Eng Adriana Spassova MSc Construction Law Dispute Resolution

Eng. Adriana Spassova MSc Construction Law & Dispute Resolution King’s College London Member of BACEA Control Board, Member of FIDIC and EFCA DRBF Country Representative

Current Use of FIDIC under the Bulgarian Public Procurement Act (PPA) • The PPA establishes the principles, terms and procedures for public procurement, ensuring efficiency in the spending of public resources. (PPA Art. 1) • The Ministry of Economy is responsible for the public procurement. • The Public Procurement Agency (PP Agency) is a special body, responsible for the draft legislation, the implementing of EU directives, the methodology for their implementation and keeping a national public contracts register. • The Public Financial Inspection Agency and the National Audit Office are monitoring the proper implementation of the public procurement legislation. http: //europa. eu/youreurope/business/public-tenders/tools-database/index_en. htm#bulgaria_en_benefiting-from-public-contracts

Current Use of FIDIC under the Bulgarian Public Procurement Act (PPA) The Public Procurement Portal is a centralized information system, providing access to all aspects of public procurement. The e-Register kept by the PP Agency contains: • decisions on opening and closing public contract selection procedures, as well as decisions to extend submission periods for bids or expressions of interest; • notices intended for entry in the register; • information about awarded public contracts; • information about completed public contract agreements; • other information.

Current Use of FIDIC under the Bulgarian Public Procurement Act (PPA) Statistics for construction contracts awarded in 2014 Source: Public Procurement Portal 1 EUR = 1. 95583 BGN Threshold (excl. VAT) > 2 150 000 BGN No. Contract Amount 319 2, 052, 152, 505. 28 BGN 1132 798, 938, 990. 17 BGN 1657 83, 862, 010. 39 BGN 2 213, 356. 61 EUR • Contracts with FIDIC conditions (Red or Yellow Book): about 1% of the value of the awarded works contracts in 2014; • FIDIC used for transport, waste and water projects.

Current Use of FIDIC under the Bulgarian Public Procurement Act (PPA) FIDIC Claims and Variations under the PPA • Usually a new Clause 21 is added in the Particular Conditions, stating that all agreements and future actions of the parties shall be interpreted pursuant to the PPA. • The starting point is the mandatory PPA Art. 43(1): The parties may not modify a PP Contract! For pity, in many cases this is the mantra repeated by employers within the PPA ambit… Working with the lowest EU salaries in a constantly changing environment (5 government for the last two years, more than 60 amendments of the Spatial Development Act (SDA) and more than 30 amendments of the PPA for the last 10 years), the responsible officers prefer the narrow interpretation of the PPA.

Current Use of FIDIC under the Bulgarian Public Procurement Act (PPA) FIDIC Claims and Variations under the PPA: Including “Options” in the contract conditions pursuant to PPA Art. 15(2) 3. , within the marginal Contract Price: • Option clauses permitting time extension. • A provision for additional % (usually 5÷ 15) of the Accepted Contract Amount per FIDIC SC 1. 1. 4. 1 to be stated in the tender documents as an amount for “unforeseen costs” and to be available for adjustments in accordance with the Contract, limiting the margin of the Contract Price per FIDIC SC 1. 1. 4. 2;

Current Use of FIDIC under the Bulgarian Public Procurement Act (PPA) FIDIC Claims and Variations under the PPA: EOT Options • FIDIC mechanism to be used. “Time for Completion” per FIDIC SC 1. 1. 3. 3 means the proposed time for completion, used as a selection criterion, with any extension under SC 8. 4, calculated from the Commencement Date. (Attachment 3 to Art. 47 a (4) of the Regulations for the PPA Implementation (31): “The time for completion may be fixed or definable”); Commencement Time for Completion EOT State Commissioning • The Commencement Date per FIDIC SC 1. 1. 3. 2. to be the Date for the Commencement of Construction, pursuant to the SDA (the SDA Site Opening to be harmonised with FIDIC SC 2. 1); • Harmonising the Taking-Over procedure with the SDA – different trends, sometimes disbalancing the contract, due to the state commissioning procedures with uncertain deadlines;

Current Use of FIDIC under the Bulgarian Public Procurement Act (PPA) FIDIC Claims and Variations under the PPA: EOT • Suspension of the works, signing the relevant Act 10 per Regulation 3 for acts and protocols during construction in case of unfavourable climatic conditions (FIDIC SC 8. 4), unforeseeable physical conditions (FIDIC SC 4. 12) or other unforeseen circumstances (e. g. Force Majeure FIDIC Clause 19). Instead of determining the Contractor’s entitlement to EOT, the interpretation is that the Time for Completion is not running until the Act 11 for the restarting of construction is signed by the parties. Commenc ement Time for Completion Suspension Time for Completion State Commissioning

Current Use of FIDIC under the Bulgarian Public Procurement Act (PPA) FIDIC Claims and Variations under the PPA: Addendum to the contract within the ambit of the PPA Art. 43(2)exceptions: “Unforeseen Circumstances”(defined in the PPA Additional Provisions Para 1, 14 b: have arisen after the contract was signed; not a result of actions or non-performance of the parties; could have not been foreseen, taking due care; make impossible the execution of the contract) lead to: • Extension of Time for Completion – FIDIC SC 8. 4; • Partial substitution of activities benefiting the Employer, not increasing the Contract Price; • Reduction of the Contract Price, reducing or omitting activities or reducing rates; • Changes in law increasing the Contract Price – FIDIC SC 13. 7.

