Netherlands: Procurement Law and Deadlines in IT Projects
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Netherlands
I'm an associate in our Construction, Regulatory & Administrative and Commercial Group with a passion for all matters regarding the built environment.
Partner
Netherlands
I am a partner in our Competition & EU Law Group in The Hague where I specialise in competition law and public procurement law, advising on contentious and non-contentious matters for a broad variety of our clients.
Circumstances during the execution of contract may change. This is particularly relevant for contracts within the technological field or other fast-moving sectors. It is important for contracting authorities to remain alert for material changes when responding to changing circumstances. For example: if a party fails to meet a contractual deadline and the contracting authority does not enforce contractual remedies such as penalties or termination of the agreement, does this constitute a change to the contractual terms and conditions? Is this permitted from a procurement law perspective?
We will provide a brief overview of a ruling by the Dutch court of Rechtbank Midden-Nederland1 that offers insight into how these questions should be answered.
Background Ruling
The ruling relates to an IT project tendered on 16 December 2022. The contractual terms include a four-month transition period during which the winner bidder will have opportunity to convert the existing IT infrastructure to its own systems. The terms of the contract explicitly stipulate that this transition phase must be completed by 1 October 2023 at the latest.
Two bidders submit bids, and the contracting authority awards the contract to one of these bidders on 1 June 2023. During the execution of the contract, the winning bidder does not comply with the deadline for the transition phase and the contracting authority proceeds to discuss the consequences of the delay and the extent of the liability for delay damages. The claiming party in this ruling, the bidder who did not win the tender, considers this conduct in breach of procurement law and starts legal proceedings with the aim of , inter alia, the annulment of the contract between the contracting authority and winning bidder due to a material change.
Ruling
It follows from the ruling that contracting authorities are not obliged to revert to relatively severe contractual remedies, such as a penalty or termination of the agreement, in the event of not meeting a contractual deadline. The contracting authority has a certain degree of autonomy when determining its approach forward subsequent to the relevant delay. This autonomy is subject to the limits of the contract, as well as the premise that continued leniency can result in a material change. The court also considers that a public body can be expected to show some leniency and not immediately reverting to termination of the contract.
Considerations for Contracting Authorities
The pace of change in the IT sector is rapid. The circumstances in which a contract is to be performed may therefore also be affected by such changes. The discussed ruling highlights the need for caution for contracting authorities when addressing changes in the performance of the contract. The contracting authority is permitted a certain degree of autonomy in the execution of a contract. Exercising leniency in case of non-compliance does not automatically result in a material change. The contracting authority is entitled to exercise the contractual options available but should be aware that continued leniency may result in a material change, and therefore breach with procurement law.
1Court of Midden-Nederland 9 January 2024, ECLI:NL:RBMNE:2024:457.
