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Coronavirus - Amendments to public procurement – Spain

  • Spain
  • Coronavirus - Contractual issues
  • Coronavirus - Country overview

05-05-2020

Royal Decree-Law 17/2020 of May 5, which approves measures to support the cultural sector and tax measures to address the economic and social impact of the COVID-2019 (hereinafter "RD Law 17/2020"), published yesterday in the Spanish Official Journal, comes into force today, May 7, 2020. This decree contains important new features in the area of public procurement, which are listed below.

Suspension of contract procedures

1. Suspension of contracting procedures affected by the declaration of the state of alarm has been lifted, new procedures have been initiated and the special appeal has been lodged.

The 8th additional provision of RD Law 17/2020 establishes ex lege the resumption of contracting procedures that would have been suspended as a result of the declaration of the state of alarm, provided that they can be processed by electronic means. It also allows for the beginning of new contracting procedures under the same conditions, that is, when they are carried out by electronic means.

The additional provision establishes, as of its entry into force, the lifting of the suspension of terms and interruption of deadlines for contracting procedures promoted by entities belonging to the Public Sector that had been imposed by the 3rd additional provision of Royal Decree 463/2020, of March 14, declaring the state of alarm. This provision conditions the continuation of the procedure to be carried out by electronic means.

Similarly, the initiation of new contracting procedures is permitted if they are also processed by electronic means.

Finally, the 8th additional provision states that "this measure shall be extended to the special resources that apply in both cases". With this somewhat cryptic statement, the legislator would be opening up the possibility of the special appeal in procurement matters against acts that are issued in the course of resumed and newly initiated procedures, i.e. the filing of new appeals.

Urgent complimentary measures to support employment

In fact, this possibility had already been contemplated by the 6th section of the 10th final provision of Royal Decree Law 15/2020, of 21 April, on urgent complementary measures to support economy and employment. This refers to those contracting procedures whose extension has been agreed by the public sector bodies due to their connection with the facts that caused the state of alarm. In relation to these procedures, the acts that could be subject to special appeal could be challenged. The difference is that now it is the Law itself the one that orders the lifting of the suspension, which does not depend on the criteria of each contracting body nor on its link to the situation that determined the state of alarm. For the same reason, the opening of the possibility to appeal affects all the procedures in progress or newly initiated.

However, it should also be understood that the provision orders the resumption of the time limits for lodging appeals that have been interrupted as a result of the 3rd additional provision of Royal Decree 463/2020, of 14 March, declaring the State of Alarm for the management of the health crisis situation caused by COVID-19. The question that immediately arises concerns how to resume the calculation of the periods that would have begun before March 14, 2020.

In this regard, it should be recalled that paragraph 1 of the 8th additional provision of Royal Decree Law 11/2020, of 31 March, adopting additional urgent measures in the social and economic field to deal with COVID-19, established that "the period for lodging administrative appeals (...) shall be calculated from the first working day following the date on which the state of alarm was declared, regardless of the time that has elapsed since the notice of the administrative action being appealed against or challenged prior to the declaration of the state of alarm. ” According to this provision, the deadline for appealing administrative acts (including procurement acts) notified before 14 March was to be counted in full from the end of the state of alarm".

Conclusions on the Royal Decree

Considering all this, and not without some difficulty due to overlapping rules and the lack of clarity of some of these rules, we can conclude:

(a) The 8th additional provision of RDL Law 17/2020 leaves without effect the previsory 8th additional provision of RDL Law 11/2020, as concerns to special appeals in the field of contracting and to the time when the computation of the deadline for the lodging has to be initiated. It is no longer necessary to wait until the end of the declaration of the state of alarm, but such appeals can and must be lodged taking as a temporal reference the date of 7 May 2020, the date of entry into force of RDL Law 17/2020.

b) On the other hand, with regard to the time available for appeal, we understand that the 8th additional provision of RDL Law 11/2020 is still in force, so that it would have to be entirely calculated as of 7 May 2020, regardless of whether a part of it had been consumed at the time the state of alarm was declared.

