Introduction
Public procurement contracts in Turkey are governed by a special legal regime. Once a public tender is completed under Public Procurement Law No. 4734, the contractual phase is mainly regulated by Public Procurement Contracts Law No. 4735. This distinction is extremely important for companies, contractors, suppliers, service providers and foreign investors participating in Turkish public tenders.
Law No. 4734 regulates the tender process: publication of tender notices, procurement procedures, bid submission, bid evaluation, complaints, appeals and tender award decisions. Law No. 4735, on the other hand, regulates the contract signed after the tender. In other words, once the tender is finalized and the successful bidder signs the contract with the contracting authority, the legal focus shifts from procurement procedure to contract performance.
The official Public Procurement Authority legislation page lists both Public Procurement Law No. 4734 and Public Procurement Contracts Law No. 4735, each published in the Official Gazette dated 22 January 2002 and numbered 24648. Law No. 4735 states that its purpose is to determine the principles and procedures regarding the preparation and implementation of contracts relating to tenders conducted under the Public Procurement Law. It applies to contracts concluded as a result of tenders carried out by authorities subject to Law No. 4734.
For companies, winning a public tender in Turkey is not the end of the legal process. It is the beginning of a highly regulated contractual relationship. Public procurement contracts include strict rules on performance bonds, contract type, price difference, insurance, force majeure, inspection and acceptance, contract amendments, assignment, termination, prohibited acts, debarment and contractor liability. Therefore, any company participating in public tenders in Turkey should assess contract risks before submitting a bid.
Legal Nature of Public Procurement Contracts in Turkey
Public procurement contracts in Turkey are not ordinary private-law agreements freely negotiated between two equal commercial parties. Although they are contracts, their content is largely determined by the tender documents, statutory rules and standard contract forms. The contracting authority cannot freely rewrite the contract after the tender is awarded, because doing so may violate the principles of transparency, competition and equal treatment that governed the tender process.
Law No. 4735 expressly provides that contracts prepared under the law cannot include provisions contrary to the conditions set out in the tender documents. It also states that, except in cases specified by the law, contract provisions cannot be changed and additional contracts cannot be executed. This rule is one of the most important features of Turkish public procurement contracts.
The practical consequence is clear: bidders must review the draft contract and tender documents before submitting their bids. A contractor should not assume that unfavourable provisions can be renegotiated after winning the tender. In most cases, the administration and the contractor are bound by the tender documents, draft contract and mandatory rules of Law No. 4735.
Relationship Between Law No. 4734 and Law No. 4735
The public procurement process in Turkey has two main stages. The first stage is the tender stage, governed primarily by Law No. 4734. The second stage is the contract stage, governed mainly by Law No. 4735.
This distinction affects legal remedies and risk management. If the dispute concerns the tender notice, administrative specification, technical specification, bid evaluation, abnormally low bid explanation, exclusion decision or award decision, the issue usually falls under Law No. 4734 and the complaint/appeal mechanism before the contracting authority and the Public Procurement Authority.
If the dispute concerns performance, delay penalties, delivery, acceptance, warranty, force majeure, termination, performance bond, additional works, work decrease, price difference or contractor liability, Law No. 4735 becomes central. In practice, many disputes arise because bidders focus heavily on winning the tender but fail to analyse the contractual obligations that will apply after award.
A successful public procurement strategy in Turkey must therefore cover both laws. A company must first comply with Law No. 4734 to win the tender and then comply with Law No. 4735 to perform the contract without sanctions.
Mandatory Use of Standard Contracts
Law No. 4735 provides for the use of standard contracts in order to ensure uniform implementation. It states that standard contracts for goods, services and works are published in the Official Gazette, and that contracting authorities prepare their contracts based on these standard contract provisions.
This standardization protects the integrity of the procurement system. It reduces arbitrary contract drafting and ensures that similar public contracts are subject to similar legal structures. However, standardization does not mean that every contract is identical. The specific content of each contract depends on the type of procurement, tender documents, administrative specification, technical specification, performance period, payment terms, penalties, price difference rules and other tender-specific conditions.
For contractors, this means that the contract must be reviewed together with all tender documents. Law No. 4735 also requires the contract to state that all documents included in the tender documents form annexes to the contract. Therefore, the technical specification, administrative specification, standard forms, project documents and other annexes may become binding contractual obligations.
