The Public Construction Commission (hereinafter, the “CPC”) issued Circular Gong-Cheng-Qi-1100102070 dated December 30, 2021 to announce that the “Model Statement Indicating That Index Adjustment Clauses prices in the bidding document do not apply to the Bid Price” (hereinafter, the “Model Declaration”) prescribed by the CPC by Gong-Cheng-Qi Circular 09800141010 of April 3, 2009 is no longer applicable as of the day of the announcement.The PCC also simultaneously revised the construction procurement contract template.
I. Context of the formulation of the model declaration
In 2008, the prices of some building materials in Taiwan fell sharply and construction operators complained that when some of the contracts were executed, negotiations on procurement prices and payment of the price of building materials were finished. However, when they requested a price estimate from the entity during construction, the price index was down sharply. Accordingly, the entity deducted the payment based on the downward price index (or general index). The Association of Small and Medium Construction Operators also petitioned saying that since its members are mainly contracted for shorter, smaller and medium-sized projects, the impact of price fluctuations is limited. Therefore, the association proposed that suppliers could choose not to raise or lower the price based on the contractual price index adjustment clause and make the declaration themselves when calling for offers.
As a result, the CCP has issued the Model Statement in 2009.
II. The nature of the statement example
The reporting template is voluntary in nature. Even if it is included in a solicitation document, a supplier can choose to submit it or not to submit it, and this does not affect the qualifications of the solicitation. In practice, however, some procuring entities sometimes confuse this model declaration with a document that should be submitted at the time of the tender. In addition, some procurement projects include the “submission of such declaration by a bidder” as an element of evaluation for the selection of the most favorable offer.
III. Controversies in practical implementation
(1) Can the supplier still rely on the principle of change of circumstances provided for in Article 227-2 of the Civil Code after the submission of the model declaration?
In practice, there have been cases where a supplier has executed this model declaration at the time of the tender, but then asked the entity in a lawsuit to pay a price adjusted by the price index. In this regard, a court decision clarified: “As the statement is also a contractual document, the contractor must not claim that he is not bound by the statement and request payment of a price adjusted by the price index. The contract stipulated a fair distribution of future risks, in addition to which there were no large-scale price fluctuations during the execution of the project. Therefore, the risk and magnitude of price fluctuations had been anticipated by the parties during the performance of the contract. Since the measure of manifest injustice has not been established, the parties can only exercise their rights under the initial contract and cannot claim a payment adjustment. based on the principle of changed circumstances.
However, according to CCP Circular Gong-Cheng-Qi-1100016287 of July 14, 2021, if a supplier performs the declaration at the time of bidding and wins the bid, the parties to the contract can still consider the principle change of circumstances under the Civil Code and negotiate the resumption of the price index adjustment clause in the initial tender document to adjust the payment of the project for the “parts not yet built”.
(2) If a supplier can still argue that it is a manifestly unfair “standard contract” within the meaning of Article 247-1 of the Civil Code after having filed this declaration.
The PCC stated that the procurement contract template is only for the reference of procuring organizations and is not a standard contract in nature. A court ruling said: “A supplier may obtain the tender document before bidding, may send a written request to the procuring entity to seek clarification or raise an objection based on the tender instructions tender and then determine if it will participate in the tender. after weighing various factors. Since the supplier has the possibility to negotiate the contract, this differs from the situation where a party can only decide to perform a contract with provisions already formulated in advance by the other party. »
IV. CCP Considerations for Terminating this Statement
Considering the controversies on the application of this reporting model, which can practically affect the promotion of infrastructure projects as mentioned above, and the fact that the project procurement contract model (Article 5: Conditions of payment of the contract price) published by the PCC already provided for the mechanism: “for (the method of adjustment of the price index), the procuring entity specifies the threshold and the adjustment ratio according to the nature of the specific project at the time of the invitation to tender; and if the procuring entity does not specify it for a specific project, the default rate of the model contract will apply”, the PCC announced that the declaration model is no longer applicable and simultaneously revised the model contract of construction supply on January 4, 2022 (deleting the original provision on “the effect of the application of the model of declaration”). In the future, suppliers will submit their price quotations on the same basis at the time of bidding, which should be more fair and reasonable and avoid disputes.