22.04.2025

Fixed price in public procurement contracts for the design and execution of works

 In the present article, we aim to offer a solution to an important problem that contractors may face, in practice, in public procurement contracts for the design and execution of works, regulated by GD no. 1/2018, namely the possibility that the contracting authority, as beneficiary, may refuse, after the completion of works, to pay the difference between the lump sum agreed in the contractual agreement and the amount of the sums accepted for payment during the course of the contract.

Currently, a significant part of public procurement contracts is subject to the provisions of GD no. 1/2018 for the approval of the general and specific conditions for certain categories of procurement contracts related to investment objectives financed from public funds (hereinafter "GD no. 1/2018"). 2 to this normative act contains the general and specific conditions, together with the framework model contractual agreement, for public or sectoral works procurement contracts, having as their object both the design and the execution of works and related to investment objectives financed from public funds, including non-reimbursable and/or reimbursable funds .[1]

Essentially, the terms of these contracts are represented by the General Conditions for design and works contracts set out in Annex No 2 to the aforementioned normative act (hereinafter "General Conditions"), as supplemented and amended by the Specific Conditions established by the Parties at the conclusion of the Contract and by the Contractual Agreement.

The General Conditions approved by GD no 1/2018 are abundant in terms of the clauses governing the manner in which the price is established and paid. At first sight, they provide a clear solution - in the absence of an express stipulation that the price of the works is to be paid according to the quantities supplied or the works performed, the contract price is a lump sum[2]. Thus, clause 45.4 of the General Conditions expressly provides that, to the extent that the parties wish to derogate from the fixed price, this must be expressly provided for in the Special Conditions agreed by the parties. This conclusion is confirmed by several clauses in the General Conditions .[3]

In fact, the provisions of HG no. 1/2018 regarding the price of the public works procurement contract are nothing more than a particular application of the lump-sum price regulated in Article 1867 of the Civil Code, so that Clause 49.1 expressly provides that "Except in the cases expressly provided for in the Contract Conditions, the Contractor shall not be entitled to request an increase in the lump sum on the grounds that the work or service required more labour or cost more than initially anticipated, and likewise, the Beneficiary shall not be entitled to request a decrease in the lump sum price on the grounds contrary to the above"

However, a number of contractual provisions relating to the way in which the price is to be paid (e.g. on the payment instalment schedule, the drawing up of statements of works or the issuing of a payment certificate) give rise to difficulties of interpretation which are sometimes speculated on in practice by contracting authorities in order to avoid full payment of the price.

Thus, after clause 49.1 establishes that the lump sum is to be paid in accordance with the instalment schedule, clause 49.2 of the General Conditions provides as follows:

^"49.2.[...] The Supervisor shall also use an alternative method of valuing the parts of the Permanent Works executed at that time (including the Contractor's Documents), using the lists of quantities in the Contractor's Documents, the measurement of those quantities actually executed and the unit prices submitted by the Contractor as provided in Clause 18 [Detailed Price Structure] or other relevant unit prices such as market prices."

Clauses 50.1 and 50.3 of the General Terms and Conditions also provide that:

"50.1. Situation of Works

After the Commencement Date, on a monthly basis, the Contractor shall submit to the Supervisor, in quadruplicate, the Statement of Works detailing the amounts to which the Contractor considers itself entitled, together with supporting documents. [...]

The Contractor shall not claim in the Statements of Works and the Supervisor shall not certify for payment amounts for which the Contractor has not provided in full and in final form the necessary supporting documents as reasonably determined by the Supervisor."

 "50.3. [...] By issuing a Certificate of Payment, the Supervisor certifies, on his own responsibility, that the amounts claimed for payment are in accordance with the Contract and correspond to actual works, services and items in accordance with the Contract. [...]

The Supervisor shall not certify for payment amounts for which the Contractor has not provided in full and in final form the necessary supporting documents as reasonably determined by the Supervisor."

On a superficial reading, these provisions may appear contradictory and may give rise to the risk that a beneficiary contracting authority may refuse to pay the difference between the lump sum agreed in the contractual agreement and the amounts accepted for payment during the course of the contract, after the works have been completed.

We consider that such an interpretation cannot be accepted and that such a refusal would be based on a confusion between the obligation to pay the price, which concerns the total price (set as a lump sum) and the way in which parts of it are settled during the course of the contract. Moreover, clause 49.2 sets out the mechanism for reconciling the contractual provisions relating to the lump sum price with those providing for payment on the basis of the quantities actually performed .[4]

On a systematic interpretation of the provisions cited, we consider that a distinction must be drawn between the payment of the works during the performance of the contractual agreement and the total, flat-rate price which the beneficiary is obliged to pay to the contractor at the end of the performance of that contract.

It is thus true that, by reference to the provisions of clause 49.2, if the application of the method set out in the instalment payment schedule would result in the contractual value of the works performed being significantly higher than the value of the parts of the permanent works performed at that time, determined in accordance with the alternative method provided for in the said clause, the supervisor is entitled to temporarily withhold this difference from the corresponding payment certificate. Therefore, during the execution of the contractual agreement, the works may be settled on the basis of the quantities actually executed and not according to the payment instalment schedule.

Instead, after completion of the Works, the Contractor is entitled to claim for payment the difference between the value of the Works as a lump sum set out in the instalment payment schedule and the amount established by the Supervisor during the course of the Contract, given that, according to Clause 49.2, "Any balance temporarily retained in accordance with the provisions of this sub-clause shall become payable on the first Payment Certificate issued after the approval of the Acceptance of Completion of all Works."

It can therefore be concluded that the beneficiary will remain obliged to pay the lump sum price agreed by the parties through the contractual agreement, regardless of the quantities actually performed by the contractor, and that the alternative method of breaking down payments according to the quantities actually performed, as provided for in Clause 49.2, is merely a mechanism for determining the amount of payments to be made by the beneficiary during the performance of the contact agreement

An article signed by Dan-Rareș RĂDUCANU - Senior Partner and Mircea VASILE - Junior Lawyer, STOICA & ASOCIAȚII.