CMS Expert Guide on rising raw material prices in Morocco

In order to mitigate the impact of rising prices on companies holding public procurement contracts and to prevent them from falling into financial crises due to the shortage of raw materials and rising prices, the Moroccan Chief Executive issued a circular on Monday, 18 April2022, No. 09/2022 introducing the following set of measures: 

1. Extending the performance periods for current procurements for up to 6 months to avoid the application of delays penalties;
2. Restituting delays penalties collected in the framework of current procurements;
3. Allowing termination without confiscation of securities for ongoing procurements;
4. Promoting the amicable settlement of disputes arising from termination decisions with forfeiture of the final security deposit and application of late payment indemnities;
5. Broadening price adjustments to works procurement contracts awarded at non-adjustable prices;
6. Expediting the payment of sums due to contractors based on the initial amounts of services performed before completing payments in the event of difficulties in establishing revised prices;
7. Clearing up the situation surrounding undecided provisional and final acceptance of completed projects to expedite the return of the final securities provided by the contract holders;
8. Using "stop and go" for procurements whose holders claim to be facing performance difficulties.

In several cases, the Government allows contracting authorities to amend the existing public contracts, for instance to extend the performance periods of current public contracts up to 6 months to avoid the application of delays penalties.

No. the imprévision theory is not recognized under Moroccan law. Nevertheless, the measures enacted by the circular No. 09/2022 allow the amendment of current public contracts (e.g., price adjustments of works procurement contracts awarded at non-adjustable prices) to mitigate the impact of the increase in the price of raw materials on the companies holding public procurement contracts.

The circular No. 09/2022 allows contracting authorities to extend on a case-by-case basis, by amendment, the deadlines granted to companies holding public procurement contracts for periods of up to 6 months to avoid the application of delays penalties. 

Furthermore, the circular No.09/2022 provides for the restitution of delays penalties collected in the framework of current public contracts. Indeed, the Government is putting in place compensation mechanisms for the benefit of companies in the framework of contracts that are still in progress, which have been charged penalties for delay for reasons attributable to the economic crisis.

The Moroccan Chief Executive invited the Minister of the Interior to consider the possibility of adopting a circular that includes the same measures and to extend it to all public contracts awarded by municipal authorities.

The Moroccan Chief Executive also invites contractors who are facing difficulties in the execution of their procurements, due to price increases or shortages of raw materials, to inform the contracting authorities as soon as possible, specifying the effects of these difficulties on the contractual execution time.

Once the contractors' requests have been studied - and subject to confirmation of their validity - the contracting authorities will produce service orders pronouncing the postponement of the work and service orders for the resumption of the work when the reasons for the postponement abate.

However, it is specified that in this case, no compensation for the postponement of work can be claimed by the contractors.

Moreover, the circular specifies that all the measures referred to in the above circular are implemented with a constant budget, in a logic of prioritization of contracts and with the possibility of smoothing over time.

The circular No. 09/2022 is of general scope and applies to all public contracts and does not specifically provide for measures related to public contracts that are governed by private law.