Contract modifications and extensions: what a buyer may change without a new tender

A public contract is not frozen at signature. Scope grows, prices are indexed, deadlines slip, a contractor is bought. Every one of these is a modification, and Article 72 of Directive 2014/24/EU decides which modifications a buyer may make by agreement with the contractor and which require a new tender. For the incumbent, the article is the boundary of what can be negotiated. For everyone else, it is the reason a contract you thought was locked away for five years may be back on the market in two.

The principle

A contract may be modified without a new procedure only in the cases Article 72 lists. Any other substantial modification requires a new procurement procedure. A modification is substantial when it makes the contract materially different in character, and in particular when it:

• introduces conditions which, had they been part of the original procedure, would have allowed other candidates or a different tender to be chosen;
• changes the economic balance of the contract in favour of the contractor in a way not provided for originally;
• extends the scope of the contract considerably;
• replaces the contractor in a case not covered by the article.

The six permitted cases

1. A review clause in the original documents

Modifications, whatever their value, that were provided for in the initial procurement documents in clear, precise and unequivocal review clauses. Price indexation formulas, options to extend by a stated period, quantity adjustments within a stated range. The clause must state the scope and nature of the possible modification and the conditions for using it; it may not change the overall nature of the contract.

For bidders this is the most important case to read before pricing: a contract with a two-year base and three optional one-year extensions is, commercially, a five-year contract that the buyer can end after two.

2. Additional works, services or supplies from the same contractor

Where they have become necessary and a change of contractor cannot be made for economic or technical reasons (interchangeability, interoperability with existing equipment) or would cause significant inconvenience or substantial duplication of costs. The increase may not exceed 50 percent of the value of the original contract per modification; successive modifications may not be used to circumvent the rule.

3. Unforeseeable circumstances

Where the need arose from circumstances a diligent buyer could not have foreseen, the modification does not alter the overall nature of the contract, and the increase does not exceed 50 percent of the original value. Again per modification, and again without stacking to get around it.

4. Replacement of the contractor

Where a new contractor replaces the original one because of a review clause, or because of universal or partial succession following corporate restructuring - takeover, merger, acquisition, insolvency - provided the new contractor meets the original selection criteria and the replacement does not entail other substantial modifications. Or where the buyer itself assumes the main contractor's obligations toward subcontractors under national law.

5. Non-substantial modifications

Anything that does not meet the definition of substantial above, whatever its value.

6. The de minimis rule

Modifications whose value is both below the relevant EU threshold and below 10 percent of the initial contract value for services and supplies, or 15 percent for works, provided they do not alter the overall nature of the contract. Where several successive modifications are made, the value is the cumulative net value. This is the everyday case: small extensions, minor additional items, a few extra months.

A worked example of the limits

A city awards a three-year facility management contract for 3,000,000 euros, with a review clause allowing one twelve-month extension at the same annual price. Over the contract's life the buyer asks for four things:

1. The extension, worth 1,000,000 euros. Allowed under the review clause, whatever its size, because the clause was clear and published.
2. Two additional buildings from year two, worth 240,000 euros. Under the de minimis rule the limit is 10 percent of 3,000,000, that is 300,000, and the sum must also stay below the EU threshold Below the EU threshold A smaller contract governed by national rules and published on national portals, not on TED. Full entry . This one passes, provided nothing else has used the allowance.
3. A third building a year later, worth 120,000 euros. Cumulative modifications are now 360,000, above the 10 percent line. The de minimis route is closed. The buyer must find another case, most likely "additional services from the same contractor" if changing supplier would duplicate costs, which requires a modification notice on TED TED Tenders Electronic Daily: the EU's official journal for public contracts above the EU thresholds. Full entry , or run a new procedure.
4. A change of contractor after the incumbent is acquired by a larger group. Allowed as universal succession, provided the new owner meets the original selection criteria and nothing else changes.

The lesson for both sides: the first modification is easy, the third is where the arithmetic bites, and the record of all of them is public.

Publication: the modification notice

Modifications under cases 2 and 3 - additional work from the same contractor and unforeseeable circumstances - must be published in the Official Journal as a modification notice. It states the original contract, the modification, its value and the reason. These notices are public and they are signals: a buyer that has extended a contract by 40 percent under "unforeseeable circumstances" has a need that outgrew the contract and will have to re-tender soon; a buyer that used a review clause to extend for the last permitted year has a fixed end date.

On Aperlena, changes to a notice are recorded on the tender page as they are published, and the recompete radar uses contract end dates, including extensions where the source publishes them, to estimate when each contract comes back to market.

What this means for the incumbent

• Read your own contract for review clauses. They are the cheapest route to more work and the buyer can only use them if they exist and are precise.
• Document unforeseeability. If the buyer wants extra work under case 3, the file must show why a diligent authority could not have planned for it. A buyer with a thin file will hesitate; help them build it.
• Track the cumulative percentage. Several small modifications under the de minimis rule add up, and the eleventh percent triggers a new procedure for everyone.
• Do not rely on informal extensions. A contract that continues past its end date "while the new tender is prepared" is a modification like any other, and a competitor can challenge it.

What this means for the challenger

• Watch the modification notices for your sector. They tell you which contracts have hit their limits.
• Challenge unlawful extensions. A substantial modification made without a new procedure is a contract awarded without publication, which the Remedies Directives treat as one of the gravest breaches: the review body can declare it ineffective. The challenging a decision guide explains the route.
• Prepare for the recompete early. A contract at the 50 percent ceiling or at the end of its last review-clause year will be tendered within months. Bidders who have followed it know the scope, the incumbent's price from the award notice, and the buyer's history before the notice is even drafted.

A note on termination

Article 73 obliges member states to let buyers terminate a contract where it has been substantially modified in breach of Article 72, where the contractor should have been excluded at award, or where the Court of Justice finds a serious breach of EU law. Modifications, in other words, are not only a question of what can be added; a contract that grew unlawfully can be ended by the same rules that let it grow.