New provision allowing price indexation in Bulgarian public procurement contracts

Аn amendment to the Bulgarian Public Procurement Act (“PPA”) came into force, allowing for price indexation of public procurement contracts in the event of inflation. The amendment aims to address the effects of industrial inflation caused by the COVID-19 pandemic and amplified by the war in Ukraine. Although the new provision applies to public procurement contracts in all industries, the need for price indexation is most pressing in relation to construction contracts.

Тhe new indexation provision allows for prices in public procurement contracts to be amended when there is a significant increase in the price of the goods and materials needed to execute the contract.

The draft version of the methodology currently published by the government envisages the following conditions:

  • Only works certified/invoiced or carried out after 30 June 2021 are subject to price adjustments;
  • The total amount of the increase may not exceed 15% of the contract value;
  • Contracts already completed before the new rules take effect are not subject to indexation;
  • Indexation can only be carried out if funding has been secured and if the indexation is feasible for the contracting authority.

Pending the adoption of the final methodology by the government, it remains to be seen whether the introduced mechanism will prove effective in resolving existing financial difficulties and in incentivising the completion of ongoing public procurement projects.