Drd. Eugen Sârbu, attorney-at-Law
Introduction
The principle of price stability and firmness represented, for a long time, the central dogma of the Romanian public procurement system. The initial rationale was eminently one of protecting budgetary funds: preventing bidders from submitting undervalued (dumping) bids during the tendering phase, with the intention of subsequently undermining the contractual balance through successive addenda.
However, recent macroeconomic realities – marked by structural shocks to the supply chain, the COVID-19 pandemic, international logistical bottlenecks, the severe energy crisis, and armed conflicts – have demonstrated that a rigid contract is bound to fail.
The galloping increase in prices for construction materials, equipment, fuel, and labour has placed contractors in a situation of manifest impossibility of performing their obligations. In the absence of flexible legal mechanisms, contracting authorities faced the risk of a mass failure of critical infrastructure contracts.
This study provides a detailed analysis, in historical and conceptual order, of the evolution of the legislation regarding price adjustment, highlighting the purpose of each normative act, the elements covered, the mathematical calculation formulas, and the strict rules governing their application.
1. Price Adjustment under Law No. 98/2016 on Public Procurement
With the legislative reform of 2016, the transposition of European Directives 24 and 25 of 2014 established the regime for contractual modifications under Art. 221 of Law No. 98/2016 (and Art. 236 of Law No. 99/2016 on sectoral procurement, respectively). The initial rule established was restrictive: the price of a contract could only be modified if this possibility had been transposed in the form of clear, precise, and unequivocal review clauses in the initial award documentation.
The Methodological Norms approved by Government Decision No. 395/2016, under Art. 164, detailed the technical mechanism, stipulating that any adjustment must relate to official statistical indices provided by the National Institute of Statistics (INS), such as the Consumer Price Index (CPI) or the Construction Cost Index (CCI). The major deficiency of this initial framework lay in its optional nature: if the contracting authority did not insert a specific mathematical clause during the tendering phase, the contract retained a firm price, becoming completely vulnerable to inflation.
This structural vulnerability was only subsequently corrected by Law No. 208/2022, which transformed the option into a legal obligation. Thus, price adjustment became mandatory for any service or supply contract running for a period exceeding 24 months, and for works contracts running for a period exceeding 6 months.
2. Price Adjustment in Contracts Concluded under the Standard Model of Government Decision No. 1/2018
For the management of major public investment contracts, the adoption of GD No. 1/2018 represented a qualitative leap, imposing mandatory General Contract Conditions at the national level. The price adjustment regime, rigorously regulated under Clause 48 (Price Adjustment), establishes essential distinctions based on the execution duration and the degree of detail of the award documentation.
2.1. The Firm Price vs. Adjustable Price Rule
According to Sub-clause 48.2 of GD No. 1/2018, if the execution duration at the signing of the contract is less than or equal to 365 days, the prices are considered firm and shall not be adjusted except in wholly exceptional cases of legislative amendments regulated under Sub-Clause 48.8. Conversely, according to Sub-clause 48.3, if the execution duration at the signing of the contract is greater than 365 days, it is deemed that the prices in the Contractor’s Offer were established based on the price and market conditions in force at the Base Date, and the amounts payable to the Contractor shall be adjusted to reflect the variations in the price indices of the constituent elements. No adjustment will be applied to works evaluated on the basis of actual Cost or current prices.
2.2. The Main Polynomial Formula (Sub-clause 48.4)
The price adjustment formula provided in Sub-clause 48.4 is a polynomial formula of the type: An=av+m*Mn/Mo+f*Fn/Fo+e*En/Eo. Within this formula, An is the adjustment multiplier to be applied to the estimated contract value for the works carried out in month n. The coefficient av represents a fixed percentage value corresponding to the advance payment relative to the contract price. The coefficients m, f, and e represent the estimated weighting of each relevant cost element in the execution of the works (materials, labour, and equipment), mandatorily established by the Employer in the table of adjustment data, such that the equation av+m+f+e=1 is strictly observed. The indices with the subscript n indicate the current values reflected 60 days prior to the last day of the execution month, while the indices with the subscript o represent the base indices as of the Base Date.
2.3. The Subsidiary Simplified Formula (Sub-clause 48.5)
When the provisions regarding adjustment are applicable, but the table of adjustment data in the Contract Agreement has not been completed by the Employer, Sub-clause 48.5 imposes a simplified safety formula, utilizing a single general index: An=av+(1-av)*In/Io. In this case, In represents the total construction cost index published by the National Institute of Statistics in the Statistical Price Bulletin, applicable 60 days prior to the last day of the execution month, and Io is the total cost index applicable at the Base Date.
2.4. Delays and Legislative Amendments
According to Sub-clause 48.7, if the Contractor fails to complete the works within the approved Time for Completion, the price adjustment after the end of this period shall be made using either the adjustment multiplier calculated based on the indices 60 days prior to the last day of the contractual duration, or the multiplier calculated based on the current indices, choosing in each instance the most favourable option for the Employer. Additionally, Sub-clause 48.8 establishes that the Contract Price shall be adjusted to take account of any increase or decrease in Cost resulting from a change in the Laws, published after the Base Date, provided that this economic impact has not already been absorbed by the evolution of the indices in the standard adjustment formulas.
