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Frequently Asked Questions: Government Contracts in the wake of COVID-19 in Turkey

16 May, 2020

COVID-19 pandemic touched almost every area of socio-economic life, causing various activities to slow down or stop completely. In Turkey, various measures are already taken to protect public health and the economy while public services continue. This raises questions about how the procurement processes and execution of contracts will proceed with the administrations, despite measures such as curfews or postponement of meetings. Turkish Public Procurement Authority’s (“the Procurement Authority”) Electronic Public Procurement Platform (“EKAP”) published a Q&A video on COVID-19, which conveys expert opinions on questions related to the problems faced by concerned entities and administrations. As Herdem Attorneys at Law, we have summarized the questions and answers for you below.

1.  Will procurement processes continue during the pandemic?

As per the announcements made by the Procurement Authority earlier, reminders and suggestions were made regarding continuation of the procurement processes during the COVID-19 pandemic while public services continue to operate. Accordingly, in order to maintain social distancing in line with the recommendations of the Government, procurement processes will be carried out electronically as much as possible, and if not, signature of procurement offers and contracts may be done by mail provided that the responsibility for ensuring security for such documents belongs to the parties. Additionally, relevant tender committee’s operations can be carried out either electronically or live in a way that the tenderers will follow the process from a separate room in the building, or in a large hall provided that they take the necessary measures to ensure public health.

2.  Shall electronic procurements become compulsory?

Not all administrations have the capacity to provide an electronic procurement environment. Thus, the preference of the administrations comes forward on this topic.

3.  May direct procurement be conducted unlimited?

Direct procurement is a procurement method (but not a tender type) made by conducting market research without exceeding the monetary limit stipulated by the Public Procurement Law No.4734 (“Law No. 4734”) and without announcement or giving a guarantee as per Article 22 of the Law No. 4734. However, it is not recommended to use the direct procurement method by exclusively focusing on certain bidders and complicate the procurement procedure.

On the other hand, negotiated tendering stated under article 21/b of Law No. 4734 is a directly applicable provision for the pandemic period. This procedure is a fast procurement method that can be carried out electronically, has no limitation on goods and services, requires no announcement period and provides flexibility during extraordinary periods. However, this method cannot be used for all procurements because a causal link is sought by the Procurement Authority regarding the difficulties on procurement processes and pandemic period. Therefore, it is recommended to evaluate articles 21/b, 21/f of Law No 4734 and finally direct procurement, respectively.

4.  Which contracts does the Executive Order No. 2020/5 cover?

As per the Executive Order No. 2020/5 of Presidency of Turkey published in the Official Gazette dated April 2, 2020 No. 31087; it was clarified how government contractors can act if their work has been temporarily or permanently, partially or absolutely became impossible to perform due to COVID-19 by applying to the relevant authority with evidencing documents. Accordingly, after the determining whether or not the impossibility to perform did not arise out of the government contractor’s acts or omission, the contractor could not afford to remove such obstacle and the situation constitutes an obstacle in fulfilling the contractual obligations, it can be decided to grant additional time extension or terminate the contract by the relevant administration.

The Executive Order covers procurement subject to Law No. 4734 (including exceptions) and regulations exempted from this law. Public-private partnership, build-operate-transfer model and other similar situations are not directly subject to the Executive Order. However, relevant administration may consider this Executive Order in future transactions. 

5.  Can the periods related to the tender processes be extended due to the outbreak?

In the event that it is foreseen by the administration that, except for non-urgent works, sufficient bids cannot be delivered and/or a competitive environment cannot be provided until the tender date and time announced before, due to the measures taken; an addendum may be issued to ensure that the tenderers are informed that the last bidding period can be extended at least ten days before the deadline for bidding in accordance with article 29 Law No. 4734.

In addition, although there is no clear regulation regarding the period extension of the invitation to the contract, there are State Council rulings regarding the extension of these periods in cases where the contractor reveals the force majeure provided that the administration does not urgently in need of procurement. However, the administration cannot be expected to do such an extension ex officio. Application or request regarding the extension of time is required by the economically most advantageous bidder, together with the time requested to be extended.

6.  How will the duration of the extension be determined?

Along with the extension duration requested by the contractor in the applications, the progression of the virus and principle of good faith will be taken into consideration by the relevant administration.

7.  Is it possible to apply for a second-time extension?

There is no provision in the legislation that prevents an application for a second extension.

8.  What can be done for delays in acceptance processes during the pandemic?

Time extensions can be granted by the administrations based on the force majeure applications made by contractors.

9.  Shall time extension be given for contractors that are not coverred by the Executive Order No. 2020/5 ?

It is possible to be given time extensions upon evaluation of the relevant administration.

10.  How will the processes for signing contracts continue during the pandemic?

For electronic procurements, the first and second tenderers who are economically most advantageous are obliged to submit their documents which cannot be verified electronically, upon request of the relevant administration. As stated by the Procurement Authority’s previous announcements, the necessary procurement documents can be sent by mail after contacting the relevant administration provided that the responsibility for ensuring legal security belongs to the parties.

For other procurements, the tenderers will be deemed to have submitted documents that can be queried electronically, by providing the necessary confirmation information and the web address where the verification can be made, without needing to provide the conditions for the presentation of the document.

