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According to Art. 105, par. 1, of Legislative Decree n. 50/2016 (Public Procurement Code – “Code”) the awarded operator (also “Operator”) shall directly perform the works, the services and the supplies under the agreement, and neither the contract nor the execution of its obligations can be transferred to third parties shall the (strict) requirements under Art. 105 not be met.
Moreover, the current wording of Art. 105, par. 19, of the Code states that the obligations transferred by the Operator to the sub-contractor (or sub-contractors) shall not be subsequently transferred to third parties.
The latter provision is commonly referred to as the “prohibition of subcontracting chains” since the Italian legislator prohibited subcontracting chains, even in those cases in which the final executor of the services/works/supplies possesses the general and special requirements as indicated in (or integrated by) the tender documentation.
The Code thus shows a deep distrust towards subcontracting (and subcontracting chains) in public contracts, since this tool is believed to be a potential vehicle for criminal infiltration into the (profitable) public contracts sector (in this regard, see Law no. 55/1990).
In this respect, it is worth also noticing that the Italian regulator’s disfavour seems not to be shared by the European ruler, which has always considered subcontracting with great favour since “it allows the widest participation and access to public contracts by small enterprises” (please see EU Commission infringement-procedure no. 2018/2273).
A brief excursus of the main issues raised by the EU Authorities about the Code’s subcontracting regulation and a concise overview of the major corrective legislative actions can be found below.
The infringement procedure no. 2018/2273. Open points and adopted/foreseen solutions.
Given the mentioned regulative and perspective framework, the European Commission activated the infringement procedure no. 2018/2273 against Italy to solve the reported non-compliance of the Code with the EU legal framework.
In particular, according to the “Keys decisions – Infringements package” (updated to April 6, 2022 – https://ec.europa.eu/commission/presscorner/detail/EN/INF_22_1769) the Commission called on the Italian authorities to address the detected issues already raised in the previous letters of formal notice, such as “the prohibition for subcontractors to use other subcontractors” and, among others, “the imposition of a threshold limit for the obligations to be subcontracted”.
As indicated in the mentioned procedure, the EU Commission activated its powers to “ensure the correct transposition of the Directives on public procurement and concessions (Directives 2014/24/EU, 2014/25/EU and 2014/23/EU)” and raised the following objections (partially corrected by the Italian ruler as specifically noted below):
- The insertion of a general threshold limit for the obligations to be sub-contracted.
The former version of Art. 105 stated that up to 30% of the agreement’s obligations could be sub-contracted.
However, according to the EU Authorities, the mentioned limitation does not comply with the relevant framework as “the thresholds limit does not take into consideration the uniqueness of the single situation”.
Therefore, the Italian Parliament adopted Law Decree no. 32/2019 (so-called “sblocca cantieri“) to “correct” the reported issue and increased the threshold from 30% to 40% until December 31, 2020.
However, in a supplementary letter of formal notice, the European Commission noted that the amendment, though desirable, would not be sufficient to bring the national system into compliance with the EU framework since (i) the increase was temporally limited and (ii) the imposition of a threshold limit (although increased) would still be in breach of the EU Court of Justice case law.
Indeed, at the entry into force of the sblocca cantieri, the EU Court of Justice had already intervened on the matter by judgment September 26, 2019 in Case C-63/18 (Vitali SpA v. Autostrade per l’Italia SpA) clarifying the scope of the subcontracting regime.
In particular, the EU Court of Justice upheld the question raised by the Italian Judge and noted that the insertion of a quantitative limit on the use of subcontracting, as regulated by the Italian Code, did not take into consideration the economic sector involved, the to-be-signed contract, the nature of the works or the identity of the subcontractors, and did not leave any room for a case-by-case assessment by the contracting authority, and this even if the latter was able to verify the identity of the subcontractors and could ascertain that the limitation was not necessary for the purpose of combating criminal infiltration in the context of the contract in question.
The Court, indeed, pointed out that less restrictive measures would be sufficient to achieve the goal pursued by the Italian legislator, such as the disclosure requirements as indicated in Article 71 of Directive 2014/24.
Considering these arguments, the Court ruled that Directive 2014/24/EU must be interpreted as precluding national legislation that limits to 30 percent the portion of the contract that the Operator is allowed to subcontract to third parties.
Following implementing the mentioned decision, the threshold limit was removed by means of the European Law (a yearly law by which the Italian legislator adheres to the European framework) no. 238/2021, according to which the contracting stations would have to indicate in the tender documents (i) the services/works to be performed by the contractor and (ii) the obligations for which the control of working conditions, health, the safety of workers should be strengthened (please see Art. 105, par. 2 of the Code).
The indication of a set of subcontractors.
With Law Decree no. 32 of 2019, the national ruler suspended the application of the provisions imposing the economic operator to indicate a set of subcontractors in the tender documentation in case of the value of the works/services/supply is equal to or higher than the EU relevance thresholds (see Article 35 of the Code) or, in any case, whether the agreement concerned activities exposed to high risk of criminal infiltration.
In this respect, the European Commission noted that the mentioned “interim” suspension could not be considered a solution to the issue raised in the letter of formal notice.
Lastly, Art. 8, pa. 1, lett. b) and c) of the 2019-2020 European Law provided that the Operator is no longer obliged to indicate a set of subcontractors when bidding for EU-relevant contracts, or, in any case, whether the agreement concerns activities exposed to high risk of criminal infiltration.
According to the latest interpretation of the relevant Directives by the EU Court of Justice (please see Judgement in C-402/18 and the infringement-procedure no. 2018/2273 – Keys decisions – Infringements package) the “prohibition of subcontracting chains” is in breach of the relevant Directives and, therefore, the Code is not compliant with the relevant EU framework.
However, it should also be noted that in the recent draft of the new public procurement code (whose date of entry into force hasn’t been revealed yet), the prohibition of subcontracting chains will be abolished (please refer to Artt. 119 and 188 of the draft) to implement the EU framework.
In this respect, it is worth highlighting that the version of the new public procurement code shared by the Council of State is still a draft; therefore the following evaluations concern the latest available outline of the text, whose wording is subject to modification at any time prior to its entry into force.
This said, according to Article 119 of the latest draft of the new code, the use of subcontracting chains will be limited by means of the tender documentation.
The Public Authority will be able to identify the services/works that (i) should be performed directly by the Operator (paragraph 2) and (ii) could be deferred to other tiers of subcontractors (paragraph 17).
The choice to limit subcontracting chains shall be motivated in light of the complexity of services, works, and supplies to be performed. The mentioned reason-giving duty may be disregarded only if subcontractors are registered on the “white list” referred to in Article 1, Paragraph 52, of Law no. 190/2012, or included in the anti-mafia registry pursuant to Article 30 of Law Decree no. 189/2016.