Contact: Britta Oltjer and Epp Lumiste; LEADELL Pilv Law Office.
Attorneys-at–law Britta Oltjer and Epp Lumiste wrote in the article in business newspaper Äripäev (published on 1 February 2017) that it is not always possible to avoid (court) disputes in construction procurements.
Even along with very carefully and thoroughly planned construction procurement, the fulfilment of concluded contract can lead to time-consuming and resource-intensive (court) dispute. Unfortunately, one must admit that in the light of current Law on Public Procurement (LPP) and court practice, it is likely not possible to instantly avoid these situations to occur in future.
What causes disputes? Insufficient identification of supplier’s needs, lack of previous experience, unclearly formulated purchase inquiry, directed procurements, undersupply, lack of cooperation between contractor and tenderer, construction workload etc. Questions regarding workload not necessarily arise during planning phase of procurement, as well as subcontractors may not draw the attention to this issue before an offer made (during phase of assessing the object). The real volume of construction works or some drawbacks in submitted by contractor project can emerge after construction had already begun (for example situation with procurement of the university’s library). What are the subcontractor’s options in this case?
LPP and the court practice restrict the process of making amendments of contract, as well as subcontractors’ options to stop the construction. According to the court practice, the errors in project are not the ground for terminating the construction, particularly in those cases when errors can be apparently eliminated by parties’ agreement and good faith (see example of clarification by the court in the dispute between Skanska and Kiviõli secondary school). The Supreme Court clarified in 2016 the limitations of potential alternatives of subcontractors. Namely, one might claim the amendments of procurement contract only if this option is clearly provided in the contract. This means that if the contractor hasn’t foreseen the probability of amendments of the contract during initial process of coordination of the procurement, then subcontractor couldn’t demand making any amendments to existing contract because of increased workload.
As it follows from the case-law of the Court of Justice, it is not allowed to change the procurement contract by agreement in case of increased or decreased construction workload; instead there should be organized new procurement with adjusted conditions.
The alternatives of subcontractor and tenderer have limited options to act when inability to proceed with construction arise due to increased workload (and also decreased) during the process. Making amendments to procurement contract are allowed only in specific cases, thus in the court practice it is preferred to conduct a new procurement process in order to guarantee equal treatment to tenderers.
Long awaited LPP gives a bright hope that requirement for making amendments of procurement contract will be alleviated, and both tenderer and subcontractor will have right to bring some adjustments to the contract during constructive cooperation, if any described above problem occurs. Currently, this is still being processed by the Estonian Parliament, whereas the last proposals were submitted on January 18th, 2017.