11.  Is it possible for contracts to be cancelled by administrations?

The cancellation of the signing of the contract is a concept that coincides with the cancellation of the procurement. Administrations do not have unlimited discretionary power in this regard. The reason for the cancellation of the procurement should be put forward in order to cancel the signing of the procurement contract.

12.  What are the actions to be taken in case of the delayed site delivery or if the work cannot be started due to the pandemic?

As per the general specifications of the construction procedures, sufficient time must be given to the tenderer in the event of a delay arising from the negligence of the administration.

If the contractor fails to start work as the contract process begins, he/she will have to apply to the administration for force majeure within good faith and without delay in order not to get a delay penalty that will be imposed in accordance with Public Procurement Contracts Law No. 4735 (“Law No.4735”) and secondary legislation. If the force majeure application is evaluated positively, the delay penalty collected from the contractor shall be cancelled and the legal consequences of it shall be eliminated.

13.  What should be done in case of a non-payment by the administration or the commitment is not fulfilled by the contractor during the pandemic period?

The general provisions of Turkish Law shall apply in this situation. In accordance with Article 112 of the Turkish Code of Obligations (“TCO”), an obligor is liable to the obligee for any damages arising from non-performance or neglect of obligations. Accordingly, the obligee shall have optional rights where the obligor is in default as it is stipulated under articles 117-125 of TCO.

On the other hand, in accordance with article 136 of TCO, if performance becomes impossible due to the reasons other than obligor’s neglect, the obligor cannot be held responsible for this situation. In this case, as per the article 10 of the Law No. 4735, it is sought to reveal the causal link between the pandemic and the non-performance of contractual obligations as well as other conditions of force majeure provided that the contractor has made a written application to the administration within 20 days. The 20-day period will be deemed to continue as long as the pandemic continues. The statements of international organizations, official statements, administrative procedures, court decisions, etc. shall be considered whether the event constitutes a force majeure case by case by the relevant administration. Considering that the applications to be made to the administration by the contractor will be evaluated by the relevant administration as it is stated under Executive Order No.2020/5 and “epidemic” listed as a force majeure event under the sub-clause c of Article 10 of the Law No. 4735; the contractor does not need to apply to the Procurement Authority regarding force majeure.

In this regard, in case the administration was negligent, the provisions regarding the defense of non-payment shall apply and if the administration has no negligent acts, the outcome of the contract will be determined with general provisions considering force majeure.

14.  Will there be a penalty for delay of the contractual performance when it is decided to extend the time?

The penalty imposed for delay will be applied only if the contractor does not fulfill the commitment in accordance with the procurement documents as it is stated under article 20/a of the Law No. 4735 and will not be applicable on the time extension due to force majeure.

15.  Is there any other action to be taken except for force majeure or time extension due to the COVID-19 pandemic?

As per the article 24 of Law No. 4735 on work decrease, in case it has been determined that the work may be completed with a price lower than 80 % of the contract price, the contractor shall be obliged to complete the work. In such case, as a reward for the real expenses realized by the contractor and contractor’s profit, the 5 % of the difference between 80 % of the (total) contract price and the amount of work performed on the basis of contract prices shall be paid to the contractor over the prices current on provisional acceptance date.

16.  Shall relevant administrations enforce work increase during the pandemic? Does the contractor have to accept this?

Article 24 of Law No. 4735 on work increase provision shall be applicable. As long as the conditions in the relevant article are met, the contractor is obliged to accept this increase in the work demanded by the administration. However, the contractor’s right to apply for force majeure is reserved.

17.  Shall an additional price difference be taken due to the price increases during the pandemic? Does this situation constitute a force majeure?

Price differences can be paid according to the price difference principles in the contract. However, price increases do not constitute force majeure alone and cannot be evaluated within the scope of the memorandum 2020/5.

18.  Shall contractors apply for force majeure for situations prior to the emergence of COVID-19?

Contractors cannot make force majeure applications regarding the impossibility of performance due to the pandemic before the appearance of the virus. However, since the effect of the outbreak varies on a country basis, it is not possible to make an accurate assessment on the date.

19.  Are complaint procedures stipulated under Law No. 4734 included in the provisional article 1 of Law No. 7226?

As per the provisional article 1 of Law Amending Certain Acts No.7226 (“Law No.7226”) published in the Official Gazette No. 31080 dated March 26, 2020, in order to prevent loss of rights in the judiciary; deadlines of all periods regarding the origination, use or termination of a right in/regarding litigation, enforcement proceedings, application, complaint, appeal, notice, submission; statutory limitation, mandatory administrative application periods suspended from (including) March 13, 2020 to April 30, 2020. However, this judiciary period suspension is temporarily extended until June 15, 2020 with the exception of the mandatory administrative application periods stipulated under Public Procurement Law No. 4734 with the amendment made on Law No. 7226 on April 30, 2020.

Additionally, a new e-filing system has been established for complaints through EKAP (please see for further information http://herdem.av.tr/legal-update-e-complaints-for-procurements-in-turkey). Thus, the loss of the rights will be prevented during the fight with the pandemic.

Authors: Şafak Herdem, Deniz Çelikkaya

 

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