Effective 1 July 2013, the Royal Decree of 14 January 2013 (hereinafter, the "Decree") will introduce new general rules for the performance of public contracts and public works concessions.[1] In practice, the Decree will have a significant impact, as it will affect the general terms and conditions of purchase for all procuring entities in Belgium, valued at billions of euros on an annual basis.
Structure
The Decree will replace the Decree of 26 September 1996 and the General Contracting Conditions annexed thereto and merge the provisions of these two documents.
The first chapter of the Decree sets out the provisions applicable to all government contracts (Arts. 10 to 73). The Decree then provides for rules specific to public works contracts (Arts. 74 to 103), public works concessions (Arts. 104 to 114), supply contracts (Arts. 115 to 144), and services contracts (Arts. 145 to 160).
Scope of application
The Decree will apply to contracts in both the classic sector and the utilities sector (water, energy, transport and postal services), as well to defence contracts.
As is currently the case, full application of the rules will depend on the contract value. The rules will apply in full to contracts with a value above EUR 30,000 and in part to contracts with a value between EUR 8,500 and EUR 30,000. Contracts with a value below EUR 8,500 will not be subject to the new rules.
One helpful clarification is that the rules will no longer apply to certain types of contracts for which they were clearly unsuitable, inter alia contracts for (i) financial services, (ii) legal services, (iii) joint procurement with public authorities from other countries, (iv) public-private partnerships that adopt the design-build-finance-maintain (DBFM) model, and (v) setting up a new company jointly held by a private contractor and a public authority for the purpose of performing a specific task.
Performance bond
The Decree provides for greater flexibility with regard to the warranty to be provided by the contractor (the so-called performance bond). The list of contracts for which no warranty is required will also be extended, in particular when the initial value of the contract is less than EUR 50,000 (or EUR 100,000 for contracts in the utilities sector).
Confidentiality
A duty of confidentiality shall in principle apply to drawings, designs, know-how, methodologies and inventions belonging to the contracting authority or jointly to the contracting authority and the contractor.
Penalties
The Decree provides for certain modifications with regard to the penalties applicable for breach of contract. For example, the penalties applicable in the event of delays are increased (specifically if the deadline for completion of the contract was an award criterion). The Decree also provides for the possibility to exclude a contractor from future contracts (previously, this sanction was only applicable for works contracts) and for new rules on the imposition of sanctions.
Late payments and Directive 2011/7/EU
The Decree implements Directive 2011/7/EU on combating late payment in commercial transactions. As a result, it provides for stricter payment terms and stipulates that contractual clauses excluding the contractor's right to charge interest or to be compensated for recovery costs shall be deemed null and void. Late payments are subject to a heightened interest rate (8%).
These provisions will hopefully put an end to the practice of too many public authorities of systematically delaying payments to their suppliers.
Compensation of the contractor
The Decree provides for two important changes regarding the possibility for the contractor to have the contract revised or to be compensated for unforeseeable events (previously Article 16 of the General Contracting Conditions, now Article 56 of the Decree):
- As before, in order for the contractor's claim to be admissible, it must have sustained a "very significant" loss. However, the Decree now specifies that this will be deemed the case when the loss amounts to at least 2.5% of the contract value or EUR 100,000. The purpose of this provision is to provide greater legal certainty regarding the notion of a "very significant" loss;
- Furthermore, if the claim is deemed admissible, the contractor shall only be compensated for 82.5% of the damage it sustained as a result of the event which triggered the application of this article. The Decree thus provides for a deduction of 17.5% (up to a maximum of EUR 20,000) of the amount due by the procuring authority. The aim of this provision, which will certainly give rise to much discussion, is to avoid having the authority bear the totality of consequences for events which were, by definition, unforeseeable.
In addition, the limitations period for legal proceedings by the contractor is now, in general, 30 months from provisional acceptance (previously, it was 2 years from final acceptance).
Modification and assignment of the contract and subcontracting
In order to comply with the CJEU's Pressetext ruling, which limits the possibilities to modify a contract, the Decree provides for a new threshold of 15% of the contract value, beyond which contractual changes are in principle inadmissible (Art. 37). The Decree also confirms that a contract can only be assigned with the authority's prior consent and provided the assignee meets the selection criteria applicable to the original contractor (Art. 38).
Entry into force
The Decree is expected to enter into force on 1 July 2013, together with the Act of 15 June 2006 on public procurement and its other implementing decrees.
For more information on the new rules, do not hesitate to contact us or to sign up for our 'Public Procurement Seminar' on 27 March 2013.
[1] Royal Decree of 14 January 2013 establishing general rules for the performance of public contracts and public works concessions, Belgian State Gazette, 14 February 2013.
