Ten key elements of the new Public Sector Contracts Law

Among its many other components, the law makes it easier for SMEs to access procurement procedures, encourages transparency and introduces new criteria which make the quality of a bid prevail over a decision based exclusively on price. It also addresses the issue of cost overruns, sets out provisions on the use of “minor contracts” (contratos menores) and provides new requirements and measures concerning employees and tax for contractors.

We take a look at some of the new legislation these provisions contain and companies entering into government contracts would be well-advised to bear in mind.

1. Origin

The new Public Sector Contracts Law transposes the EU Directives on public procurement into Spanish law, in particular, Directive 2014/24/EU on public procurement and Directive 2014/23/ EU on concession contracts.

2. Objectives

• Achieve greater transparency in public procurement.
• Secure a better price-quality relationship in the goods and services acquired by the public sector.
• Make public procurement an effective instrument for implementing national and EU policies on social, environmental, innovation and development, and competition matters, and for supporting SMEs.
• Move towards digitalization through e-procurement.

3. Transparency

The law gives greater transparency to public procurement procedures by making information widely available in contracting authority profiles [U1] and on the Public Procurement Platform.

4. Factors benefitting SMEs

• The law makes it easier for SMEs to access public procurement procedures.
• It allows contracts to be put out for tender in a number of lots. The division of contracts into lots has actually now become the general rule rather than an exception.
• Documenting requirements are simplified. The cases requiring classification are reduced to be confined to works contracts in amounts equal to or higher than €500,000. It makes it possible for, and allows, bidders to evidence and complete their solvency by taking that of other companies as a basis, regardless of the legal nature of their relationships with them.
• Rules benefitting subcontractors (which are generally SMEs) have been introduced, such as being paid directly by the contracting authority.

5. Quality vs Price

The quality component of bids has a more central role. The law now gives priority to bids offering a better quality-price relationship.

6. Lodging appeals

The special appeal has taken hold in public procurement matters as a mechanism for interested companies to react to potential irregularities in public procurement procedures, and the subject-matter of these appeals has been broadened considerably to take in acts after the award, such as modifications.

7. Cost overruns

Limits in the event of modifications are provided, based on the contract price: up to 20% of the original price if the modifications were envisaged in the procurement documents; and 50% of the original price if they are unforeseen, exceptional modifications, which may not under any circumstances alter the overall nature of the contract.

8. Use of minor contracts

• Excessive use of this type of contract is prevented and it is made more transparent and efficient.
• The amounts and types of contracts for which minor contracts may be used have been reduced, and new requirements and formalities have also been added.
• Minor contracts may only be used for works (subject to a €40,000 limit), supplies and services (subject to a €15,000 limit) contracts.
• The contracting authority must issue a specific report supporting the need for the contract and the option of signing it with the contractor.

9. Effects concerning employees

The new law introduces measures to safeguard workers’ rights and the legislation in force on equality and social integration.

• The use of industry-specific, as opposed to company-specific, collective labor agreements is encouraged.
• The submission of unusually low bids as a result of breaching labor obligations is envisaged as a ground for exclusion.
• Specific provisions are introduced on surrogate employees.
• Contracts are prohibited with companies that employ more than 250 workers and breach the obligation to have an equality plan or fail to comply with the legal requirements on the employment of disabled workers. And it is encouraged to include certain criteria for awarding contracts such as having in place equality plans, policies for balancing work and family or personal life, or stable employment, among others.
• Specific penalties are envisaged for contractors incurring breaches or delays in the payment of wages. This in fact may be treated as a ground for termination of the contract.

10. Effects concerning tax

It clarifies the legal nature of the fees paid by users for using of public works or services: they are treated as payments of a public nature other than taxes.