In their interesting paper 'Political Contestability and Contract Rigidity: An Analysis of Procurement Contracts', Beuve, Moszoro & Saussier 'argue that a significant part of the contractual rigidity difference between purely private and public contracts [is] due to the specific nature of public contracts which are more permeable to the political environment'. This main claim is very interesting (and potentially controversial) because it implies that public contracts are per se more prone to ex ante formalisation and ex post modification and renegotiation.
Beuve, Moszoro & Saussier's argument lies in good measure in the insight that 'public contracts are characterized by intrinsic differences stemming from the fact that a substantial amount of supervision and control is done by political contesters and interest groups who have a stake in challenging and disrupting the contractual relationship. Thus, although politics is normally not necessary to understand private contracting, it becomes fundamental to understanding public contracting' (p. 2).
Furthermore, they stress that '[p]ublic contracting is characterized by formalized, standardized, bureaucratic, and rigid procedures, partly because politics must be secured against opportunistic third parties. What we call “contract rigidity” refers to rule-based (bureaucratic) implementation; i.e., the addition of contractual provisions and specifications that impose ex post stiff enforcement, intolerance to adaptation, and penalties for deviation'; and that '[m]oreover, when faced with unforeseen or unexpected circumstances, private parties— as long as the relationship remains worthwhile—adjust their required performance without the need for costly and formal renegotiation ... Conversely, public agents will be more likely to have these contractual changes formalized in amendments. The same insulation mechanism that triggers higher rigidity of public contracts compared to purely private contracts induces formalization of renegotiations through written amendments' (ibid).
They derive three propositions: 'First, public contracts are more rigid than equivalent transactions governed under private contracting. Second, contracts signed with public authorities in politically contestable jurisdictions are characterized by more rigid procedures than other public contracts; i.e., public authorities subject to third-party challenges increase the proceduralization of contractual agreements to insulate themselves from plausible politically motivated challenges. Third, public contracts renegotiations are more frequently formalized through amendments because of their initial rigidity (i.e., no relational adaptation) and as a means to avoid charges of discretionary misuse of public funds' (pp. 2-3).
They test these propositions using a rich database of car park contracts contracts signed between 1985 and 2009 in France. Remarkably, their dataset is quite unique in that they analyse contracts 'signed between one private operator and 24 private procurers ... and between the same private operator and 152 public authorities'. This allows them to isolate certain idiosyncratic characteristics of public contracts. In their terms: 'Because there is only one contractor and car parks arguably entail a standardized product and service, a large part of the contractual heterogeneity comes from the procurers’ characteristics and time-varying political contestability' (p. 3).
Rather controversially, at least when confronted with the received wisdom that (public) contract renegotiation can derive from opportunism or even corruption [see, from a legal perspective, eg GM Racca & R Cavallo Perin, 'Material Amendments of Public Contracts during their Terms: From Violations of Competition to Symptoms of Corruption' (2013) 4 EPPPL 279-293], they submit that their 'results suggest that previous studies that surfaced public contracts’ inefficiencies related to high renegotiation rates ... might be somewhat misleading. Frequent renegotiations observed in public contracts can be understood as a consequence of their specific nature instead of a manifestation of opportunism: “In a sense, [...] the frequency of contract renegotiation may provide concessions a ‘relational’ quality” ... An important corollary is that the perceived inefficiency of public contracting is largely the result of contractual adaptation to different inherent hazards and thus is not directly remediable' (p. 4, emphasis added). Or, as they venture in their conclusions, '[w]hat can be interpreted, at first glance, as a sign of weakness (i.e., frequent amendments) might well be good news indicating that the contracting parties can make the contract adaptable through time' (p. 23).
I find Beuve, Moszoro & Saussier's a very thought-provoking claim and one that will be very relevant for the scholarship dealing with the challenges derived from the new rules on contract modifications included in Art 72 of Directive 2014/24--and the complex rules in which they will necessarily derive in their transposition into Member States' domestic legal systems. Thus, I think that this is a paper worth reading and its insights should be taken into account when shaping domestic modification controls, particularly in terms of oversight.