Price redetermination in Argentina: how it works and why filing late loses money

Note: the regime has been amended several times. Check the current text and the provincial or municipal rules that apply to your contract.

A conceptual point worth having clear from the start: price redetermination in no case constitutes a modification of an essential element of the contract such as the price; it is a mechanism intended to keep it current throughout the execution of the works.

Where the regime comes from

The context is worth it, because it explains the design.

Decree 1295 of 2002 had established a regime to preserve the original economic-financial equation of public works contracts, within the public emergency declared by Law 25.561. Over time, the alteration of that equation brought a significant increase in administrative and judicial claims, and a large number of public works were left paralysed or with significantly less progress than they should have had.

Hence its replacement by the regime of Decree 691/2016, with the purpose of preserving the economic and financial balance of public works and public works consultancy contracts. Annex I of that decree was later replaced.

Which contracts it applies to

Article 2 of Decree 691/2016 specifies that it applies to the national public administration in the terms of article 8, subsection a, of Law 24.156 — the central administration and decentralised agencies, including social security institutions.

Provinces, the City of Buenos Aires and municipalities are invited to adhere.

Practical implication: if your contract is provincial or municipal, do not assume the national regime applies. Check whether that jurisdiction adhered, and to what extent. It is the first question to answer and the one most often skipped.

How it works, concretely

The mechanism is built on these elements:

Reference variation. A cost-variation threshold that must be reached for redetermination to become available. Until it is reached, there is no procedure.

Input structure and weightings. The composition of the project’s cost by input category, with each one’s weight. It is the equivalent of a polynomial formula, and it defines how much the mechanism gives back.

Provisional adjustment. An adjustment applied provisionally while the definitive redetermination is processed. It is what keeps the contractor from financing the difference through the whole procedure.

Definitive redetermination. The final calculation that consolidates the redetermined prices.

The two deadlines you must know

Here is what costs the most money to ignore.

The filing deadline. If the request for redetermination and provisional adjustment is filed more than 45 calendar days after the last day of the month in which the reference variation was reached, the new prices apply to the portion of the contract still pending execution at the date of that request.

Read it carefully: filing late does not make you lose the right, but it makes you lose the redetermination over everything you executed between the moment it became available and the moment you filed. On a project that is moving, that can be a substantial part of the contract.

Delay attributable to the contractor. There is a situation foreseen in article 12 of Annex I concerning breach of deadlines for reasons attributable to the contractor, in which case the settlement is made at the prices corresponding to the date on which the works should have been completed.

That is: if you are behind through your own fault, the redetermination is calculated as if you had kept the schedule. The cost of inflation during your delay is absorbed by you.

Corollary: documenting that a delay is not attributable to you is not only a schedule matter. It is also a price matter.

The mistakes that cost

Not monitoring the reference variation. If nobody is watching for when the threshold is reached, the 45-day clock runs without you knowing.

Filing out of time. Already explained — the most expensive and most frequent mistake.

Not having per-period progress records. The calculation rests on what was executed and what was pending at each date. Without a dated, reliable progress record, the study becomes debatable.

Assuming the national regime applies to a provincial contract. Check the adhesion.

Not documenting delays caused by others. Without contemporaneous record, every delay is presumed yours, and that moves the price-settlement date against you.