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The public works contract: price, changes and limits

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By , construction economist

Information verified on 8 min read

What you will learn How a contracting authority differs from a private client, the three levers and three limits that the Public Procurement Act sets on the final cost of construction works, what the reform entering into force on 1 November 2026 changes, and the three articles in this branch.

A private client can negotiate the price with the contractor, accept an overrun of the estimate or amend the contract by agreement between the parties. A contracting authority cannot act so freely: the Public Procurement Act (riigihangete seadus, RHS) ties its price decisions to the rules of the procurement procedure and of public contract modification, so the final cost is largely decided in the procurement documents. This article gives an overview of the levers left to the contracting authority and the limits that come with them.

Why a contracting authority is not an ordinary client

The law speaks of the contracting authority and the estimated value, not of the client and the estimate. The chapter of the Law of Obligations Act (võlaõigusseadus, VÕS) on contracts for work uses the terms tellija (the client) and töövõtja (the contractor). The RHS uses the term hankija (the contracting authority) and measures a procurement by its eeldatav maksumus (estimated value) (§ 23): this is the amount excluding VAT that covers the whole fee payable, including possible future obligations, and it must reflect the average market price immediately before the procurement is launched.

There is no room for free bargaining between the tenders and the contract. The contracting authority must follow the rules of the chosen procedure. The choice of procedure, thresholds and time limits are a matter of procurement organisation, covered in the guide to public procurement of construction works; here we look only at how those rules affect the final price.

Even a signed contract cannot be changed freely. A public contract (hankeleping) may be modified without a new procurement procedure only in the cases listed in RHS § 123(1). If a change does not fit any of them, the contracting authority may terminate the contract or withdraw from it under § 124(1)(1). For the final cost, that is the worst outcome.

The price agreement in a public contract cannot be entirely non-binding. VÕS § 639(1) presumes that an estimate (eelarve) agreed in a contract for work (in this article: the estimated amount agreed in the contract, not the contractor's detailed costing) is binding on the contractor unless the parties have agreed otherwise. In the private sector this presumption can be set aside by contract. According to the Supreme Court (Riigikohus) case law review, the court found in judgment 3-2-1-102-14 (12.11.2014) that the price agreement in a public contract cannot be entirely non-binding. This is a trend in published case law, not a statutory provision.

Three levers and three limits

The contracting authority has three statutory levers to protect the final cost, and each has its own limit. The first operates before the contract is signed, the second and third during the contract.

Lever What it allows Limit Provision
Rejecting all tenders ending the procedure when the prices of all tenders, or of all tenders declared compliant, exceed the estimated value the decision must be written and reasoned; the lever is useful only with a realistic estimated value RHS § 116, § 23(3), § 73(3)(3)
Modifying the public contract adding or changing works without a new procurement only in the cases of § 123(1): for construction works, a total value of changes up to 15% of the original value and below the international threshold; for additional works or unforeseeable circumstances, up to 50% per change RHS § 123(1)(1), (3), (4)
Price review changing the price without a value limit only if the clause was provided for in the procurement documents clearly, precisely and unequivocally RHS § 123(1)(2)

The first lever is only as strong as the estimated value the tenders are compared with. If it was built on outdated prices, every tender exceeds it and rejection merely leads to a new procurement in the same market. If it is inflated, the lever cannot be used even when prices are excessive.

The second lever wears down with every change. The percentages of small changes add up, and changes made under points 3 and 4 must be notified to the public procurement register (§ 123(5)). The percentage limit is a statutory ceiling, not a reserve to be spent; every change also needs funding.

The third lever is the only one that does not use up the percentage limit, but it has to be written before the procurement is advertised. A price review clause cannot be added during the contract: it would then be an ordinary change that must fit within the limits of the other points.

Two states of the law

Until 31 October 2026 the current rules apply. The Act amending the Public Procurement Act and other Acts (RT I, 03.07.2026, 3) enters into force, under its § 6(1), on 1 November 2026. For the levers in this article, the reform changes two things: in § 123(1)(3) the condition “nor would it be possible for economic or technical reasons” is replaced by “and would be unreasonable for economic or technical reasons” (unofficial translation), and the time limit for the modification notice (§ 123(5)) is extended from 10 days to 30 days. The 15% and 50% limits stay the same and the reform does not change § 116.

Thresholds change too, but they belong to procurement organisation. For example, the simplified procurement threshold for construction works rises from 60,000 euros to 100,000 euros and the provision on the national procurement threshold is repealed; the details are in the overview of the procurement reform changes. Under the transitional provision (§ 219^3), procurement procedures begun before 1 November 2026 are completed under the version in force until 31 October 2026. The transitional provision deals with procurement procedures and does not expressly govern the modification of contracts already signed, so on that question it is worth obtaining a legal assessment before deciding.

The articles in this branch

This article describes the state of the rules on the date they were checked and provides professional guidance. It does not replace legal advice or an assessment of the specific case.

Frequently asked questions

That depends on the type of procedure, which is covered in the procurement guide. In any case, the law allows the contracting authority to reject all tenders if their prices exceed the estimated value (RHS § 116).

The total value of small changes may be up to 15% of the original value and must stay below the international threshold; for additional works and unforeseeable circumstances, a single change may not increase the value by more than 50%. A price review under a clause provided for in the procurement documents has no value limit.

RHS § 124(1)(1) then allows the contracting authority to terminate the contract or withdraw from it. For the final cost, that means an interrupted build and a new procurement.

No. The reform changes the wording of the condition in § 123(1)(3) and extends the time limit for the modification notice from 10 days to 30 days, but the 15% and 50% limits stay the same.

Explore the articles in this guide

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