Contract modifications and new rates in Spanish public works

Spanish public contracting rests on the contractor's risk and fortune principle and on the immutability of the bargain: what was tendered is what gets built, because every later modification alters the conditions under which the other bidders competed (and lost). That is why the LCSP does not regulate modifications as a matter between the parties but as an administrative prerogative, exhaustively listed and controlled: only the administration can modify, only on the legal grounds and through a formal procedure.

The law distinguishes according to whether the modification was announced from the start:

The most important operational threshold is another one: a modification approved by the administration is mandatory for the contractor when it does not exceed 20 per cent of the initial price. Above that, the contractor may accept it or not; if not, the contract is terminated without fault on either side. That 20 per cent is, in practice, the line separating an order from a negotiation.

In works contracts, the law adds a specific valve: measurement excess, the variation in the number of units actually executed against those foreseen, is not treated as a modification if it stays within 10 per cent of the initial price, and is settled directly in the final certificate. It is the legal acknowledgement that no design measures with perfect accuracy.

Where the modification introduces work items absent from the contract's price schedule, their price is set through the new rate procedure (precio contradictorio): the supervising team proposes the new rate from the design's elementary costs and market prices, the contractor states its position in a hearing and, failing agreement, the contracting authority sets it, the contractor's right to claim remaining intact. New rates incorporate the award discount: the new item is paid with the same coefficient as the rest of the contract, a rule worth remembering before accepting optimistic build-ups. The decomposition and negotiation technique for these rates is developed in the article on new rates.

The golden rule of public works execution: no modified work is executed without prior approval. Verbal instructions from the supervising team, site urgencies, trust that "it will be regularised later" all lead to the same place: works executed without contractual cover whose payment the administration cannot approve, because doing so would validate an unlawful modification. Case law exceptionally admits compensation for unjust enrichment, but that is a years-long lawsuit with an uncertain outcome, not a collection route.

The contractor's protection is documentary and preventive: faced with an instruction altering the design, request its formalisation in writing; faced with refusal, record it in the order book or in minutes; and under schedule pressure, remember that formally suspending the affected work front (with its minutes and compensation effects) protects, while voluntarist execution does not. Each of those steps costs minutes and later sustains the whole position.

The formal procedure is the border between a valid modification and the unpaid de facto route, and its stations are worth knowing: a technical report from the supervising team justifying the legal ground and quantifying the proposal; a hearing for the contractor, which is the moment to dispute quantities and new rates in writing; legal and expenditure control reports; approval by the contracting authority; readjustment of the performance guarantee in proportion to the new price, which is a condition of effectiveness; signature and publication on the contracting profile. Skipping any of those stations turns the modification into unpaid work.

Two practical consequences of that circuit. The first is calendar: a serious modification takes weeks or months to travel it, and that time must be managed with the correct mechanism (documented partial suspension of the affected work fronts, reprogramming of the rest), not with anticipated execution. The second is documentary strategy: the contractor's hearing is the only station where the company speaks in the file; the observations submitted there (on quantities, rates or added time) are the ones that will exist later, in the final certificate or before a tribunal. What was not raised at the hearing is much harder to resurrect.

A project with an initial price of EUR 1,500,000 hits ground worse than the geotechnical study predicted. The supervising team prices the necessary foundation reinforcement at EUR 270,000: 18 per cent. Staying below 20 per cent, once the modification is approved on unforeseeable circumstances grounds, the contractor is obliged to execute it at the resulting prices (schedule prices and, for new items, new rates with the discount applied).

Had the pricing reached EUR 330,000 (22 per cent), the scenario changes: the contractor may accept or seek termination without penalty. That four-point difference turns the critical review of the modification's valuation (are the new items properly measured? do the new rates reflect real costs?) into negotiating leverage: accepting a badly valued 22 per cent modification is voluntary; executing a well valued 18 per cent one, mandatory.