What is the difference between consortium and subcontracting?
Posted: Sun Dec 22, 2024 5:30 am
The idea of subcontracting is to allow the winning bidder to perform more specialized services by hiring third parties, but under its own responsibility. Bidders are even allowed to qualify for the bidding process by presenting certificates from the companies they will subcontract, provided they commit to signing a contract exclusively with that company.
In this sense, subcontracting differs from consortium in two aspects:
a) the subcontractor is not part of the contract signed with the Administration, and compliance with its obligations is the exclusive responsibility of the company that won the bid; and
b) subcontracting of the entire contract or of a predominant portion of the contract is not permitted, under penalty of non-compliance with the bidding principle.
A good example of the usefulness of subcontracting is the construction of an airport passenger terminal. There is equipment and systems in this type of project that, due to their speciality, are unlikely to be executed email database australia by the company that wins the bid – elevators, baggage conveyor belts, fire detection systems, etc.
In this case, subcontracting is even more recommended than allowing consortia, although they can be cumulative. These specific equipment and systems represent a small portion of the object, and therefore it is not necessary for the companies that will execute them to be included in the contractual relationship with the Administration.
However, in order to permit subcontracting of part of the object, the call for bids must contain clear and objective rules, establishing, mandatorily:1
a) motivation and presence of public interest;
b) need for prior authorization from the Administration;
c) specification of the reasons for the service to be subcontracted and the desired deadline;
d) specification of the maximum percentage that may be subcontracted, with the maximum limit of up to 30% of the object usually adopted.
It is worth noting that, currently, case law already recognizes subcontracting as a form of material division of the object:
Recommendation to the Ministry of Planning, Budget and Management to provide, in a normative document that deals exclusively with bidding and contracting of IT services, distinct from the norm that refers generically to the contracting of other services, that the basic projects or terms of reference, used by federal public administration entities to contract IT services, contain, at least, the following topics: [...]
d.4) in the case of subdivision of the object, justification for the choice among the permitted forms, namely, the use of separate bids, the awarding by items, the permission to subcontract a specific part of the object or the permission to form consortiums.2
Thus, it is clear that the consortium will have a much greater responsibility towards the Public Administration, since it must fulfill all its obligations and report directly on them, while the subcontractor carries out its activities and reports directly to the subcontractor. Furthermore, the Consortium may be responsible for the entire contract, while the subcontractor is only responsible for a portion of it.
In this sense, subcontracting differs from consortium in two aspects:
a) the subcontractor is not part of the contract signed with the Administration, and compliance with its obligations is the exclusive responsibility of the company that won the bid; and
b) subcontracting of the entire contract or of a predominant portion of the contract is not permitted, under penalty of non-compliance with the bidding principle.
A good example of the usefulness of subcontracting is the construction of an airport passenger terminal. There is equipment and systems in this type of project that, due to their speciality, are unlikely to be executed email database australia by the company that wins the bid – elevators, baggage conveyor belts, fire detection systems, etc.
In this case, subcontracting is even more recommended than allowing consortia, although they can be cumulative. These specific equipment and systems represent a small portion of the object, and therefore it is not necessary for the companies that will execute them to be included in the contractual relationship with the Administration.
However, in order to permit subcontracting of part of the object, the call for bids must contain clear and objective rules, establishing, mandatorily:1
a) motivation and presence of public interest;
b) need for prior authorization from the Administration;
c) specification of the reasons for the service to be subcontracted and the desired deadline;
d) specification of the maximum percentage that may be subcontracted, with the maximum limit of up to 30% of the object usually adopted.
It is worth noting that, currently, case law already recognizes subcontracting as a form of material division of the object:
Recommendation to the Ministry of Planning, Budget and Management to provide, in a normative document that deals exclusively with bidding and contracting of IT services, distinct from the norm that refers generically to the contracting of other services, that the basic projects or terms of reference, used by federal public administration entities to contract IT services, contain, at least, the following topics: [...]
d.4) in the case of subdivision of the object, justification for the choice among the permitted forms, namely, the use of separate bids, the awarding by items, the permission to subcontract a specific part of the object or the permission to form consortiums.2
Thus, it is clear that the consortium will have a much greater responsibility towards the Public Administration, since it must fulfill all its obligations and report directly on them, while the subcontractor carries out its activities and reports directly to the subcontractor. Furthermore, the Consortium may be responsible for the entire contract, while the subcontractor is only responsible for a portion of it.