IACCM Contract Management Forum

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Victorian Council - Australia
2020-01-19 23:26:51

Contract extension beyond terms (Special)

Can we extend the contract beyond its original term? Even if the maximum extension period has been reached. Say for a contract of 2 years plus 1+1 years.

I come to circumstances where I must delay tendering because of political challenges and changes to the current method of delivering the service; hence a change of scope of work. However, I need to maintain the current service delivery under stronger contract terms rather than using Purchase Order terms and conditions (used for low-risk goods and services).

Since the contract relates to offering and acceptance. If the contracted parties agree to apply for that extension (say 6-12 months) and use the existing contract terms and conditions, can we exercise that 'special' extension?

The second scenario, I have, is can we do such extension after the expiry date of the contract. Provided it is not since long expired?! (Less than 1-2 month of the expiry date).

What is the legal implication for both options / scenarios?
 •  Telefonica  •   2020-01-21 16:08:37
I note your profile refers to "Moreland City Council", I assume Melbourne (Australia).

Note - this response references 'UK' practice and legislation, different rules may well apply in your jurisdiction.

In the UK consideration would need to be given as to whether the contract was let under a government framework (or similar 'public procurement rules'), if so there may well be restrictions in place as to whether you could extend further.

If it is under a Framework, in the UK you would need to offer a 'Direct Award' extension (if permitted). If it is 'non-framework' then you would almost certainly be able to extend subject to agreement with the supplier.

Assuming you can extend, doing so after the previous contract has expired is generally permissible as long as both parties agree; for 'neatness' I would suggest that the extension applies with 'retroactive effect' from the day the previous contract expired, so there aren't any 'uncovered periods'.

Hope this helps

NOTE: you need to be wary of anti-bribery and corruption laws - extending 'expired' contracts rather than running a competitive procurement process often leads to concerns being raised - you may well need to demonstrate that this is very much an 'interim and last resort' measure as a precursor to a full competitive procurement process.
 •  Victorian Council - Australia  •   2020-01-22 02:12:10
Thank you, Steve
Thank you for the prompt reply!

I agree with your comments

Victoria's IBAC (anti-Corruption body) highlighted that as one of the red flags for corruption

Generally speaking, we do not extend contracts beyond their expiry dates, especially if all extensions have been exhausted.

I am coming to these special and few cases that we have to manage. I am trying to balance commercial needs and legal exposure if any.
 •  smcv  •   2020-03-04 12:17:11
Of course it depends on the legislation of each country.

In my case we have gone from avoiding having extensions or addenda to contracts to try as a first option to extend the contract through an addendum since there are many associated advantages such as having a long-term collaborative relationship with the contractor. Manjeand the risk of corruption we have achieved very good agreements to extend contracts.

My experience is in the mining industry.
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