Types of Public Procurement Contracts Under Law No. 4735
Law No. 4735 recognizes several types of public procurement contracts. These contract types are directly connected to the nature of the tender and the pricing method.
For construction works based on application projects and related site lists, a turnkey lump-sum contract may be concluded for the total price offered by the bidder. For goods or service procurements where the features and quantity of the work are determined by the administration, a lump-sum contract may be concluded for the total price offered. For construction works based on preliminary or final projects and unit price schedules, or goods and services based on detailed specifications, a unit price contract may be concluded based on the multiplication of quantities and unit prices. Law No. 4735 also recognizes mixed contracts in construction works and individual contracts based on framework agreements.
The contract type is not a technical detail; it directly affects commercial risk. In a turnkey lump-sum contract, the contractor usually bears a higher risk regarding quantities and performance within the agreed price. In a unit price contract, payments are linked to actual quantities and unit prices. In a mixed contract, some parts may be lump-sum while others are unit-price based. Therefore, bidders should evaluate the contract type carefully before pricing the bid.
Mandatory Content of Public Procurement Contracts
Law No. 4735 sets out mandatory elements that must be included in public procurement contracts. These include the name, nature, type and quantity of the work; the contracting authority’s name and address; the contractor’s name or trade name and notification address; subcontractor information where applicable; contract price, type and duration; payment place and conditions; advance payment rules; price difference provisions; taxes, duties, transportation and insurance expenses; support services such as installation, training, maintenance and spare parts; performance bond amount and return conditions; warranty rules; delivery and acceptance conditions; delay penalties; force majeure and time extension rules; inspection and acceptance procedures; insurance in construction works; contract amendment rules; termination conditions; personnel responsibilities; annexes to the contract; dispute resolution; and occupational health and safety obligations.
This list shows why public procurement contracts must be reviewed carefully. Each of these items may create significant legal and financial exposure for the contractor. For example, the delay penalty clause may determine the cost of late delivery. The warranty clause may extend obligations after acceptance. The price difference clause may determine whether the contractor is protected against inflation or cost increases. The force majeure clause may determine whether a delay is excusable.
A contractor should never sign a public procurement contract without understanding these mandatory elements. In practice, most disputes arise not because the contract is unclear, but because the contractor underestimated the consequences of the provisions already included in the tender documents.
Performance Bond and Additional Performance Bond
Performance bonds are one of the most important legal and financial elements of public procurement contracts in Turkey. After winning the tender, the successful bidder generally must provide a performance bond before signing the contract. The purpose is to secure the contractor’s proper performance of the public contract.
Law No. 4735 also regulates additional performance bonds. If price difference is payable and this creates an increase in the contract price, an additional performance bond is taken at the rate of 6% of the increased amount. The law also allows this additional bond to be collected by deduction from progress payments.
The return of performance bonds is also regulated. In construction works, half of the performance bond is returned after deficiencies and defects are remedied and the provisional acceptance certificate is approved; the remainder is returned after the social security clearance document is submitted and the final acceptance certificate is approved. In non-construction works, the return depends on acceptance, social security clearance and, where applicable, expiry of the warranty period.
From a practical perspective, contractors should plan their cash flow and bank guarantee capacity before submitting a bid. Performance bonds may remain blocked for a significant period. If the contractor has tax, social security or other debts arising from the work, the administration may convert the performance bond into cash and set it off against such debts without needing to file a lawsuit or protest.
Price Difference in Public Procurement Contracts
Price difference is a crucial issue in Turkish public procurement contracts, especially in periods of inflation, exchange rate volatility and unexpected cost increases. Law No. 4735 provides that the principles and procedures for price difference according to contract types are determined by the competent authority upon the proposal of the Public Procurement Authority. It also states that the price difference principles included in the contract cannot be changed after the contract is signed.
This rule has major commercial importance. If the tender documents state that no price difference will be paid, or if the price difference formula is limited, the contractor may not be able to request additional payment merely because costs increased. Conversely, if the contract includes a price difference mechanism, the contractor must calculate and document its entitlement according to the applicable rules.
