From option to obligation
Article 60 of the code provides that the inclusion of price revision clauses relating to the performance covered by the contract is mandatory in the initial tender documents of award procedures. The obligation covers all procedures and not only multi year contracts.
The wording marks a systemic change from the previous regime, which left revision to negotiation between the parties with a far wider margin. Today the clause is not a negotiable element but a mandatory content of the tender documents.
Two consequences follow from that obligation. One concerns the authority, the other the operator.
The first concerns the contracting authority: a notice without the clause is incomplete against an imperative provision. The incompleteness is contestable within the periods for challenging the notice.
The second concerns the economic operator: the clause exists independently of its bargaining power, and its actual wording is an element of the tender documents to be read before submitting a tender. The wording of the clause bears directly on the financial plan of the tender.
Its place in the system
One technical point clarifies the relationship between mechanisms and should be known because it avoids treating revision as a variation. It concerns the relationship between article 60 and article 120.
Article 120, governing modifications to contracts during performance, opens by preserving the provisions of article 60 on price revision clauses. The saving clause makes the two mechanisms autonomous.
Revision is therefore not a contract modification: it is the implementation of a clause already contained in the contract. Significant practical consequences follow from that classification.
The conditions and quantitative limits applying to contract modifications, in particular the fifty per cent limit, do not apply. No finding on the conditions justifying a modification is required. And activation does not depend on a discretionary assessment by the authority but on the occurrence of the objective conditions the clause identifies.
The distinction has direct argumentative value during performance: an authority treating a revision request with the logic of a variation is applying a regime that does not govern it. Citing the saving clause is the first argument to raise.
The conditions for activation in works contracts
The clauses do not make changes altering the general nature of the contract and are triggered on the occurrence of particular objective conditions. The conditions are objective and verifying them is not discretionary.
For works, revision is triggered by a variation in the cost of the works, whether upwards or downwards, exceeding 3 per cent of the overall amount, and operates to the extent of 90 per cent of the value exceeding the 3 per cent variation, applied to the performance still to be carried out. The ninety per cent applies to the excess share alone.
Three features of that structure should be taken together. They concern the deductible, the extent and the temporal scope.
The mechanism works both ways. It operates upwards and downwards, and is therefore not a one sided protection for the contractor.
The 3 per cent threshold is a deductible and not a condition of access to full adjustment: revision operates on the value exceeding the threshold. The share within the threshold stays with the operator.
The temporal scope is limited to performance still to be carried out, which makes the moment the threshold is crossed decisive for the share of the contract affected. Performance already delivered falls outside the calculation.
For services and supplies the threshold and the extent differ, and distinguishing the two regimes is one of the changes introduced by the corrective decree. It is worth checking which of the two regimes the clause invokes.
| Aspect | Content |
|---|---|
| Source of the obligation | Article 60 of the code, clause in the initial tender documents |
| Relationship with contract modifications | Expressly preserved by article 120 |
| Condition in works contracts | Variation in the cost of the works above 3 per cent |
| Extent in works contracts | 90 per cent of the value exceeding the threshold |
| Temporal scope | Performance still to be carried out |
| Basis of calculation | Official indices invoked by the clause |
How the clauses apply
The corrective decree introduced a dedicated annex on how the revision clauses are to be applied. The annex sets the minimum structure of a compliant clause.
Compliant clauses refer to article 60, specify the threshold and extent applicable to the contract type and identify the basis for calculating the variation, which refers to official indices. The index invoked determines the amount of the adjustment.
The actual wording of the clause and the indices it refers to should be checked in the tender documents of the individual award, because that is where the general regime takes operational form. Two contracts governed by the same article may contain clauses referring to different indices, with appreciably different economic effects.
The resources drawn on
The code identifies the resources contracting authorities use to meet the additional costs arising from revision, and the list has indirect significance for the operator. The availability of the resources bears on how quickly adjustment is paid.
Up to a limit of fifty per cent, the resources set aside for contingencies in the project cost framework are used, save for sums relating to contractual commitments already made, together with any further sums at the authority's disposal allocated to the same project. Sums already contractually committed remain excluded.
Also used are sums arising from tender discounts, unless a different destination is prescribed, and sums available in respect of other completed projects of the same authority for which final inspections have been carried out or certificates of satisfactory completion issued. The order in which the sources are drawn on is set by the rules.
The significance for an operator is one of predictability. An authority that has correctly sized its contingency provision has the cover for revision; one that omitted it will have to find resources elsewhere, with effects on how quickly the adjustment is recognised.
What to check before bidding
Three checks bear directly on how a tender is framed and should be made against the tender documents. They concern the presence of the clause, the threshold and the index invoked.
Whether the clause is present and compliant with article 60. A missing or non compliant clause is a point to raise through a clarification request.
The reference index the clause identifies. Different indices return different variations on the same market movement, and on a multi year contract the difference is material.
Where the clause sits in the financial plan of the tender. On contracts of any duration, a compliant clause reduces the risk an operator would otherwise have to build into the price as a safety margin. Ignoring it means bidding at a higher price than necessary or, worse, not pricing the risk while not being covered against it.
The most frequent errors
Treating revision as a variation is the first, and applies conditions and limits that do not govern it. Revision operates by contractual clause and not by administrative decision.
Assuming the 3 per cent threshold opens the way to full adjustment is the second, and ignores that the threshold is a deductible. Adjustment operates on the excess share alone and to the extent provided.
Not reading the index the clause refers to is the third, and is the one with the greatest financial impact on multi year contracts. Different indices produce very different amounts on the same variation.
Not building the presence or absence of a compliant clause into the financial plan of the tender is the fourth. A multi year contract without a compliant clause carries a different risk profile.
Note: the legislative references in this page relate to Italy and are current as at the date of publication. The price revision regime was amended by the corrective decree and the application rules are set out in an annex to the code: the text in force and the tender documents of the individual award should be checked before any operational use.