Regulatory and compliance

The Public Sector Contracts Law finally welcomes the possibility to revise the price of public sector contracts without exceptions

Published on 31st May 2023

Such revision will only be applicable to a part of the price of the contract, and shall require that the specifications foresee it and include the calculation formula

Business planning meeting, photo of people's hands holding pens and going over papers

Law 9/2017, of 8 November, on Public Sector Contracts, (the "LCSP") has recently had its article 103 on the revision of prices for sector contracts modified, through the Seventh Final Provision of Law 11/2023, of 8 May, on the transposition of European Union Directives on the accessibility of certain products and services, migration of highly qualified people, taxation and digitalisation of notarial and registry proceedings; and amending Law 12/2011 of 27 May 2011 on civil liability for nuclear damage or damage caused by radioactive materials, which extends the possibility of periodic and predetermined revision of the prices of all public sector contracts (the "Law 11/2023").

Since its entry into force, the LCSP has provided the possibility of periodically and predetermined revision of the prices of public contracts, although this possibility was limited exclusively to works contracts, supply contracts for the manufacture of armaments and equipment of the public administrations, energy supply contracts and those in which the period of recovery of the investment was equal to or greater than five years. This revision was subject to specific rules and to the provision in the specifications of this possibility together with the applicable formula.

This excluded the possibility of price revision (not to be confused with modification of the contract) in supply or service contracts, given that these are contracts in which, due to their characteristics and duration, there is no investment recovery period of five years or more.

Inflation, high energy costs and other factors have led to the modification of this law, with article 103 now providing for this periodic and predetermined price revision to be extended to any type of contract (including, therefore, supply and services), even if its investment recovery period is less than five years.

The revision, which is not compulsory but may be provided for in the specifications if the contracting authority so considers, shall not apply to the entire contract budget, but only to that part of the budget corresponding to the raw materials, intermediate goods and energy to be used in the contract, provided that the sum of these exceeds 20% of the base bidding budget.

For this purpose, the tender documents must specify the percentage of each raw material, intermediate good or energy supply in the total budget, which also represents a share of more than 1% of the budget, as well as its official price revision index.

Finally, Law 11/2023 modifies the fifth paragraph of article 103, reducing from two years to one year the period that must elapse from the formalisation of the contract for the application of the periodic and predetermined revision formula of any contract, while the requirement that at least 20% of the contract amount has been executed remains unchanged.

This means that the revision can only take place after the first year of the contract, provided that at least 20% of the contract amount has been executed. These requirements do not apply to energy supply contracts, and the percentage requirement does not apply to service concession contracts.

It remains to be seen whether and how this modification, which came into force on 10 May, will be applied in the forthcoming specifications for supply or service contracts, and whether and how they will include periodic and predetermined price revisions.

This latter task will surely not be without its difficulties, given the wide variety of contracts that will be eligible for this possibility and the likely difficulties in the design of the revision formulas.

If you would like to know more about new regulatory or healthcare legislation and its potential implications, please do not hesitate to contact one of our experts listed below or your usual contact at Osborne Clarke.

Share

* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

Interested in hearing more from Osborne Clarke?

3 Upcoming Events