Under most construction contracts, the contractor takes on the ground conditions risk. However, a recent case has demonstrated that the risk can fall on the employer.
In Județul Neamț and Județul Bacău v Ministerul Dezvoltării Regionale și Administrației Publice, Cases C260 and 261/14 the ECJ upheld a 5% clawback of ERDF grants from two local authorities. The clawbacks were imposed by the central government ministry responsible for administering those ERDF grants.
Both of the contracts funded by the grants were subject to an open tendering procedure. However, conditions imposed by the local authorities in that tendering procedure were said not to comply with national procurement rules. The case does not say what was non-compliant about the tender process. In a UK context, though, it could include a failure to advertise a contract valued over £25,000 on Contracts Finder.
It is important to note that there was no suggestion of any breach of European procurement rules. It was the breach of purely national rules that led to the clawback.
This case is a further illustration of the care that is needed when procuring contracts funded by ERDF or ESF money. In these cases it is wise to adopt a very cautious approach to complying with both European and national procurement rules.
For more information
Please contact Andrew Millross.
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