Turkey has also introduced temporary price difference and time extension mechanisms in response to extraordinary economic conditions. For example, the Public Procurement Authority announced the implementation principles of Provisional Article 7 of Law No. 4735, applicable to certain Turkish lira construction contracts tendered before 1 March 2023 and ongoing as of 28 December 2023, including increased price difference for works performed between 1 January 2024 and 31 December 2024 and the possibility of time extension up to six months under specified conditions.
However, such temporary mechanisms are exceptional and limited in scope. Contractors should not assume that future legislative relief will always be available. The safest approach is to evaluate price risk, inflation risk, currency exposure and supply chain risks before submitting the bid.
Force Majeure Under Law No. 4735
Force majeure is another critical topic in public procurement contracts. Law No. 4735 lists certain events that may be accepted as force majeure, including natural disasters, lawful strikes, general epidemics, partial or general mobilization, and similar cases to be determined by the Public Procurement Authority where necessary.
However, the occurrence of such an event is not automatically enough. For the administration to accept a case as force majeure, the event must not arise from the contractor’s fault, must prevent performance of the obligation, must be beyond the contractor’s power to eliminate, must be notified to the administration in writing within twenty days following the occurrence of the event, and must be documented by competent authorities.
This creates a strict procedural burden. A contractor affected by a force majeure event should immediately collect documents, notify the administration in writing and explain how the event prevents performance. Late or undocumented force majeure claims may be rejected.
Force majeure may lead to time extension or, in some cases, termination of the contract. If the contract is terminated due to force majeure, the account is liquidated according to general provisions and the performance bond and additional performance bonds are returned.
Inspection, Examination and Acceptance Procedures
Public procurement contracts are completed not merely by delivery or performance, but by formal inspection and acceptance. Law No. 4735 states that inspection and acceptance procedures for delivered goods, services, works or completed jobs are carried out by inspection and acceptance commissions established by the administration, consisting of at least three persons. It also states that inspection and acceptance cannot be carried out unless the goods or work are delivered to the administration.
In contracts involving production or manufacturing processes, the administration may inspect whether the work is being performed according to the quality and characteristics specified in the tender documents at certain stages and intervals, provided that this does not remove the authority and responsibility of the inspection and acceptance commission.
For contractors, acceptance is a key legal milestone. Payment, release of performance bonds, warranty periods, liability periods and final account procedures may depend on provisional or final acceptance. Therefore, contractors should document delivery, testing, inspection, correction of defects and correspondence with the administration.
Contract Amendments After Signing
One of the strictest principles under Law No. 4735 is the limitation on contract amendments. As a general rule, contract provisions cannot be changed and additional contracts cannot be made except in cases permitted by the law.
After the contract is signed, amendments may be made only if the contract price is not exceeded and if the administration and contractor mutually agree, and only in relation to specific matters: the place of performance or delivery, and the duration of work and related payment terms, provided that the work is performed or delivered earlier than the original time.
This means that public procurement contracts are far less flexible than ordinary commercial contracts. A contractor cannot rely on informal promises or post-award renegotiation. If the contractor’s performance depends on a different delivery place, different payment schedule, different technical solution or revised scope, these issues must be checked against the tender documents and Law No. 4735.
Assignment of Public Procurement Contracts
Law No. 4735 allows assignment of a public procurement contract only in compulsory cases and with the written permission of the tender authority. The assignee must meet the conditions required in the original tender. Except for assignments due to name or status changes, the same contractor cannot assign or take over another contract within three years following an assignment. Unauthorized assignments or assignments violating these rules may result in termination and sanctions.
This rule is especially important in mergers, acquisitions, restructuring, group company transfers and foreign investment transactions. A public procurement contract cannot simply be transferred like an ordinary private contract. The contractor must evaluate whether the intended transaction constitutes an assignment, whether written permission is required and whether the receiving entity meets the original tender requirements.
Failure to comply with assignment rules may result not only in termination but also in debarment and forfeiture of guarantees.
Termination by the Contractor
Law No. 4735 regulates termination initiated by the contractor. If, after the contract is concluded, the contractor declares in writing that it cannot fulfil its commitment due to financial incapacity, except in force majeure cases, the administration may terminate the contract without needing to issue a protest. In such a case, the performance bond and additional performance bond are recorded as revenue, and the account is liquidated according to general provisions.
