Public contract disputes

What is happening

The work is done and the acceptance documents have been sent through the unified information system, but the customer replies with reasoned refusals whose comments change from letter to letter. Payment is stuck, the performance deadline has formally passed and late-payment penalties are accruing.

The customer has deducted a large fine from the performance security, counting it separately for each breach. The company is convinced the delay was the customer's own doing: the site was handed over late and the design documents were never approved.

Material prices have risen so far that performing the contract means a loss. The company is looking for a lawful way to change the price or terminate by agreement without risking the blacklist.

What the law says

• Performance of a public contract is governed by the Civil Code and Federal Law No. 44-FZ of 5 April 2013 "On the Contract System for Procurement of Goods, Works and Services to Meet State and Municipal Needs" (Law 44-FZ). Penalties and how they are calculated are set in the contract under rules approved by the Government, and the total of fines charged is capped.
• Under Law 44-FZ the essential terms of a contract may be changed only in the cases expressly provided for by the law, including by agreement where the volume changes within permitted limits.
• Acceptance under Law 44-FZ is generally carried out electronically in the unified information system. A reasoned refusal to sign an acceptance document must state specific reasons, and those are what have to be contested.
• A customer's unilateral withdrawal takes effect ten days after the supplier has been duly notified, and the supplier may remedy the breach within that period.
• Public contract disputes are heard by the commercial court. Before filing a claim for money, the Commercial Procedure Code (APK) as a rule requires a claim letter and a 30-calendar-day wait.
• In certain periods the Government has adopted rules for writing off penalties charged to suppliers. Whether they apply to a given contract depends on its dates and circumstances.

What we do

• We analyse the contract, the specification, the performance schedule and the correspondence, and establish who caused the delay.
• We check the calculation of penalties and fines against the contract and the rules on charging them.
• We draft responses to reasoned refusals and claims, and record the customer's own breaches.
• We recover payment for completed work, amounts withheld without grounds, and the security.
• We represent the company in the commercial court on the customer's claims and on counterclaims.
• We assess options for changing the price and timing and for terminating the contract by agreement.
• Where the customer has announced a unilateral withdrawal, we also defend the company against being placed on the register of unreliable suppliers.

What we will need from you

• The contract with all annexes and supplementary agreements.
• Acceptance documents: certificates, records in the information system, reasoned refusals, expert reports.
• Correspondence with the customer: letters, notices, minutes of meetings.
• Evidence of what prevented performance: suppliers' letters, photos, as-built documentation, work logs.
• The customer's calculation of its claims and details of any deductions from the security.