Hungary: recommendation by the Public Procurement Authority to mitigate the risks of war in public works contracts
The Russian-Ukrainian war is having a serious economic impact on the construction industry, e.g. increase in the price of building materials. The Public Procurement Authority has issued a recommendation on the solutions that parties can apply in public procurement procedures in the event of force majeure caused by war.
If the time limit for submission of tenders/participation has not yet expired, the contracting authority may amend the notice or the documents, the time limit or withdraw the notice before the expiry of the time limit. If the amendments are not effective, the notice may be withdrawn before expiry without giving any reason. After expiry, the contracting authority may withdraw from the procedure if it is unable to perform the contract due to unforeseeable circumstances beyond its control occurring after expiry or if there is a right to withdraw from or to terminate the contract. However, withdrawal solely for reasons of force majeure, without further examination, is not possible.
If the result has been announced but the contract has not yet been concluded, either party may be released from the obligation to contract, if – due to unforeseeable circumstances beyond the control of the parties occurring after the summary has been sent – that party would not be able to conclude or perform the contract or if there is a right to withdraw from or to terminate the contract. Even in this case, it is not enough to invoke force majeure alone; a direct causal connection is required.
In cases of concluded works contracts, e.g. in the event of an increase in the price of building materials or transport costs, the value of the contract may be amended by up to 15% of the initial contract value. If the need for modification has been brought about by circumstances which a diligent contracting authority could not have foreseen, the contract value may be adjusted up to 50% of the initial value. In both cases the modification must not alter the overall nature of the contract and the mere fact of war without causal connection is not a sufficient ground of reliance.
For procedures under preparation, the contracting authority has the right to clearly set out in the draft contract any future changes to the conditions. Thus, the changed conditions will automatically become part of the contract. However, the modifications must not alter the general nature of the contract.
The contracting authority must document the entire process in all cases.
Source:
Recommendation by the National Federation of Contractors and the Public Procurement Authority to mitigate the business risks of the Russian-Ukrainian war (23.03.2022)
Act CXLIII of 2015 on Public Procurement