The Council of State recently rendered a judgment in principle in connection with the duration of public procurement contracts. The duration of such contracts may exceed four years, but the grounds for such longer duration then need to be justified. The conditions for a duration in excess of four years deserve attention.
On 3 February 2016, the Administrative Litigation Section of the Council of State rendered an important judgment with respect to the length of a public procurement contract. In the case pending before the Council of State, the applicant criticised the fact that the contract would be entered into for a duration of three years and could be renewed twice, each time for one year, whereas article 37, §2 of the Public Procurement Act of 15 June 2006, as a general rule, does not allow the conclusion of public procurement contracts for longer than four years. Furthermore, the applicant argued that the justification in the award decision – of which it sought annulment – for a possible extension of the contract up to five years was neither pertinent nor acceptable. Moreover, the applicant held that this justification was provided too late, since it was only included in the award decision.
The Council of State ruled that article 37, §2 does not prohibit derogations from the maximum duration of four years determined in that provision. However, the Council of State added that such derogation must be justified and that this justification must be explicitly formulated, in view of the contracting authority's obligations – in casu the opposing party in the procedure – imposed by the Act of 29 July 1991 on the Formal Justification of Administrative Acts. Subsequently, the Council of State established that the grounds for such derogation do not need to be included in the tender specifications nor in the decision which determines the conditions of the contract. However, the grounds must be present in the administrative file, in order to allow verification that these reasons were indeed those which the contracting authority took into consideration when deciding on the derogation. In its judgment, the Council of State not only found that the grounds were not present in the administrative file, but also that the grounds invoked by the contracting authority in the award decision were too general to comply with its duty of justification.
Several lessons can be drawn from this judgment:
- The Council of State confirms that concluding a public procurement contract for a duration of more than four years is not excluded per se
- However, the judgment dramatically changes the way of thinking of contracting authorities. If a contracting authority wishes to conclude a public procurement contract for a duration in excess of four years, the contracting authority is required to prepare and document this aspect of the tender: it must take a specific "decision" with respect to the duration of the contract, based on an adequate justification. These grounds must be explicitly formulated (formal justification) in the tender document, or at least in the award decision. It appears that the Council of State subjects these grounds to profound testing. Indeed, in the case at hand the Council of State did not accept the contracting authority's justification that it wanted a contract of five years (three years, renewable twice) rather than a four-year contract, in order to secure price stability over a longer period of time.
- The grounds invoked must correspond with those, included in the administrative file, which were taken into account by the contracting authority when deciding on the derogation.
It is clear that the duty to document and specifically justify the duration of a public procurement contract for a period in excess of four years (with the exception of framework agreements) is not stipulated in the European directives. This duty is a rule of Belgian law. Contracting authorities awarding a contract for a duration in excess of four years without taking this rule into account expose themselves to a significant risk.