An amendment to the provisions of the Executive Regulations of Law No. 24 of 2015 Regulating Tenders and Bids ("Tender Law") has been published in the August 4, 2022 volume of the Official Gazette. The Executive Regulations were amended by virtue of Council of Ministers Decision No. 11 of 2022 ("Amendment"). According to the Amendment, the term "settlement agreement" is defined as a final, written agreement between a governmental department and a contracting party to settle the financial and contractual rights and obligations of each contracting party after terminating or concluding a contract that is subject to the Tender Law. Under the Amendment, settlement agreements must be reviewed by the in-house Tenders and Bids Committee ("Tender Committee") of a government entity. To better understand the impact of the Amendment, we set out below the key differences between the roles of the Tender Committee and the Compensation and Claims Committee1 ("CCC") with respect to settling contractual claims.
Each governmental entity has its own Tender Committee. A Tender Committee is responsible for conducting tenders in accordance with the provisions of the Tender Law and its Executive Regulations. It must consist of 5-7 members who are generally employees of the relevant government entity. Its function is, among others, to review settlement agreements with contractors, provided that these settlement agreements do not include contractor compensation/damages.
On the other hand, the CCC is a single committee that operates under the Ministry of Finance and has members from various governmental authorities and ministries. It is mandated to review and eventually pass recommendations to the Minister of Finance regarding compensation claims submitted against government bodies, with a particular focus on compensation claims by those entities for delays in the performance of their obligations arising from contracting, supply and service contracts.
Article 1 of the Amendment replaces Article 11 of the Executive Regulations with the following text:
"The [Tender] Committee's Competence is as follows:
...
- Examining the requests for the settlement of contracts submitted by the Competent Department2 and expressing its opinion thereon, provided that it does not contain a claim for compensation by the contractor.
Requests for settlements shall be submitted to the [Tender] Committee by the Competent Department after agreeing with the contractor to terminate the contract. This shall be by virtue of a document signed by the Government Entity3 and the contractor which outlines the financial and contractual rights and liabilities of the parties upon conclusion of the performance of the contract."
Unlike the CCC in which claims must be filed by the contractor, the Tender Committee may only be approached by the relevant government entity. Additionally, the settlement review request to the Tender Committee occurs after the parties are in agreement in respect of the terms of the settlement. On the other hand, naturally, claims raised before the CCC are disputed by the government entity.
Neither the CCC nor the Tender Committee issue decisions. The CCC raises recommendations with respect to a compensation claim to the Minister of Finance ("Minister"). These recommendations are passed by votes of the CCC members. The mechanism for passing such recommendations is outlined in the Council of Ministers Decision No. 34 of 2020. Eventually, the Minister issues the ultimate decision regarding the claim.
In contrast, the Tender Committee does not raise recommendations; it merely opines on the settlement request. Neither the Amendment nor the Executive Regulations contain provisions which clarify the effect of the Committee's opinion on the approval of the settlement request.
Footnotes
1. For more information on The Compensation and Claims Committee, please see Dispute Resolution Relating to Tenders and Administrative Contracts
2. The administrative unit in charge of tenders and bids affairs at the government entity.
3. The concerned ministry, governmental body or public entity or institution, as the case may be.
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