Change of Contractor

A public contract is awarded to a specific supplier following a competitive process. That supplier's legal identity, financial standing, and technical capability were all assessed as part of the selection. Allowing the contract to be quietly transferred to a different entity would undermine the entire evaluation, granting to the substitute supplier a contract for which it never competed. This is why a change of contractor is treated as a form of modification, and why it is only lawful in three carefully defined circumstances under Article 72(1)(d) of Directive 2014/24/EU.

What is a change of contractor?

A change of contractor occurs when the legal entity holding the public contract is replaced by a different legal entity. This can arise through corporate restructuring, merger, acquisition, demerger, insolvency, subcontracting arrangements that evolve into a full substitution, or deliberate transfer of the contract. Article 72(1)(d) of Directive 2014/24/EU sets out three situations in which a change of contractor is permitted without a new procedure.

The first is where the original contractor is succeeded by another economic operator following a corporate restructuring, including takeover, merger, acquisition, or insolvency, provided the successor satisfies the exclusion grounds and selection criteria that were applied in the original procurement. The second is where the contracting authority itself takes over the contractor's obligations to its subcontractors, for example following contractor insolvency. The third is where the contract documents provided for a review clause specifically contemplating the possibility of a contractor substitution under defined conditions.

Where none of these grounds applies, a change of contractor is treated as a substantial modification. The effect is that the authority would need to run a new procurement to award the modified (or effectively new) contract. Simply reassigning the contract by supplementary agreement without meeting one of the three permitted grounds is unlawful.

In the UK under the Procurement Act 2023, the framework is broadly comparable. Corporate succession following merger or acquisition is the most commonly invoked ground. The key test remains whether the successor entity meets the standards that applied at original award.

Why it matters for bidders

For suppliers involved in mergers, acquisitions, or demergers, the change of contractor rules have direct practical consequences. If your company is acquired and you hold public contracts, both you and the acquiring entity must confirm to contracting authorities that the successor satisfies the original selection criteria. Authorities have the right to verify this before consenting to the succession.

For competing suppliers, a change of contractor is sometimes an opportunity. If the new entity cannot satisfy the original selection criteria, the authority should not permit the substitution without a new procedure, which would open competition for the remaining contract term.

Example

A Polish public broadcaster holds a five-year broadcast technology services contract with a mid-size AV integrator. Midway through the contract, the integrator is acquired by a larger European group. The acquiring entity has stronger financial capacity and equivalent technical capability. The broadcaster conducts a fresh check against the original exclusion grounds and selection criteria, confirms the acquirer passes, and documents the substitution via a supplementary agreement. The change of contractor is lawful under Article 72(1)(d)(i).

Frequently Asked Questions

Does the successor entity need to go through the full procurement selection process again?

No. The test is whether the successor satisfies the criteria that applied at the time of original award, not whether it would win a new competition. The authority applies the original standards, not current-day standards, to the new entity.

What happens if the original contractor becomes insolvent?

Insolvency is one of the most common triggers for a change of contractor review. The authority may transfer the contract to the insolvent entity's successor (e.g., the entity that acquires the business from administrators) if it meets the criteria, take over the contractor's obligations to its subcontractors, or terminate and re-procure.

Can a subcontractor become the main contractor?

Generally not without a new procedure, unless the contract documents contained a review clause expressly anticipating this. Elevating a subcontractor to the prime contractor role changes the legal and economic character of the arrangement in a way that typically constitutes a substantial modification.