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January
06
FOR PROJECT PROMOTERS: HOW TO IMPLEMENT A PURCHASE CONTRACT PROPERLY AND AVOID MISTAKES
The Lithuanian Business Support Agency (LVPA) emphasises the importance of adhering to the terms and conditions of purchase contracts and the payment procedure, to avoid material errors for project promoters.
It should be noted that applicants, project promoters or partners who are not contracting authorities under the requirements of the Law on Public Procurement (hereinafter referred to as the non-contracting authority) must not only carry out the procurement procedures in accordance with the Project Administration and Financing Rules (subparagraphs 460.8, 460.9, hereinafter ‘PAFR’) but also duly perform the contract awarded after the completed procurement procedures in accordance with the terms and conditions of the tender and the provisions of the public purchase contract.
‘We would like to remind you that the procedure for settlement with suppliers and the deadlines for completion of the public purchase contract, and penalties for failure to fulfil its obligations in a timely manner to suppliers are essential purchase terms and conditions, therefore they must be strictly observed’, says Tomas Vitkauskas, Chief Expert of Project Development and Evaluation Division of the LBSA.
During the execution of the public purchase contract, the payment procedure may not be changed if this demonstrates favouring the supplier. For example, it is not possible to increase the amount of the advance payment, reduce the final payment by transferring the amounts due to advance or interim payments, or bring forward the final payment before the equipment is installed and commissioned if the purchase contract expressly provides that payment is due only after the supplier has fulfilled all its obligations.
It should also be noted that the deadlines for the performance of the purchase contract are essential and must be respected. The deadlines may be changed only in the cases specified in the purchase contract, or in the event of the occurrence of circumstances beyond the control of the supplier, which the prudent and diligent supplier could not have foreseen when submitting the tender and concluding the purchase contract, and which directly impede the fulfilment of its obligations.
However, such circumstances must be substantiated by the supplier, and the project promoter must be able to prove their validity. Otherwise, an extension of the deadline without interest for late payment will not be in line with the provisions of the PAFR.
The LBSA assesses whether the amendment of the purchase contract would have had an impact on suppliers operating in the market who had not previously participated in the tender under the terms and conditions of the initial purchase contract, i.e. whether these entities might have participated if the amended clause had been included in the terms and conditions of the initial contract.
In other words, it is assessed whether the economic behaviour of the supplier operating in the market might have changed, and it would have decided to participate in the tender if it had not previously exercised that opportunity, or would have participated in that tender under the terms and conditions different from those under which it has submitted its bid.
In the event of a need to modify the terms and conditions of the awarded purchase contract as a result of circumstances related to Covid-19, the non-contracting authorities may take into account the interpretation provided by the Public Procurement Office.
‘In any case, we recommend that before making an amendment to the purchase contract or before making a decision not to comply with the terms and conditions of the purchase contract, even if it is not formalised in a written amendment to the purchase contract, to coordinate such a decision with the LBSA’s project manager’, notes Vitkauskas.
Please be reminded that a project promoter is responsible for the proper execution of the public purchase contract.
It should be noted that applicants, project promoters or partners who are not contracting authorities under the requirements of the Law on Public Procurement (hereinafter referred to as the non-contracting authority) must not only carry out the procurement procedures in accordance with the Project Administration and Financing Rules (subparagraphs 460.8, 460.9, hereinafter ‘PAFR’) but also duly perform the contract awarded after the completed procurement procedures in accordance with the terms and conditions of the tender and the provisions of the public purchase contract.
‘We would like to remind you that the procedure for settlement with suppliers and the deadlines for completion of the public purchase contract, and penalties for failure to fulfil its obligations in a timely manner to suppliers are essential purchase terms and conditions, therefore they must be strictly observed’, says Tomas Vitkauskas, Chief Expert of Project Development and Evaluation Division of the LBSA.
During the execution of the public purchase contract, the payment procedure may not be changed if this demonstrates favouring the supplier. For example, it is not possible to increase the amount of the advance payment, reduce the final payment by transferring the amounts due to advance or interim payments, or bring forward the final payment before the equipment is installed and commissioned if the purchase contract expressly provides that payment is due only after the supplier has fulfilled all its obligations.
It should also be noted that the deadlines for the performance of the purchase contract are essential and must be respected. The deadlines may be changed only in the cases specified in the purchase contract, or in the event of the occurrence of circumstances beyond the control of the supplier, which the prudent and diligent supplier could not have foreseen when submitting the tender and concluding the purchase contract, and which directly impede the fulfilment of its obligations.
However, such circumstances must be substantiated by the supplier, and the project promoter must be able to prove their validity. Otherwise, an extension of the deadline without interest for late payment will not be in line with the provisions of the PAFR.
The LBSA assesses whether the amendment of the purchase contract would have had an impact on suppliers operating in the market who had not previously participated in the tender under the terms and conditions of the initial purchase contract, i.e. whether these entities might have participated if the amended clause had been included in the terms and conditions of the initial contract.
In other words, it is assessed whether the economic behaviour of the supplier operating in the market might have changed, and it would have decided to participate in the tender if it had not previously exercised that opportunity, or would have participated in that tender under the terms and conditions different from those under which it has submitted its bid.
In the event of a need to modify the terms and conditions of the awarded purchase contract as a result of circumstances related to Covid-19, the non-contracting authorities may take into account the interpretation provided by the Public Procurement Office.
‘In any case, we recommend that before making an amendment to the purchase contract or before making a decision not to comply with the terms and conditions of the purchase contract, even if it is not formalised in a written amendment to the purchase contract, to coordinate such a decision with the LBSA’s project manager’, notes Vitkauskas.
Please be reminded that a project promoter is responsible for the proper execution of the public purchase contract.
