Emergency procedures to mitigate the impact of the COVID-19 pandemic
The Spanish Public Procurement Law establishes two extraordinary procedures to accelerate ordinary deadlines: (i) urgency procedure; and (ii) emergency procedure.
Royal Decree-Law 7/2020, of 12 March was published, adopting urgent measures to tackle the economic impact of COVID-19. It stated that any contract entered into by the State General Administration or its public bodies and public law entities to cover needs arising for the protection of the public and other measures adopted to address COVID-19 constitutes an emergency contract and is therefore subject to the emergency procedure provided for in the Public Sector Contracts Law.
Note that the emergency procedure entails a direct award of the public contract. Once awarded, the contract must be published at the relevant Public Contracting Platform.
Other options available to contracting authorities
Royal Decree 463/2020, of 14 March, declaring a state of alarm in order to manage the current COVID-19 health crisis, among other measures, declared all administrative procedures suspended (including any ongoing public procurement). Therefore, since the state of alarm was declared, any contracting authority interested in initiating and/or continuing regular public procurement procedures (not related to COVID-19) has to issue a report justifying the need for the procedure and its significance to prove that it has to be processed without delay. Once the above is justified, the contracting authority may follow any of the regular public procurement procedures established by the Spanish Public Procurement Law.
However, according to Royal Decree-Law 17/2020, of 5 May, those regular public procurement procedures that can be awarded via electronic means are no longer suspended. Therefore, since 7 May 2020, all public procurement procedures that can be conducted via electronic means must continue.
Note that the Spanish Public Procurement Law has been modified by Royal Decree-Law 15/2020 and Royal Decree-Law 16/2020 (both of which approve measures to combat the COVID-19 sanitary crisis). The modification refers to the open simplified procedure and it states that the opening of the offer does not have to be public.
Measures adopted regarding ongoing public contracts
Royal Decree-Law 8/2020, of 17 March, on extraordinarily urgent measures to deal with the economic and social impact of COVID-19, adopted certain measures regarding the execution of public contracts. Said Royal Decree-Law has been modified by the above-mentioned Royal Decree-Law 17/2020 and the Royal Decree-Law 11/2020.
The described measures do not apply to the following contracts:
- contracts for health, pharmaceutical or other services or supplies, whose subject matter is related to the health crisis caused by COVID-19
- any contract entered into by the State General Administration or its public bodies and public law entities to cover the needs arising to protect the public and other measures adopted by the Council of Ministers to address COVID-19, which constitutes an emergency contract and is, therefore, subject to the emergency procedure provided for in the Public Sector Contracts Law
- contracts for IT security, cleaning or maintenance services
- service or supply contracts necessary to ensure mobility and security of transport infrastructures and services
- contracts awarded by those public entities that are listed on official markets and do not receive income from the General State Budget
1. Measures concerning the suspension of works contracts, in addition to successive execution public service and supply contracts
Those public sector contracts that become impossible to perform as a result of COVID-19 or the measures taken by the authorities to combat it will be suspended from the moment the situation that prevents their performance arises and until the contracting authority notifies the contractor of the end of the suspension once the circumstances or measure that prevented their performance has come to an end.
In the event of such suspension, the contracting authority shall pay the contractor the damages actually incurred during the period of suspension and which are related to salary costs, costs for maintenance of final guarantees, costs for rentals or maintenance of machinery, installations and equipment allocated to execute the contract and which could not be used for other purposes and costs relating to insurance policies provided for in the tender documents and linked to the subject matter of the contract. Under no circumstances may the suspension of contracts lead to their termination.
The above shall apply only when the contracting authority, at the request of the contractor and within five calendar days, finds that it is impossible to execute the contract. In its request, the contractor must justify the reasons for the inability to continue and the personal and material resources devoted to the contract at that time, as well as the unfeasibility of using these means in another contract. Once the period indicated has elapsed without the contractor being notified of the express decision, it will be understood that it has been rejected.
With regard to works contracts, the above shall only apply to those contracts whose execution period was scheduled to end between 14 March, and during the period of the state of alarm or, as a result of the situation created by COVID-19 or the measures taken by the state, the handover of the work cannot take place. In these cases, the contractor may request an extension of the final handover date provided that it offers to meet its outstanding commitments if the initial deadline is extended.
Acknowledgment of the right to compensation and damages indicated above shall apply only if the successful bidder provides clear evidence that: (i) the main contractor, its subcontractors, suppliers, and providers contracted for the performance of the contract were up to date with their labor and social security obligations as of 14 March 2020; and (ii) the main contractor was up to date with its obligations to pay its subcontractors and providers.
In addition, regarding successive execution service and supply contracts, contractors may request an advance of the corresponding compensation when the contracting authority finds that it is impossible to execute the contract.
With regard to successive execution public service and supply contracts, when, on the expiry of a contract, the new contract guaranteeing the continuity of the service has not been concluded as a result of the paralysis of the contracting procedures arising from the provisions of Royal Decree 463/2020, the original contract may be extended until the execution of the new contract begins and, in any case, for a maximum period of nine months, without amending the remaining conditions of the contract.
2. Measures relating to public supply and service contracts other than successive execution contracts
If the contractor is late in meeting the deadlines laid down in the contract as a result of COVID-19 or the measures taken by the authorities to combat it, and the contractor offers to meet its obligations if the deadline is extended, the contracting authority: (i) will grant (following a report from the person in charge of the contract, stating that the delay has occurred as a result of COVID-19) an extension of the initial deadline or the current extension for a period that will be at least equal to the time lost, unless the contractor requests a shorter one; (ii) will pay the additional salary costs actually incurred up to a limit of 10% of the initial contract price (following a request and due evidence by the contractor). In such cases, no penalty shall be imposed on the contractor or the contract shall be terminated.
3. Measures relating to public works concession and service concession contracts
The de facto situation created by COVID-19 and the measures taken by the authorities will be considered force majeure, entitling the concessionaire to restore the economic balance of the contract by extending its initial duration by a maximum of 15% or by amending the economic clauses included in the contract.
This rebalancing will in any case compensate the concessionaires for the salary costs paid during the period of the situation (following a request and due evidence by the contractor).
The above shall apply only where the contracting authority, at the request of the contractor, has recognized that it is impossible to perform the contract.
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