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EFFECT OF COVID-19 ON PUBLIC PROCUREMENT RELATIONS

The Covid-19 pandemic which emerged in Wuhan, China and spread to the whole world is declared as a “pandemic” by the World Health Organization Covid-19 pandemic has caused adverse effects in many areas, especially in the economy and brought many legal questions and problems along. Within the scope of the negative effects of Covid-19 pandemic, especially in contractual relations, problems have started to be experienced in terms of fulfilment. The general principle in contractual relations is the principle of “Pacta Sunt Servanda in the Contract” and as a rule, the parties are obliged to fulfil the acts they have undertaken as agreed in the contract. Unexpected event and force majeure concepts which are among the concepts related to the scope and exceptions of the principle of “Pacta Sunt Servanda”, have been examined in our articles titled “Contract And (Pacta Sunt Servanda) In Turkish Law” and “Unexpected Event, Force Majeure, Pandemic And Their Effects On Contracts“, the effects of the Covid-19 Pandemic on the procurement contracts which are signed in compliance with the Public Procurement Law no. 4734 and the State Procurement Law no. 2886 will be examined in this article.

Procurement Contracts within the scope of the Public Procurement Law and the State Procurement Law:

The procedures and principles regarding the procurement of goods and services of public administrations and construction works are regulated under the Public Procurement Law No. 4734 and the principles and procedures for the preparation and implementation of contracts are regulated under the Public Procurement Contracts Law No. 4735.

In the 23rd Article of the Law No. 4735, it is stated as follows; “In case the contract is terminated due to force majeure, its account will be liquidated in accordance with the general provisions and the performance bond and additional performance bonds, if any, shall be returned.”.

In the first paragraph of the Article 10 of the same Law, the situations that can be accepted as force majeure are listed. The Covid-19 pandemic falls within the scope of “General epidemic disease” which is listed under subparagraph (c) of this article. On the grounds of the Covid-19 pandemic, both the contractor and the administration may terminate the contract unilaterally. On the other hand, if the termination of the contract is not considered by the parties, it is possible to pause and postpone the works due to the force majeure (Covid-19 pandemic) in accordance with the 10th Article of the Law No. 4735 and the contractor may be given a time extension.

Procurement Contracts which are within the scope of Public Procurement Law and which are regarding the income-generating procurements of the Public administrations are subject to the provisions of the State Procurement Law numbered 2886. In the paragraph 3 of the Article 84 of this Law, the force majeure is mentioned with the following provision; “The decision of ban from participating in procurements up to one year may be made by the ministry that organizes the procurement or by the relevant ministry in disfavor of the applicants that the procurement is established on and who do not want to make a contract and the contractor or the customers who renounce their undertaking and the ones who do not fulfill their undertakings in accordance with the provisions of the contract and specification besides force majeure and these decisions shall be published in the Official Gazette and shall be recorded on their contractor records.” According to this provision, no decision of ban from participating in procurements shall be made for the contractor who terminates the contract due to force majeure. In addition, we would like to state that; in procurement contracts within the scope of Law No. 2886, it is also possible to postpone the obligations instead of termination.

The Presidential Circular No. 2020/5 regarding Public Procurement Contracts: 

The Presidential Circular Numbered 2020/5 and dated 1 April 2020 on the Effect of the COVID-19 Pandemic on Public Procurement Contracts has been published in the Official Gazette No. 31087 dated April 2, 2020. With this Circular, the administrative ways to be applied by the contractors due to COVID-19 pandemic and the actions that may be taken by the administrations upon the applications are stipulated for the procurements within the scope of the Public Procurement Law No. 4734 and dated 04.01.2002 (including exceptions) and other regulations that are exempted from this Law. In accordance with the regulations in the relevant Circular;

In the contracts signed as a result of the procurements made within the scope of the Public Procurement Law (including exceptions) dated 04.01.2002 and numbered 4734 and the regulations exempted from this Law, applications regarding the fulfillment of the contractual work became temporarily or permanently, partially or completely impossible due to the COVID-19 outbreak shall be made to the administration, which is the party of the contract, by documenting this situation by the contractors.

These applications will be examined within the scope of the Article 10 of the Public Procurement Contracts Law No. 4735 dated 05.01.2002 and other legislative provisions by the administrations and the opinion of the Ministry of Treasury and Finance shall be obtained before the decision is made.

As a result of the evaluation made by the administrations; upon the determination of the facts that the conditions that arise are not due to a fault caused by the contractor, these conditions are in the nature of preventing the contractor from fulfilling their obligations arising from the contract and that the contractor is unable to eliminate this obstacle are present together, it may be decided to give an extension of time or terminate the contract.

General Evaluation and Conclusion :

For the termination of procurement contracts due to the Covid-19 outbreak (force majeure), the pandemic should have an effect preventing the contractor from fulfilling their undertakings in accordance with the contract provisions. The same condition is also valid for the administration. In case the said pandemic prevents the administration’s contractual obligations that arise from the contract, then the parties will have the right to terminate the contract.

On the other hand, although the parties have the right to terminate the contract due to the Covid-19 pandemic, the termination of the contract will not have beneficial consequences for both parties, the contractor will lose his job and the services of the administration will be interrupted. For this reason, it would be appropriate to suspend and postpone the obligations arising from the contract temporarily, by mutual agreement and to give a time extension to the contractor in this regard rather than termination of the contract.


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