This seems to be the most reasonable interpretation, but it is not free from uncertainty, due to the aforementioned overlapping of rules that are more a result of the difficult situation we are living in than of conscious planning. Therefore, we cannot rule out at all that some court of contractual appeals may interpret that on May 7, 2020 the calculation of the period resumes and the appellant has only the days remaining in that period when the state of alarm was declared, in accordance with the first provision contained in RD 463/2020 and in the understanding that paragraph 1 of the 8th additional provision of RDLey 11/2020 has been completely and implicitly repealed by RD Law 17/2020. It is therefore advisable, in the case of appeals whose period began before 14 March, to calculate the period by taking into account the days that have already elapsed before that date.

Recognizing payments on account in the case of suspended contracts

In addition, the 9th final provision, section 1 of RDL Law 17/2020 amends Article 34.1 of Royal Decree Law 8/2020 of March 17, on extraordinary urgent measures to deal with the economic and social impact of COVID-19 (hereinafter "RDL Law 8/2020") and recognizes the possibility of making advance deliveries in respect of the compensation arising from the suspension of the contract provided for in Article 34.1 of RDL Law 8/2020.

The new RD Law 17/2020 allows, at the contractor's request, the possibility of performing advance deliveries. The contractor of a suspended contract would be entitled to receive the amount of the advance payment once the contract has been lifted. This settles the dispute between certain Spanish Regional Governments (the Basque Country, Catalonia and Andalusia), which admitted the possibility of making such payments on account, and the Spanish State's Legal Service, which had rejected this option (Report AEH - Hacienda 10/20 (R-341/2020), April, 7, 2020).

It is envisaged that the advance payment may be made in a single payment or by means of periodic payments and that the amount advanced will subsequently be deducted from the liquidation of the contract. Furthermore, it is indicated that the contracting authority may require that the advance payment be secured by some of the means of guarantee provided for in Law 9/2017 of 8 November on Public Sector Contracts (hereinafter, LCSP).

The contractor must request the delivery on account of the amounts that form part of the corresponding compensation and the contracting body decides without precise guidelines on this (the provision merely says that the contracting body may grant it). In these circumstances, we face an open scenario in which public sector suppliers may find themselves with very different decisions depending on the authority in question.

Of course, in our Law pure discretion is not easily admitted and practically all acts of the public authorities are subject to judicial control, so that a negative decision without foundation would certainly be appealable according to the provisions of the law. However, insofar as there is no summary procedure for resolving such a discrepancy, the possibility is more theoretical than real since, in the event of a refusal, the contractor may prefer to wait until the end of the suspension of the contract before claiming compensation.

Moreover, the provision does not indicate the value of the administration's silence on the request for delivery on account. However, for the reason given above, the discussion on this point may prove to be sterile, since, even if silence were admitted to be positive, the contractor would be obliged to make a new request for execution of what would have been tacitly granted by the contracting authority, opening a new procedure, which may extend beyond the time when the final compensation may be requested.

In any case, this is a positive regulation that puts an end to the dispute over the possibility of making deliveries on account of the final compensation.

Rebalancing of contracts in works and services concession

Section 2 of the 9th final provision of RDL 17/2020 introduces a small amendment to Article 34.4 of RDL 8/2020, which regulates the right to rebalance works and service concessions in this exceptional situation.

The regulation of the right to rebalance concessions in Article 34 4 of RDL 8/2020 is being strongly criticized by all the economic sectors affected (infrastructure and public service concessionaires), above all because of the requirement contained in the third paragraph of the precept in which this right is conditioned ("...it will only proceed...", he states) in those cases in which "...it has been determined that it is impossible to execute the contract..." as a result of the pandemic or the government measures adopted to control it.

Since the entry into force of RDL 8/2020, there has been serious legal uncertainty as to what should be understood by "...impossibility..." of executing the concession contract, and whether or not it implies a total cessation of service provision. In fact, the main uncertainty for the concessionary companies is whether there is a right to the rebalancing of the concessions in which the very rules of the state of alarm require that the provision of the service continue because it is an essential service. But in which the revenues of the concession have been substantially reduced or even practically disappeared, due to the effect of the containment measures or movement restrictions.

The legal interpretation that the General State Administration has made of this precept (which has been expanding at lower territorial levels) is that the right to rebalance requires the absolute impossibility of providing the service. And that, therefore, the concessions that continue to be executed, even though demand has been substantially reduced, would not fall within the scope of Article 34.4 of RDL 8/2020. An interpretation that generates great concern in the sectors affected (and which we in no way share).

