DOC’s Supply Guidelines do not include a pre-established list of supplies which can benefit from such compensation requests. The DOC has instead stated that such requests are to be considered on a case-by-case basis by the contracting authority involved. This entails that supply contractors must submit substantially more detailed compensation requests when compared to their works contracts counterparts, which requests must include:- a detailed justification to substantiate the request linked to unforeseeable external market forces;
- a financial analysis of the contract in question;
- a breakdown of the compensation requested for each item supplied;
- original and amended invoices supplied by the contractor’s manufacturer; and
- the price index for the relevant supplies to prove inflation e.g. the NSO price index.
Procedure for Contracting Authorities
DOC’s Supply Guidelines also sets out the procedure to be followed by contracting authorities once they receive a claim from their contractors. First of all, the contracting authority must assess the Request for Compensation on the criteria of fairness and reasonableness. This means that a contracting authority may turn down the compensation request if it determines that it can realise better value for money through the re-issue of a competitive call. A number of obligations are also imposed on the contracting authority of a particular supply contract who must:- certify that the supplies were delivered within the applicable timeframe; and
- certify that the compensation request is valid, accurate, and justified, as well as properly substantiated.
Authors: Clement Mifsud-Bonnici, Calvin Calleja February 3, 2023