This is a severe consequence. A contractor facing financial difficulty should not simply stop performance or send an informal notice. It should first evaluate whether force majeure, time extension, price difference, work decrease, settlement, legal impossibility or another lawful mechanism may apply. Otherwise, termination may lead to loss of guarantees, debarment and compensation claims.
Termination by the Administration
The administration may terminate the contract in specific cases. Under Law No. 4735, if the contractor fails to perform the commitment according to the tender documents and contract provisions, or fails to complete the work on time, and the situation continues despite a written warning giving at least ten days and clearly stating the reasons, the administration terminates the contract. The administration also terminates the contract if the contractor is found to have committed prohibited acts during contract performance. In such cases, the performance bond and additional performance bond are recorded as revenue and the account is liquidated.
Termination has serious consequences. The contractor may lose its guarantees, face debarment, become liable for the administration’s damages and suffer reputational harm in future tenders. Therefore, contractors must monitor deadlines, quality obligations, delivery requirements and written warnings very carefully.
If the administration issues a warning, the contractor should immediately respond with evidence, cure the alleged breach where possible, request time extension if legally justified and preserve all documents for potential dispute resolution.
Termination Due to Prohibited Acts Before Contract Signing
Law No. 4735 also regulates a situation where prohibited acts committed during the tender process are discovered after the contract is signed. If it is later determined that the contractor committed prohibited acts under the Public Procurement Law during the tender process, the performance bond and additional performance bond are recorded as revenue and the contract is terminated.
However, there is an important exception. If at least 80% of the commitment has been completed and there is public interest in completing the work, the administration may require the contractor to complete the remaining work instead of terminating the contract, provided that certain conditions are met. In that case, sanctions may still be applied and a penalty equivalent to the performance bond and additional performance bond may be collected.
This rule shows the balance between public interest and procurement integrity. The law protects the public from unlawful conduct but also recognizes that terminating an almost-completed public work may sometimes cause greater public harm.
Additional Works, Work Decrease and Liquidation
Law No. 4735 regulates additional works and work decreases. If an unforeseen situation makes an increase in work necessary, the additional work may be performed by the same contractor if it remains within the project forming the basis of the contract and if it is technically or economically impossible to separate it from the original work without burdening the administration.
For turnkey lump-sum construction contracts, additional works may be ordered up to 10% of the contract price. For unit price goods, services and works contracts, the limit is generally up to 20% of the contract price. For unit price construction contracts, the competent authority may increase this limit up to 40% on a contract basis.
If it becomes clear that the work will be completed below 80% of the contract price, the contractor must still complete the work. In that case, the contractor may be paid a limited amount corresponding to actual expenses and contractor profit, calculated according to the statutory formula.
These provisions are particularly important in construction and infrastructure contracts where quantities, site conditions and technical needs may change during performance.
Prohibited Acts and Debarment
Law No. 4735 contains strict prohibitions during contract performance. Prohibited acts include manipulating contract-related transactions through fraud, promises, threats, influence, interest, agreement, extortion, bribery or other means; preparing or using forged documents; using fraudulent materials, tools or methods; producing defective, incomplete or faulty work contrary to technical rules; damaging the administration during performance; misusing information and experience against the administration; failing to perform the commitment according to the tender documents and contract except in force majeure cases; and assigning or taking over the contract contrary to Article 16.
Persons or entities found to have committed prohibited acts may be banned from participating in public tenders for a period of not less than one year and up to two years, including tenders of public institutions and authorities covered by or exempted under the relevant provisions. Debarment decisions must be issued within the statutory period, published in the Official Gazette and tracked by the Public Procurement Authority.
For contractors, debarment is one of the most serious risks in Turkish public procurement. It may affect not only the current contract but also future public-sector business. Companies should therefore establish internal compliance systems, verify documents, supervise subcontractors and avoid any conduct that may be interpreted as prohibited under Law No. 4735.
Criminal Liability and Civil Responsibility
Some prohibited acts may also constitute criminal offences under Turkish law. Law No. 4735 provides that if acts listed among prohibited conduct constitute crimes under the Turkish Criminal Code, the relevant persons, their partners or representatives may be reported to the competent public prosecutor, even if the act is discovered after completion and acceptance of the work. In addition to criminal penalties, court-ordered debarment may apply for a period of not less than one year and up to three years after the end of the administrative debarment period.