To try to respond to this criticism, this small modification of the third paragraph of Article 34.4 has been approved, which now reads as follows: "The application of the provisions of this paragraph shall only proceed when the contracting authority, at the request of the contractor, has assessed the impossibility of executing the contract as a result of the situation described in its first paragraph and only with respect to the part of the contract affected by this impossibility".

The addition of this brief paragraph to the rule does not provide a clear or satisfactory response to the central problem posed in this sector. It admits the rebalancing of those concessions with distinct parts that having completely stopped as a result of the pandemic (which actually happens in certain public services), but does not resolve what happens with those concessions of essential services that have continued to be provided during the state of alarm. There are interpretations of the precept that could provide a correct solution to the issue, but, by now, the same situation of regulatory uncertainty remains on this issue.

Scope of application of Article 34, in particular to concessions

Finally, the 9th final provision, paragraph 3, of RDL Law 17/2020 adds a final subparagraph to Article 34(7) of RDL Law 8/2020, which seeks to clarify the "...public contracts..." included in its scope of application.

With this legal amendment, the Government is attempting to respond to the severe criticism levelled at Article 34.7 of RDL 8/2020, which was not included in its original wording and was incorporated by RDL 11/2020. From the wording of this article it could be deduced that it did not apply to concessions prior to 2011. This is entirely absurd because a very large number of the infrastructure and public service concessions in Spain are prior to that date.

With a very unfortunate technical wording, RDL 17/2020 resolves this issue by establishing the following:

"The following shall also be considered as "public contracts": works contracts, service or consultancy and assistance contracts that are complementary to a main works contract and necessary for the correct performance of the service, as well as concession contracts, whether for works or services, including public service management contracts; concluded by entities belonging to the Public Sector within the meaning of Article 3 of Law 9/2017, of November 8; provided that they are effective on the entry into force of this Royal Decree Law and regardless of the public procurement regulations to which they are subject in accordance with the specifications."

It is thus clear that concession contracts (at least concession contracts for works, services and management of public services) prior to 2011 are also included in the scope of application of this precept. The application of this provision will continue to raise serious doubts regarding other concession modalities.

In addition to clarifying this issue, RDL 17/2020 adds a final paragraph to Article 34.7 of RDL 8/2020, the wording of which is extremely confusing and subject to different possible interpretations:

"In these contracts, the provisions of the articles relating to compensation for contract suspensions in the public procurement regulations prior to Royal Legislative Decree 3/2011, of November 14, which are applicable to them, as well as those compensations for suspension provided for in the contract specifications within the scope of the public procurement regulations in the water, energy, transport and postal services sectors, shall not be applicable to the suspensions referred to in this article".

This new paragraph seems to say that neither the compensatory regime established in Article 34(1) and (3) (suspended service contracts and works contracts) nor the administrative procedure regulated in these paragraphs is applicable to concession contracts, even if they are suspended concessions (sic).

Nor does the regulation on compensation for contract suspensions contained in public sector contract legislation prior to 2011 apply to these concessions.

This (very defensive) regulation seems to be dictated in response to actions that are being initiated in recent weeks by some companies in the concession sector.

Other developments in public procurement introduced by RD Law 17/2020

Other novelties of this Royal Decree Law related to public procurement are the following:

A) Specific measures in the area of public procurement in support of the performing arts and music

Regarding public contracts for artistic interpretation and shows with a value of no more than 50,000 euros, Article 4 of RDL Law 17/2020 provides for the possibility of modifying or suspending these contracts to be concluded at a later date. In these cases, the contracting authority may agree to pay the contractor up to 30% of the contract price as an advance payment, without this advance payment being subject to guarantee.

On the other hand, if the event cannot be postponed and a decision is taken to terminate the contract, provision is made for possible compensation in favor of the contractor, which may not be less than 3% or more than 6% of the contract price.

B) Modification of the LCSP in relation to the regime of own personalized resources

The 8th final provision of RD Law 17/2020 modifies sections 2 and 3 of article 33 of the LCSP, which refer to the consideration of own personalized means, clarifying the requirements that public sector entities must have in order to hold said condition and regulating in greater detail the case in which a public sector entity carries out an assignment to another entity of the same sector; a variation which, incidentally, would have no relation with the crisis caused by the COVID-19.