Good practices in the processing of minor contracts for local entities

In the context of the Municipios y Competencia initiative, of the National Commission of Markets and Competence (Comisión Nacional de los Mercados y la Competencia or CNMC by its initials in Spanish) in collaboration with the autonomic competence authorities, the Basque Council of Competence (BCC) has studied the use of minor contracts, specifically, by local administrations. The BCC has created a document which identifies the irregularities detected in the use of these contracts, and that contains commandments of good practices in the processing of these files to guarantee free competence (accessible here).

Additionally, both the CNMC and the BCC organized, on November 3^rd, a debate conference where the document created by the BCC was presented (accessible in the CNMC YouTube Channel).

The document of the BCC “Decálogo de buenas prácticas en la tramitación de los contratos menores por las entidades locales” (with reference LEA/AVC Nº 581-PROM-2022) exposes the irregularities that are usually detected in the use of the minor contract by the local entities, and establishes commandments of good practices with the objective of giving recommendations that serve as a guide to these entities when processing the files, so they can achieve that the minor contracting respects the current legality and guarantees the principle of free competence, given that the facility and simplicity in its processing have lead, frequently, to an abusive use of this figure.

The main characteristics of the minor contracts are the possibility of choosing the successful tenderer in a direct way and the maximum thresholds, which are the ones that allow to determine in which situations these contracts can be used. In fact, the article 118 of the Law 9/2017, of November 8^th, of the Public Sector Contracts (LCSP) is the rule that establishes that are considered to be minor contracts the contracts for works whose estimated value is inferior to €40.000, as well as the service or supply contracts whose estimated value is under €15.000.

However, the figure of the minor contract is usually used without the needed justification, being one of the most habitual cases the one of contract splitting, which consists in dividing a contract to diminish its quantity and, by doing that, eluding the requirements related to the publicity and the ones related to the procedure of adjudication that shall apply.

On this matter, to determine if there is contract splitting with which evade the rules that have to govern the contracting procedure, it is necessary to analyse jointly the definition of the object of the contract and the concept of contract splitting.

The object, according to article 99 of the LCSP, has to be determined and, according to the article 116 of the LCSP, it has also to be complete, including the execution of the totality of the entitlements to cover all the necessities that the entity may have with respect to that same utility. In this sense, it has become important the concept of “operative or functional unit” to know which entitlements has to contain the object of the contract: it is understood that this unit is given if the elements are inseparable to achieve the same finality, or if they are essential for the correct functioning of what is intended to achieve through the celebration of the contract. The European Union Court of Justice has also pronounced himself about the matter in different sentences, like the one in the C-574/10 case, where the conclusion was that three architecture contracts that were being analysed were interconnected in such a way, for treating about a work on a same building and for its technic and economic homogeneity, that they should have been contracted as a sole work.

The contract splitting, then, is considered to be “irregular” when the object of the contract is divided or “chopped” to adjudicate it through the modality of the minor contract and, like this, evade the required processing for the other procedures that are compiled in the LCSP. However, there will be no irregular contract splitting in the case of the division in lots regulated in the article 99.4 of the LCSP, given that they are cases where, moreover, the compliance with the principles of publicity and equality of access to the tender offer is guaranteed.

Another frequent abusive practice in the field of the minor contracting is the recurrence and concatenation of contracts, considered as such because the figure of the minor contract is conceived to give a quick response to the exceptional needs of scarce quantity, which is the main reason that makes logical that they are not recurrent. Nonetheless, there are irregularities concerning the surpass of the threshold established by the rules, the duration exceeding the twelve months, the lack of essential documentation in the files, etc.

In conclusion, the BCC states that the minor contracting is a tool that allows the provision of the necessities of an entity using less time and resources, but its abusive use can lead to the closing of markets for extended time periods, which could lead to increased prices, and worse quality entitlements. For that same reason, an equilibrium must always be found between the procedural efficiency (resources and time) and the protection of the principles of concurrence and free competence in the field of the minor contracting. On this matter, it is important to highlight the importance of using adequate process instruments, among which we find the correct planning of contracting necessities by the Administrations.

Finally, as an annex to this article, there’s attached the commandments of good practices approved by the BCC, to see which are the guidelines that this Council has approved for an efficient and responsible use of the minor contract.