The changes in prices and inflation observed in recent years have created a lot of uncertainty regarding signed and still ongoing contracts. This has led to questions being raised regarding specific public procurement contracts. Related legal disputes have already reached the highest courts of Lithuania. According to the courts, the law generally allows for an increase in the price of a public procurement contract, but certain criteria have to be met.
It is important to remember that the grounds for changing the price of a public procurement contract are essentially embedded in two possible sources: the law or the contract itself. There are cases when the basis for increasing the contract price provided for in the contract is used, which usually it makes it easier for both the procuring organisation and the supplier to agree on the total change in the price. For example, if price indexation is provided for, the parties to the contract apply the provided formula according to the applicable statistical price changes, and in this way a new contract price is arrived at.
However, in practice, most disputes between the parties to the contract arise when the price of the public procurement contract is fixed and a basis for change is not provided for in the contract. It is precisely with regards to these grounds for changing the contract price provided in the law that the recent court decisions are relevant.
At the end of 2023, the Supreme Court of Lithuania provided more clarity on the nature of unforeseen circumstances in the context of public procurement legislation, and clarified that this legal basis can also be used in relation to the initially agreed upon object of the contract, i.e. it is possible to review the price of the public procurement contract without ordering additional works, services or goods. For suppliers and businesses, this means that there are legal options to change the contract price without assuming new obligations. Nevertheless, one would still need to justify the claim itself in court.
One of the essential criteria is an assessment of whether the circumstances causing the supplier to incur unplanned costs could have been foreseen by either the supplier or the customer. Based on the assessment of the Supreme Court of Lithuania, there is reason to state that the war started by russia against Ukraine on 24 February 2022 should be considered unforeseen circumstances. This applies to public procurement contracts signed before this date.
The courts also diligently assess other criteria regulated by the law: stipulated mandatory restrictions on the maximum total of price changes and the prohibition on changing the general nature of the contract itself. The latter criterion means a prohibition on changing the object of the contract, and cases where the scope of the contract for the construction of a specific structure aims to acquire works unrelated to this structure are not permitted.
On the other hand, the judicial practice is taking shape, tending in the direction that it is necessary to accurately assess the effect of market conditions (for example, disproportionately increased costs, delayed or interrupted logistics chains for goods or materials, etc.) on the supplier within the context of the particular public procurement contract for which the price increase is sought. General statements or self-declarations are viewed with scepticism by the courts and are often rejected as being ungrounded.
Although these judicial interpretations have been developed during an ongoing dispute in court, procuring organisations and suppliers should take them as guidance when making changes to the price of a public procurement contract in an extrajudicial manner, as they provide additional clarity on the content of applicable legal requirements. It is likely that existing judicial practice will continue to develop in the near future, and in this way more legal clarity will be provided for participants in public procurement procedures as a whole.
