A provisional article was added to the Public Procurement Agreements Law (the “Law”) on 19.01.2022 in order to provide an additional price difference upon the request of the contractors and to enable the contractors to assign their tender agreements with the approval of the relevant tender authority for certain procurements of goods/services and construction works. The purpose of this additional provision was to eliminate the negative implications of disruptions on supply chains (including supply of raw materials) and in the unexpected increases in input costs of the contractors in the world. The President was authorized to determine the principles and procedures (including the application period) of additional price difference in public tenders and assignment of tender agreements.
In light of the above, the Presidential Decree numbered 5203 and dated 23.02.2022 about “Principles Regarding the Implementation of the Provisional Article 5 of the Public Procurement Agreements Law No. 4735” (“Principles”) was published in the Official Gazette on 24.02.2022. In this respect, the Principles have come into force as of 24.02.2022.
In this regard, in the procurement of goods and services as well as construction works, the following conditions have to be met in order for the contractors to request for additional price difference and/or to assign their tender agreements with the approval of the administrative body:
- The tender shall be made in accordance with according to the Public Procurement No. 4734 (“Tender Law”).
- The tender shall be made before 01.12.2021.
- The tender agreement signed within the scope of the tender shall have continued as of 22.01.2022 (as an alternative with respect to the additional price difference, acceptance or preliminary acceptance of goods/services shall have been made before 22.01.2022 and the relevant agreements shall not have been terminated or dissolved.).
- The currency of the relevant agreement shall be Turkish Lira.
- Additional Price Difference
- Important Provisions Related to the Scope
In addition to the conditions mentioned above, any requests for additional price difference shall not be made within the scope of the Principles for the following procurements: (i) procurement of electricity, medicine, petroleum products and liquefied petroleum gas (LPG) if the relevant tender agreements already include provisions for calculation of additional price difference, (ii) procurement of goods required to be delivered to the tender authorities within 60 days or earlier after the tender date (the date to bid for the tender) and (iii) procurements of short-term services as well as financial and legal consultancy services in certain fields. Requesting supplementary over price for procurement contracts regarding the purchase and obtainment of these will not be possible within the context of the relevant provisional article of PPCL.
- Application Period and Procedure
In order to request for the additional price difference, the contractors shall apply to the relevant tender authority in writing within 30 days as of the enforcement of the Principles until 28 March 2022 at latest (as the last day of the period which is 26.03.2022 is not a working day).
- Other Notes for Additional Price Difference Conditions
Additional price difference can be requested for obligations fulfilled between 01.07.2021 and 31.12.2021. However, the following performances shall not be considered for calculation: (i) the partial deliveries made within 60 days as of the tender date (the last day to bid for the relevant tender in other words) and (ii) agreements which should have normally been completed before 01.07.2021 but still continued after this date as subject to late performance sanctions.
On the other hand, for agreements which have time for delivery or work after 01.07.2021, even if the contractor fails to duly perform its obligations within the schedule under the relevant tender agreements, such contractors may still be eligible to request for additional price difference. Furthermore, in case of force majeure or any other extension given to contractor due to a reason arising from the relevant tender authority, additional price difference can also be calculated for works or deliveries made within the extended time period between 01.07.2021 and 31.12.2021.
Except for the procurements of electricity, medicine, petroleum products and liquefied petroleum gas (LPG), the additional price difference can still be request in accordance with the Principles in addition to other additional price difference calculation already regulated under their agreements.
If the additional price difference turns out to be a negative number according to the calculations, there will be no deductions on the remuneration made/to be made to the contractor.
- Assignment of Tender Agreements
- Important Provisions Related to the Scope
Contractors can apply for assignment of their tender agreements for all procurement of goods/services and construction works within the scope of the Law and the Principles.
- Application Period and Procedure
In order to request for the assignment of tender agreements, the contractors shall apply to the relevant tender authority in writing within 60 days as of the enforcement of the Principles until 25 April 2022 at latest.
The relevant tender authority shall decide on the application in 30 days and the contractor shall complete the necessary transactions regarding the assignment in the subsequent 30 days if their application is accepted by the authority. Otherwise, the application will not be valid. Therefore, it is quite important to closely follow the procedure when an application is made for assignment of tender agreements.
- Other Notes for Assignment of Tender Agreements
Any application to the tender authority shall not cease the contractors’ obligations arising from their tender agreements. Different from the additional price requests, the assignment of contracts shall be subject to the approval of the relevant tender authority. Until the assignment is completed, the contractor shall be liable against the tender authority for performance of the relevant tender agreement. When the assignment is completed, the new contractor shall continue to perform the remaining obligations and the previous contractor will not be entitled to claim any financial compensation other than for the work or manufacturing that had been completed until the completion of the assignment.
Except for assignments or share transfers between parties of a joint venture which signed the relevant tender agreement, the assignee shall meet the conditions for the relevant tender as of the date of the assignment. In addition, the tender authority shall also determine measures to be taken by the assignor contractor for safety of life, property and construction.
In addition to the above, the assignment of agreements will not be subject to stamp tax, the performance guarantee of the assignor will be returned to the relevant contractor once the agreement is assigned and the contractor which assigned their tender agreements can still request for additional price difference when they meet the relevant conditions for this.
As the applications within the scope of the Principles shall be made within certain periods, it is of utmost importance for the contractors to revisit their tender agreements for tenders they participated in and won before 01.12.2021 and to make the necessary written applications for the agreements which meet the conditions.
Each tender agreement should be separately evaluated to confirm whether they meet the conditions under the Principles, how the additional price difference will be calculated for the relevant tender agreement and other issues to be considered for assignment of tender agreements. As the Public Procurement Authority is authorized to make clarification about the hesitations arising from the practice. Therefore, it will be very helpful to follow up the announcements and publications of the Public Procurement Authority in this respect. There are also special provisions regarding the agreements signed with the Housing Development Administration of Turkey.
Lastly, in near future, additional regulations can also be made for other procurements (except procurements made by State Supply Office for the administrative authorities) and construction works, which are exempt from the implementation of the Tender Law as well as for agreements signed with public entities outside of the Tender Law’s scope on condition that these meet the conditions regulated under the Principles.
Special thanks to Ahmet Yılmaz for his contributions.