7 December 2020
With virtually all business operations in Thailand affected by the fallout of the COVID-19 pandemic, the government has been keen to provide relief measures to limit the economic damage. In addition to implementing broad economic relief, this has also meant changes to the government’s own internal operations, and in recent months, the Public Procurement and Supplies Administration Ruling Committee has issued two circular letters prescribing guidelines on how government authorities should handle their procurement operations during this period. The circulars, which were issued under the Public Procurement and Supplies Administration Act B.E. 2560 (2017), detail the relief measures for government procurement contracts that cannot be fulfilled because of the disruptive effects of the COVID-19 pandemic.
Most significantly, the circulars clarify that the impact of COVID-19 should be deemed force majeure under government procurement contracts and government procurement law, which affects the penalties levied on contractors for late performance of required duties under government procurement contracts. The Ruling Committee specified the start of the force majeure period as March 26, 2020 (the date when the government first announced a nationwide state of emergency). This official designation enables contractors to cite disruption from COVID-19 when requesting additional time to perform their duties under a contract, or exemption from or reduction of penalties incurred due to the delay.
For contracts that have not yet reached their maturity date, the Ruling Committee granted relief measures by directing the relevant government authorities to count the number of days that COVID-19 has affected performance of the contract, and use this number as the basis for determining an extension of the timeframe for performing the contractual duties. For contracts that have already reached their maturity date, the contractual party that failed to perform according to the contract would normally be subject to an assessed fine for their non-performance. In these cases, the relevant authorities are to likewise count the days that performance was affected by COVID-19, and exempt or reduce the fine for the contractual party accordingly.
The days to be counted in the above scenarios are defined as “the number of days of the actual occurrence”—that is, the number of days for which COVID-19 and related measures actually impacted performance. These will be considered by the government authority based on the government’s various pandemic-related regulations and restrictions, such as closure orders, prohibitions on certain activities or movements, and other relevant orders up until the date on which the business re-opened, resumed business operations, or resumed normal operations (whichever is most appropriate for performance of the obligation in question).
When a force majeure event obstructs contractual performance under a standard procurement contract in Thailand, the private party must notify the relevant government party of the delay, within 15 days of the end of the force majeure situation, in order to request an extension of the timeframe for contractual performance, or a reduction or exemption of the fines incurred. In the present situation, however, the force majeure event is still taking place, and it is not yet known when the situation will end. Therefore, the Ruling Committee has ruled that, instead of following these requirements, the contracting party must notify the government authority about COVID-19’s impact on the project, regardless of whether or not that impact has ended, and provide documentary evidence demonstrating that the contracting party was affected by the COVID-19 pandemic. Examples of this documentation could include the government’s announcement of the state of emergency due to COVID-19, closures or other limitations issued by the government agencies, or evidence showing that suppliers cancelled their production runs.
In addition to the above relief measures, the Ruling Committee has provided options for cases in which a procurement contract has not been fully executed because of a problem in the delivery or investigation of the relevant products or services. This could occur, for instance, when a contracting private party may have performed the actions required by the contract, but disruptions from COVID-19 intervened before the contracting government agency was able to investigate the products or services in order to ensure that the work had been appropriately completed.
The various relief measures that have been issued by the Public Procurement and Supplies Administration Ruling Committee in the last six months provide a number of helpful options for businesses whose involvement in government procurement has been negatively affected by the COVID-19 pandemic. By taking advantage of the alternatives outlined by the committee, and by working in concert with the relevant government agencies, businesses can mitigate their losses and delays due to the global disruption and chart a course back to profitability.
For further information, please contact:
Thammapas Chanpanich, Tilleke & Gibbins
thammapas.c@tilleke.com
