We have recently been approached by a number of our Registered Social Landlord (RSL) clients whose contractors have requested uplifts on their tendered contract rates. An amendment to the contracted rates would be a modification of the contract during its term. Here we consider the procurement law implications of making changes to a contract after it has been signed.

 The Public Contracts (Scotland) Regulations 2015 provide that a modification of a public contract during its term triggers a requirement to re-procure that contract except in specific circumstances.

Read more: Procurement Strategy: What RSLs Need to Know?

Regulation 72

Regulation 72 provides:

A contract may be modified without a new procurement procedure in the following circumstances:

(a) Anticipated: the modifications, irrespective of their monetary value, have been provided for in the initial procurement documents;

(b) Additional works: to provide for additional works, supplies or services by the original contractor that have become necessary and were not included in the initial procurement, where a change of contractor—

(i) cannot be made for economic or technical reasons; and

(ii) would cause significant inconvenience or duplication of costs for the contracting authority,

provided that any increase in price does not exceed 50% of the initial contract value;

(c) Unexpected issues arise: where all of the following conditions are fulfilled—

(i) the need for modification has arisen as a result of circumstances which a diligent public body could not have anticipated;

(ii) the modification does not alter the overall nature of the contract;

(iii) any increase in price does not exceed 50 % of the initial contract value;

(d) Corporate takeover where a new contractor replaces one to which the contracting authority had initially awarded the contract or framework as a consequence of—

(i) an unqualified review clause in the contract; or

(ii) following corporate restructure, (e.g. takeover, merger, acquisition or insolvency) the contractor is replaced by another contractor that fulfils the selection criteria in the initial tender, provided there are no other substantial changes to the contract and this is not aimed at avoiding the procurement rules;

(e) Minor modifications: where the modifications, irrespective of their value, are not “substantial” – meaning:

(1) the modification renders the contract materially different in character;

(2) the modification introduces conditions which, had they been part of the initial procurement procedure, would have—

(i) allowed for the admission of candidates other than those initially selected or the acceptance of a tender other than that originally accepted; or

(ii) attracted additional participants in the procurement procedure;

(3) the modification changes the economic balance in favour of the contractor which was not provided for in the initial contract;

(4) the modification extends the scope of the contract considerably; or

(5) the contractor is replaced by another party in circumstances other than those described above.

 (f) Minor changes: where the value of the modification is below:

- the relevant threshold; and

- 10 % of the contract value for service and supply contracts and 15% of the value for works,

provided that the modification does not alter the overall nature of the contract or framework agreement. Where there are successive minor modifications, the value is the net cumulative value of all modifications.

Read more: What Does Freedom of Information Mean For RSL Procurement?

What If You Want to Make More Than One Amendment?

Where several successive modifications are made—

(a) the value of each modification must not exceed 50% of the initial contract value; and

(b) such successive modifications must not be aimed at circumventing the regulations.

Modification Notice

Certain modifications require the public body to publish a notice to that effect on the Public Contracts Scotland website.

Conclusion

In the current economic climate our RSL clients experience many issues with contractors, e.g. contractors becoming insolvent, requesting that contracts are terminated early or that rates are increased because they cannot continue to provide the services in an economical way, corporate restructures and requests to novate contracts to other parties.

Agreeing to any change could have an implication on your duties under the 2015 Regulations. If you require any advice on making changes to a contract after it has been signed, please contact our team.