3. Price Adjustment under the Government Ordinances Issued in 2021-2022
The recent explosion of prices necessitated strong legislative interventions. The Government intervened successively through special legislative packages intended to unblock projects. Beyond their necessary nature, a chaotic overlap of legislative provisions was created, which generated difficulties in the practical application of price adjustments for both contracting authorities and economic operators, many resulting in litigation and arbitrations wherein parties seek judicial resolution of disputes arising from the application of these overlapping and interconnected layers of special legal provisions.
3.1. Government Ordinance No. 15/2021 – Focus on Materials
Adopted in the summer of 2021, GO No. 15/2021 represented the first warning signal and the first direct state intervention in ongoing contracts that lacked adjustment clauses or whose clauses were ineffective.
Its purpose was limited and surgical: to save the construction sector from the collapse caused by the rising costs of iron, cement, and bitumen. From the perspective of adjustable elements, the ordinance strictly permitted the adjustment of the price pertaining to construction materials within works contracts. The normative act expressly prohibited the application of the adjustment multiplier to the indirect costs and the profit targeted by the contractor. Disputes also arose regarding the adjustment of costs for technological equipment and machinery; however, it was concluded that as long as these cost categories include materials in their cost breakdown, the price adjustment should be applied to them as well. The formula was based on a simple weighted index extracted from INS statistics dedicated exclusively to the cost of materials.
3.2. Government Emergency Ordinance No. 47/2022 – Adjustment of All Components in Projects Financed by National Funds
Because the energy crisis massively increased the cost of fuels and utilities, the limitations of GO No. 15/2021 became evident. Contractors could no longer sustain construction sites solely through the adjustment of materials, incurring massive losses in the areas of transport and equipment operation. As such, the Government issued GEO No. 47/2022. The purpose of this normative act was to provide comprehensive coverage of the cost chain for projects financed from the state budget or local budgets (such as PNDL, the Anghel Saligny Program, or the municipalities’ own funds).
Unlike its predecessor, GEO No. 47/2022 permits adjustments for works, materials, equipment, and endowments. The multiplier applies to all price components, including direct costs, indirect costs, and profit. The ordinance establishes a rule of absorption: it replaces the formula from GO No. 15/2021 if the contractor has submitted a request to this effect. As a notable restriction, GEO No. 47/2022 does not allow the adjustment of design services, with one major exception: transport projects of national interest.
3.3. Government Emergency Ordinance No. 64/2022 – Price Adjustment in Projects Financed by European Funds
Issued shortly after GEO No. 47/2022, GEO No. 64/2022 emerged at the express request of the European Commission’s audit structures.
The central objective was the creation of an extremely rigorous methodological framework for projects financed from non-reimbursable external funds (POIM, PNRR, POC, Regional Programs), minimizing the risk of financial corrections applied to Romania.
Its scope of application is the most extensive: it covers works contracts but explicitly includes design activities (Feasibility Studies and Technical Designs for major public infrastructure), being fully applicable to Design and Build contracts.
Furthermore, the mechanism also extends to private beneficiaries executing European projects in accordance with Order No. 1284/2016.
The adjustment targets all price components, including profit. However, its application requires the effective interpretation of the concept of a firm price. Thus, even if a firm price was stipulated in the contract, it is also subject to the special adjustment under the ordinance, with the adjustment methodology being closely linked to specific subsequent acts, such as MDLPA Order No. 1586/2022 and Instruction No. 49/2022 issued by MIPE. Another essential monitoring condition is the correlation with the threshold provided in Art. 7 of Law No. 98/2016, given that, in the case of public procurement contracts awarded through simplified procedures, Art. 18 para. 2 of GEO 64/2022 prohibits the application of the adjustment formula from resulting in a contract value equal to or greater than the threshold stipulated in Art. 7 para. 1 of Law No. 98/2016.
Frequent Disputes: Price Adjustment in the Case of Project Phasing
The Administrative Risk of Project Phasing is an issue of maximum technical complexity highlighted in current administrative practice. This concerns the change in the financing program (project phasing) after the price adjustment has already been introduced via an addendum to the initial contract.
A classic example is the transition of projects from the Regional Operational Programme (ROP 2014-2020) to the new Regional Programmes (RP 2021-2027). The moment a project is phased, it automatically falls under a different regime of eligibility rules. If a contractor has obtained substantial adjustments based on prior legislation (such as GO No. 15/2021 or specific formulas from the preceding period), there is a major risk that the adjusted value will be declared uncovered or ineligible under the new Regional Programme (RP), due to methodological differences between the financing guidelines.
This technical discrepancy blocks financial flows, and some contracting authorities are still questioning the bureaucratic mechanism by which they can obtain funding for these categories of payments already integrated into the contract price via addendum, which have become certain, liquid, and exigible receivables that must be paid to constructors in accordance with the contract and the executed addenda.
Conclusions and Practical Recommendations
The evolution of legislation concerning price adjustment in Romanian public procurement contracts reflects the transition from a rigid administrative model to an economic risk management system adapted to reality. For successful implementation, contracting authorities and economic operators must ensure rigorous contract management.
Site inspectors and supervisors have acquired an even more important role, being the ones who verify the exact correlation between the statement of works actually executed on-site and the reporting month of the statistical indices stipulated in the standard contracts under GD No. 1/2018 (Clause 48) or in the Emergency Ordinances. Only through a clear demarcation of financing sources (national vs. European) and a careful monitoring of the modifications brought about by the phasing process can the delivery of investment projects be ensured without major legal or financial risks.