Infrastructure projects are, legally, work in which several layers overlap. In a motorway or rail project, alongside the contract between the authority and the contractor, expropriation procedures, loan and security agreements with financiers, subcontractor and supplier contracts, and environmental and zoning permits all run at the same time. A problem in one layer usually spills over into the others: delay in expropriation changes the time for the work, and a longer time changes the financing schedule.
The tender stage
Works, goods and services procurement using public funds is, as a rule, subject to Public Procurement Law No. 4734. Bidders may challenge unlawfulness in the tender process first by complaining to the contracting authority and then by objecting to the Public Procurement Authority. These applications are subject to short and preclusive time limits; a complaint to the contracting authority must be made within ten days from the day after the date on which the act complained of was, or should have been, noticed (Art. 55). Annulment actions may be filed in the administrative courts against decisions of the Public Procurement Board.
In bid preparation, qualification criteria, work experience certificates, explanations for abnormally low bids and the form of the bid bond are the points where disputes arise most often. As a small formal error at this stage may lead to the bid being disqualified, it is important to read the tender documents from start to finish and follow any addenda.
Performance of the contract
The relationship after the tender is governed by Public Procurement Contracts Law No. 4735 and the draft contract and general specifications in the tender documents. For the contractor, the key issues are progress payments, price differences, extensions of time, increases and decreases in the work, delay penalties and termination of the contract. Article 20 of the Law allows the authority to terminate after a notice if the contractor fails to perform its undertaking. As termination may have serious consequences, such as forfeiture of the performance bond and debarment from public tenders, the authority's notices must be answered in time and with reasons.
In internationally financed projects, FIDIC-type contracts are common. The 1999 and 2017 editions of FIDIC require the contractor to give notice of a claim for additional time or payment within 28 days of the date it became aware, or should have become aware, of the event. Missing this notice may jeopardise the right to claim. Keeping site diaries, correspondence and minutes in good order will provide evidence for any later claim or arbitration.
Public-private partnership projects
Some projects, such as motorways, bridges, airports and city hospitals, are carried out under models in which the investment is financed by the private sector and the investor earns revenue during the operating period. Law No. 3996 governs the build-operate-transfer model, and Law No. 6428 governs the Ministry of Health's public-private partnership projects. In these projects, the term of the implementation agreement, the authority's minimum usage or revenue guarantees, handover conditions, lenders' step-in rights and the amounts payable on termination form the backbone of the contract. As projects last for decades, provisions on change in law, exchange rate risk and force majeure must be drafted with care.
Expropriation
Most infrastructure projects require expropriation of privately owned property under Expropriation Law No. 2942. The process starts with a public interest decision; the authority first negotiates with the owner for a purchase by agreement (Art. 8). If no agreement is reached, the authority files an action for determination of compensation and registration before the civil court of first instance (Art. 10). If the owner considers the expropriation unlawful, it may file an annulment action in the administrative courts, or an action for correction in the civil courts for material errors; the time limit for these actions is thirty days from notification (Art. 14). Urgent expropriation (Art. 27) and cases where property is taken over without any expropriation should be assessed separately.
Common disputes in practice
The main disputes concern failure to reflect design changes in price and time, unforeseeable ground conditions, late handover of the site because of incomplete expropriation or permits, price difference calculations and subcontractor payments. Where there is a risk of a bank guarantee being called unfairly, a request for an interim injunction arises. The forum also depends on the subject: acts in the tender stage are heard by the administrative courts, while receivables arising from performance of the contract are, as a rule, heard by the civil courts. Article 125 of the Constitution provides that arbitration may be provided for by law in disputes arising from concession contracts relating to public services; international arbitration is available only for disputes with a foreign element.
Our firm's work in this sector
In infrastructure and transportation projects, we provide legal support on review of tender documents and complaint procedures, contract negotiation, preparation of progress payment and extension of time claims, expropriation actions and arbitration. This work combines our practice in Construction Law, Dispute Resolution, Urban Transformation and Zoning Law and, for the formation and management of project companies, Commercial and Corporate Law.
Main topics
- Public procurement procedures, complaints and objections (Law No. 4734)
- Performance and termination of public procurement contracts (Law No. 4735)
- Build-operate-transfer and other public-private partnership models
- Expropriation, determination of compensation and de facto expropriation
- FIDIC and international construction contracts
- Progress payments, price differences, extensions of time and variation claims
- Project finance, bank guarantees and subcontractor relationships
Frequently asked questions
Within what period must I challenge a decision of the tender commission?
Under Law No. 4734, a complaint is first made to the contracting authority. It must be made within ten days from the day after the date on which the act complained of was, or should have been, noticed. The objection to the Public Procurement Authority against the contracting authority's decision is also subject to short and preclusive time limits.
Can an arbitration clause be included in public procurement contracts?
Disputes arising from conventional public procurement contracts are generally heard by the courts. Article 125 of the Constitution provides that arbitration may be provided for by law in concession contracts relating to public services; international arbitration is limited to disputes with a foreign element. The nature of the specific contract and the applicable law should be examined separately.
I find the expropriation compensation too low. What can I do?
If no agreement is reached, the authority files an action for determination of compensation and registration before the civil court of first instance; the compensation is determined in that action through expert examination, and the owner raises its objections there. An annulment action against the expropriation itself may be filed in the administrative courts within thirty days of notification.
What happens if the 28-day notice period in a FIDIC contract is missed?
The 1999 and 2017 editions of FIDIC provide that the contractor may lose its right to additional time and payment for claims not notified in time. How this consequence applies in a specific case is assessed according to the law governing the contract and the parties' correspondence.
What can be done against a debarment decision?
A debarment decision under Article 58 of Public Procurement Law No. 4734 is an administrative act and may be challenged by an annulment action in the administrative court. The time limit for filing is, as a rule, sixty days from notification of the decision under Article 7 of the Administrative Procedure Law. As debarment may also affect the company's other ongoing tenders and its shareholders, whether to request a stay of execution together with the action should be assessed separately.
Legislation and sources
- Public Procurement Law No. 4734 (in Turkish)
- Public Procurement Contracts Law No. 4735 (in Turkish)
- Expropriation Law No. 2942 (in Turkish)
- Law No. 3996 on the Build-Operate-Transfer Model (in Turkish)
- Public Procurement Authority – Electronic Public Procurement Platform (EKAP)
The information on this page is general and does not constitute legal advice. As legislation may change, the current rules must be assessed separately for your particular situation.