In brief

The current climate surrounding the COVID-19 crisis requires a significant level of flexibility in contractual relationships. To provide flexibility, the public procurement process has been accelerated to help reduce deadlines for submission request. Permitting direct awards and providing a range of options available to contracting authorities.


Contents

  1. Accelerating procurement procedures during COVID-19
  2. Direct awards as a general rule
  3. Other options available to contracting authorities
  4. Final remarks and lessons learned

Accelerating procurement procedures during COVID-19

The Austrian public procurement laws provide sufficient means for situations where, as at present, rapid action is required to ensure the basic supply of critical infrastructures such as health care facilities and to take measures to combat and spread the COVID-19 pandemic. This applies at least to the health sector, which is also the interpretation of the European Commission. In other sectors, there are no explicit official statements in this regard.

In the course of the Corona crisis, it was previously permissible and it is open until when it will be still permissible to resort to exceptional provisions such as the negotiated procedure without notice, to shorten the time limits for submitting tenders and to award contracts to only one particular company in the negotiated procedure without notice (which is not a direct award of contracts from a purely formal point of view of the Austrian Procurement Law).

Generally speaking: according to Austrian law, it is possible in case of urgency, such as the current COVID-19 crisis, to accelerate procurement procedures by reducing the deadlines for the submission of requests to participate or offers (Sec. 74, Sec. 77 und Sec. 246 BVergG 2018; Sec. 55 BVergGVS 2012). This is not foreseen for concessions.

For contracts (services, deliveries and goods) in the classical sectors above the EU thresholds the following applies: the deadline for submission of offers in open procedures can be reduced to 15 days; the deadline for submission of requests to participate in restricted procedures and negotiated procedures with prior publication can as well be reduced to 15 days, while the limit for submission of offers amounts in such cases to 10 days. For contracts below the EU thresholds classical contracting authorities, can reduced time limits further (no minimum time limits foreseen).

Direct awards as a general rule

The conclusion of a contract via direct award without prior publication of a contract notice is under Austrian law currently permitted as a general rule for contracts with an estimated value below EUR 100.000 (defense sector EUR 75.000). This threshold applies regardless of whether emergency situations occur.

Nevertheless, in cases of extreme urgency brought about by events unforeseeable by the contracting authority and not attributable to it. If the regular time limits for public procurement procedures cannot be respected due to the emergency situation the law permits the use of a negotiated procedure without prior publication of a contract notice (Sec. 35(1)(4), Sec. 36(1)(4), Sec. 37(1)(4), Sec. 206(1)(5) BVergG 2018 and Sec. 25(4) BVergGVS 2012). This special procedure is in particular applicable to the special procurement needs directly related to the COVID-19 pandemic (personal protective equipment; medical equipment; etc.). A negotiated procedure without prior publication with only one potential contractor (i.e. a de-facto direct award) is as well admissible, but it is limited to situations where only one economic operator is able to deliver within the technical and time constraints determined by the extreme urgency (for example where certain goods due to the current situation are not anymore or were not generally available on the market). This possibility is not forseen for concessions.

The defense sector has additional specific provisions.

However, these exceptions should be applied with caution. Indeed, it is often the case that several bidders are nevertheless able to submit a bid. The situation is currently changing constantly, as can be seen, for example, in Austria in the supply of protective masks. Initially, there was no production in Austria, but in the meantime, production has also been launched here in Austria. Exceptional circumstances must therefore be subjected to very careful evaluation even in times of crisis. Although rapid action is required, the principles of transparency and objectivity in the decisions of contracting authorities remain valid. A corresponding documentation is therefore necessary.

The award of a contract following negotiations with only one bidder is also permissible if works, supplies or services can only be delivered by one contractor due to lack of competition for technical reasons or the protection of exclusive rights and no reasonable alternatives can be used (negotiated procedure without prior publication according to Sec. 35(1)(3), Sec. 36(1)(3), Sec. 37(1)(3), Sec. 206(1)(4) BVergG 2018, Sec. 25(5) BVergGVS 2012. A similar rule is contained in Sec 22(3) BVergGKonz).

It is important to point out that provisions related to special public procurement procedures have to be applied restrictively.

Other options available to contracting authorities

Existing contracts may be extended and/or amended in order to cover the additional need due to the current COVID-19 crisis. Austrian law – in line with the relevant EU public procurement directives – allows among others for amendments up to 50% of the original contract value if the amendment to the contract is due to unforeseeable events and the overall nature of the contract remains unchanged (Sec. 365(3)(6) BVergG 2018 and Sec. 108(3)(6) BVergGKonz 2018). To modify an existing contract under this provision without launching a new tender procedure the following requisites must therefore be cumulatively met:

  • the contract change is due to events that a careful contracting authority could have not foreseen at the moment of the award of the contract;
  • the contract change does not modify the general nature of the contract (for example the same type of deliveries or services are procured);
  • the price increase resulting out of the change does not exceed 50 % of the original contract value.

It is recommendable to make use of the flexibility of framework agreements and framework contracts, which permit to submit orders quickly under predefined conditions (especially in cases where competition is not reopened). While availing itself of the possibility to increase the scope of already existing framework agreements or contracts the rules on contract amendments during contract execution must be anyhow observed.

Final remarks and lessons learned

In emergencies, it is of utmost importance to apply flexible and fast solutions for public procurement. In doing this, it is anyhow essential to fully respect applicable public procurement regulations. In this regard contracting authorities should bear in mind that:

  • The use of a direct award or of other types of exceptional procedures outside the limits set by law if challenged in court can result in the annulment of the contract and/or in financial penalties for a contracting authority (Sec. 356 BVergG 2018 und Sec. 100 BVergGKonz 2018).
  • Transparency obligations according to Austrian public procurement law are to be always complied with (in Open Government Data System (OGD-System) and/or in the Official Journal of the European Union). In particular, contract notices on the award of negotiated procedures without prior publication – even if only one bidder was invited – must be published at EU and/or at national level, as well as amendments to existing contracts due to unforeseeable events for contracts above the EU thresholds/EUR 50.000,-. In case of breach of these transparency obligations an administrative penalty up to the amount of EUR 50.000 can be inflicted to the contracting authority (Sec. 375(1) BVergG2018 und Sec.117(1) BVergGKonz 2018). There is a different regulation in the defense sector.
  • Prevention of dependencies in the supply of medical goods and medicines is of utmost importance: it was already in the past necessary to avoid dependencies. This goal has increasingly been lost sight of due to budgetary constraints. However, this may have an adverse effect in times of crisis, when international supply and production chains are interrupted It is thus necessary to consider where a “multiple supplier policy” shall be pursued, eg especially for critical medical devices, for example by concluding framework agreements or by drawing lots, either regionally or for “technical” reasons.
  • Procurement specialized institutions such as the Federal Procurement Agency or the Red Cross are doing an excellent job. However, it is important to prevent a tightening of the market on both sides.
  • After Corona, it will most probably not be able to argue that a pandemic was unpredictable. Minimum standards and minimum equipment with regard to protective material will therefore have to be set. The idea of “sustainability” in public procurement may receive a new connotation.

Baker McKenzie’s Public Procurement World: More information about the world’s most important public procurement laws and guidance in light of the global COVID-19 pandemic.