Procurement in a nutshell – termination provisions
26th June, 2015
In this Procurement in a Nutshell, we will be looking at the requirements for Contracting Authorities (CAs) to include termination provisions in contracts awarded under the Public Contracts Regulations 2015.
The regulations are available in full here.
What’s new?
Under regulation 73 (1), CAs must include provisions in their contract enabling it to terminate the contract where:
- The contract has been subject to substantial modification which would have required a new procurement in accordance with regulation 72(9);
- The contractor has, at the time of the contract award, been in one of the situations described in regulation 57 (1) or (2) (the mandatory exclusion grounds), and should therefore have been excluded; or
- The contractor should not have been awarded the contract in view of a serious infringement of the obligations under the Public Contracts Directive and the Treaty declared by the Court of Justice of the European Union.
The contract provisions should also deal with the basis on which the powers of termination are to be exercised (e.g. by setting out notice provisions) and consequential matters that will arise.
Where a CA fails to include the provisions permitting termination, a power to do so will nevertheless be implied into the contract with the CA permitted to terminate on reasonable notice.
Why is it important?
CAs would be well advised to check their standard contracts in light of regulation 73 to ensure that their contracts are compliant with the regulations and to provide the necessary termination powers.
Although the power to terminate the contract will be implied in the event that one of the situations under regulation 73 (1) arises and such provision has not been made, it is still preferable for CAs to include express provisions in their contract to provide additional certainty about the mechanism for exercising the termination rights and to set out what the consequences of such termination will be.
How can I find out more?
If you have any queries on the issues raised or on any aspect of procurement, please contact us via our procurement hotline on 0191 204 4464.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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