What you need to know
- The CJEU considered whether the outstanding payment extends the contractual term for the purposes of Article 72 of Directive 2014/24/EU.
- The case clarifies that a public contract ends upon completion and acceptance of the works. The remaining obligation of the contracting authority to make payment does not prolong the contract term.
- Additional works awarded after the original contract has ended should be treated as a new contract, requiring a full procurement procedure in accordance with EU law.
Background
The city of Salzburg owns a school campus consisting of multiple buildings, including Handelsakademie I (Block I) and Handelsakademie II (Block II). The campus is refurbished and managed by Bundesimmobiliengesellschaft mbH (BIG), a contracting authority within the meaning of Directive 2014/24/EU (the Directive).
BIG awarded a works contract to Fiegl & Spielberger GmbH (Fiegl) for electrical refurbishment works in August 2022, mainly in Block II. The agreed performance period for the contract ran until 31 August 2023. During this time, parts of the contract were cancelled following a fire on the site, reducing the scope of works. This amounted to approximately two thirds of the contract volume. Fiegl completed the remaining works within the agreed timeframe and issued a final invoice.
Subsequently, Fiegl withdrew a compensation claim for the reduced work volume in exchange for an agreement to supply and fit the lighting in the fire damaged building. BIG treated this as a modification of the original contract. It then conducted a separate open procedure for the remaining electrical works. The successful tenderer for that contract, Strominator Elektro GmbH (Strominator) launched a challenge[1] against the award of the initial lighting work to Fiegl without a prior contract notice.
CJEU decision
The central question in this case, Case C‑820/24 Strominator Elektro GmbH v Bundesimmobiliengesellschaft mbH, is whether a contracting authority can lawfully modify a contract after the works have been completed and accepted, but before the final invoice has been paid. The CJEU rejects the idea that a contract remains ‘in force’ until payment. For works contracts, the decisive moment is completion and acceptance of the works. The contract can only be considered a contract “during its term” when the services have not been fully performed by the successful tender. Once accepted, the contractor has fulfilled its obligations, and the contracting authority’s payment obligation does not extend the term. It is important to note that this reflects a distinct approach under procurement law and does not necessarily align with, or change, Irish contract law.
The CJEU held that the derogations provided for in Article 72 of the Directive, which allow a contract to be modified during its term, without a new procurement procedure, must be interpreted strictly. The derogations provide a contracting authority with some flexibility to modify a contract and respond pragmatically to situations they may face during the performance of the contract. Once the contract has been completed, the contracting authority can no longer face an issue which would require a contract modification. Allowing otherwise would enable a contracting authority to extend, at their discretion, a period during which a derogation may apply under Article 72.
The CJEU noted that additional works awarded after the original contract has ended should be treated as a new contract, requiring a full procurement procedure in accordance with EU law. Post-completion modifications would allow contracting authorities to bypass competitive procurement procedures or artificially characterise new works as contract modifications, undermining the objectives of EU public procurement law.
Conclusion
The case provides important guidance for contracting authorities and economic operators. It clarifies that contracting authorities cannot rely on Article 72 to justify post-completion works. Under EU procurement law, the ‘term’ of a works contract ends upon completion and acceptance, not payment. Contracting authorities and economic operators should be alert to attempts to treat new works as modifications after the original contract has ended. Instead, these will generally require a separate, compliant procurement procedure.
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[1] Case C‑820/24 Strominator Elektro GmbH v Bundesimmobiliengesellschaft mbH