The law also regulates liability of contractors, subcontractors, consultants, suppliers and service providers. In construction works, contractors and subcontractors may be jointly liable for damages arising from non-compliance with technical and professional rules, use of fraudulent materials and similar reasons from the start of work until final acceptance, and for fifteen years after final acceptance approval.
Consultancy service providers may also be directly liable for damages arising from design errors, implementation mistakes, inadequate supervision, incorrect approximate cost calculations and similar reasons; where construction supervision services are involved, they may be jointly liable with contractors and subcontractors for fifteen years. Suppliers and service providers are directly liable for damages arising from defective or non-standard materials, improper performance and failure to comply with contract and specification provisions.
Practical Contract Risk Checklist for Contractors
Before signing a public procurement contract in Turkey, contractors should conduct a detailed legal and commercial review.
First, the contractor should confirm the contract type: turnkey lump-sum, lump-sum, unit price, mixed or framework-based individual contract. Second, it should review the performance bond amount, validity, additional bond risk and return conditions. Third, it should analyse price difference provisions and inflation exposure. Fourth, it should review delivery period, delay penalties and time extension conditions. Fifth, it should examine force majeure notification rules and documentation requirements. Sixth, it should review inspection and acceptance procedures. Seventh, it should assess warranty obligations and post-acceptance liabilities. Eighth, it should check subcontracting and assignment restrictions. Ninth, it should analyse termination consequences, debarment risks and guarantee forfeiture. Tenth, it should document all communications with the administration during performance.
For foreign companies, additional issues include Turkish tax obligations, customs procedures, work permits, local subcontractors, notarized translations, bank guarantees issued through Turkish banks, currency risk, dispute resolution forum and compliance with Turkish occupational health and safety rules.
Frequently Asked Questions
What law governs public procurement contracts in Turkey?
Public procurement contracts concluded after tenders conducted under Public Procurement Law No. 4734 are mainly governed by Public Procurement Contracts Law No. 4735. The law regulates preparation and implementation of such contracts.
Can public procurement contracts be changed after signing?
Only in limited cases. Law No. 4735 states that contract provisions cannot be changed and additional contracts cannot be made except in cases specified by the law. Certain changes may be possible if the contract price is not exceeded and the parties agree, such as change of performance or delivery place and early performance-related timing/payment changes.
What happens if the contractor fails to perform the contract?
If the contractor fails to perform according to the tender documents and contract, or fails to complete the work on time, the administration may issue a warning and, if the breach continues, terminate the contract. In termination cases, performance bonds may be recorded as revenue and debarment consequences may arise.
Is force majeure accepted in Turkish public procurement contracts?
Yes, but strict conditions apply. The event must not arise from the contractor’s fault, must prevent performance, must be beyond the contractor’s control, must be notified in writing within twenty days and must be documented by competent authorities.
Can a public procurement contract be assigned?
Yes, but only in compulsory cases and with the written permission of the tender authority. The assignee must meet the original tender conditions, and unauthorized assignment may result in termination and sanctions.
Conclusion
Public procurement contracts in Turkey under Law No. 4735 are highly regulated legal instruments. They are not ordinary commercial contracts that can be freely amended after award. Their content is shaped by the tender documents, standard contract forms and mandatory statutory provisions.
For contractors, the most important lesson is that contract risk begins before bid submission. The draft contract, administrative specification, technical specification, performance bond requirements, price difference rules, delay penalties, force majeure provisions, inspection and acceptance rules, warranty obligations, termination clauses and debarment risks must all be reviewed before pricing the bid.
Law No. 4735 creates a strict but predictable framework. It protects public interest, ensures uniform contract implementation and imposes serious obligations on contractors. A contractor that performs carefully, keeps proper records, complies with specifications and acts promptly in case of force majeure or administrative warnings can reduce legal risk. A contractor that ignores formal obligations may face termination, forfeiture of guarantees, debarment, compensation claims and even criminal proceedings.
For Turkish and foreign companies alike, public procurement contracts in Turkey require disciplined legal management. Winning the tender is only the first step. Successful performance under Law No. 4735 requires compliance, documentation, risk analysis and professional legal guidance throughout the entire contract lifecycle.
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