Current Use of FIDIC under the Bulgarian Public Procurement Act (PPA) FIDIC Claims and Variations under the PPA: New public procurement procedure without announcement • Additional works may be assigned to the Contractor under Art. 90 (1) 4 (Art. 103 for infrastructure) in case of “Exceptional Circumstances” when urgent actions are needed to mitigate the risks. • Additional works, necessary for the main contract, may be assigned to the same Contractor pursuant to Art. 90 (1) 8 (Art. 103 for infrastructure) in case of “Unforeseen Circumstances” not exceeding 50% of the Contract Price.

Current Use of FIDIC under the Bulgarian Public Procurement Act (PPA) Application of FIDIC conditions under the PPA: Problems Candidates propose impossible Time for Completion The Time for Completion is a mandatory selection criterion for the most economically advantageous tender, pursuant to PPA Art. 28 a para 2 (usual weight 10%) and due to the lack of work, the candidates often propose impossible time periods for design and construction. Solutions: • The minimum Time for Completion to be analysed in relation with the proposed organisation and resource allocation, as well as the technical specification and best practices, using the options listed under the PPA Art. 28 a para 3 to include such selection criteria. • The minimum Time for Completion to be stated in the tender documentation (in this case probably all candidates shall stick to it, thus this criterion shall not actually participate in the selection of the best tender).

Current Use of FIDIC under the Bulgarian Public Procurement Act (PPA) Application of FIDIC conditions under the PPA: Problems Self-restriction due to incompetent drafting of the contract • The Time for Completion is fixed with a calendar date; • The Contract Price is the Accepted Contract Amount and cannot be changed; • An Addendum has to be signed for each EOT. Solutions: • Competent persons to draft the tender documents; • No last moment changes to be done by the contracting authorities; • FIDIC Particular Conditions for PP procedures to be agreed and implemented for all major works contracts.

Current Use of FIDIC under the Bulgarian Public Procurement Act (PPA) Application of FIDIC conditions under the PPA: Problems Legal uncertainty about the contract modifications Solutions: • The PP Agency to issue a more detailed guidance about the application of the options; • FIDIC contract conditions to be widely implemented, in order to have a well-known transparent mechanism for variations and EOT, to be interpreted as option clauses; • FIDIC Clause 13 may be harmonised in the Particular Conditions with the European case law for substantial modifications, implemented in the new EU Directives.

Current Use of FIDIC under the Bulgarian Public Procurement Act (PPA) Application of FIDIC conditions under the PPA: Problems Discrepancy between the grant and the works contracts • In many cases the implementing agencies responsible for the grants impose additional restrictions, which are not part of the works contracts. • In similar cases, using FIDIC contracts with the same Particular Conditions, some employers may require an addendum, others not, depending on the guidance of the financing agency. Solutions: • Careful drafting and synchronisation; • Sharing best practices between contracting authorities.

Current Use of FIDIC under the Bulgarian Public Procurement Act (PPA) Application of FIDIC conditions under the PPA: Problems Subcontractors working “under cover” The 2014 amendment of the PPA added new provisions to support SMEs: • Named Subcontractors may be changed only if in default; • Subcontractors to be present during the approval of the works and • The Contractor to present evidence before the final payment, that it has paid the Subcontractors for the approved works. The big Contractors no longer name any Subcontractors! The Chamber of Contractors argues that: • The Contractor has to finance the project and • Sometimes the Contractor has to finance the acceleration measures and to be compensated, reducing the payments of the Subcontractors. Solutions: • The best practices from France and England to be reviewed.

Current Use of FIDIC under the Bulgarian Public Procurement Act (PPA) Application of FIDIC conditions under the PPA: Conclusions • FIDIC Conditions to be used for major works; • Particular Conditions harmonised with the SDA and PPA to be drafted after the harmonisation of the PPA with the new European directives; • The PP Agency to issue a detailed guidance for the modifications; • The education and training of the implementing agencies and contracting authorities to focus on the project risk management. Thank you! Adriana Spassova Partner EQE Control OOD, a company of ABS Group Mobile: +359 888 464 928 Email: aks@eq. bg www. eqecontrol. com