Building contractors are not powerless part II – adjustment of the contractor’s remuneration

In October 2014, Article 142(5) of the Act of 29 January 2004 – Public procurement law was amended to include the obligation (“the contract (…) includes”) for ordering parties to use remuneration adjustment clauses in contracts they conclude. In every contract performed for more than a year, the ordering party must include a possibility to modify the VAT rate, social security regulations and the minimum wage for work.

In the light of the said provision (which was generally unchanged until the recent inclusion of the Employee Capital Plans), a practice developed with regard to construction work contracts according to which the ordering party introduces an automated clause on VAT and usually an unspecified manner for the contractor to request a change of remuneration in other cases.

Neither the Act nor contract provisions impose an obligation to make the relevant changes or even an obligation for ordering parties to treat such change requests sufficiently seriously. If we consider the situation of most ordering parties, which are either publicly financed entities or beneficiaries of various subsidies, significant restraint in accepting such contractor requests is absolutely understandable.

Recent months have significantly extended the importance of the said instrument as its application went beyond the previous area of unqualified services provided by man-hours to include construction investment projects.

Reconciliation of the natural tendency among contractors to maximise their remuneration and an adequate level of security to the ordering party as well as its personnel and bodies requires prudent and precise action. The contractor should attach precise and clear calculation with its request, and patiently provide exhaustive responses to any potential questions from the ordering party.

Experience gained especially in cooperation with public institutions suggests that the minimum wages (minimum hourly rate) should be directly reflected in the provisions of employment contracts concluded as one of the elements that must be increased when the minimum wage rate is amended…

Legal adviser Bartosz Brzezina