Presentation to a public bidding in a joint venture advantages for SMEs
Legal framework: art 69 of Law 9/2017 of November 8 on Public Sector Contracts (LCSP) defines in its first point; “Public sector contracts may be awarded to business associations that are temporarily formed for this purpose, without the need to formalize them in a public deed until the contract has been awarded in their favor.”.
Other articles that specifically develop this rule with respect to joint ventures are Articles 75 and 140e, as well as Article 24.1 of the General Regulations of the Public Administration Contracts Law (RGLCAP).
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UTE - Temporary Joint Venture
There are three basic categories of contractors in a competitive bidding process:
- Unique companies
- Temporary Joint Ventures – UTE
- Subcontractors
In the following article we are going to focus on the second of them, the Temporary Joint Ventures, commonly known as UTE.
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Definition of joint venture / Commitment of incorporation / Main aspects
UTEs are joint ventures formed for the execution of a contract. It is not necessary to formalize their effective incorporation before a notary until the contract is awarded in their favor. Thus, when submitting proposals to a Tender, it will be sufficient to sign a Commitment to form a Joint Venture. This commitment shall designate the members (whether individuals or legal entities), their provisional percentage of participation and the representative of said temporary joint venture. This commitment is not formalized before a notary but commits the parties to sign the contract once it is awarded, not being able to modify the composition of the joint venture once the contract is awarded.
The duration of the joint venture shall coincide, at least, with the duration of the contract for which it is submitted, and the purpose of said joint venture is the actual execution of said works, supply or service contract.
The companies that make up a joint venture are jointly and severally liable to the Administration and to third parties.
In the presentation of the previous administrative documentation in which it declares responsibly that it complies with the provisions of the Specific Administrative Clauses in relation to the requirements of legal personality and capacity to contract, In all cases in which several companies are grouped together in a temporary union, a declaration of responsibility shall be provided by each participating company containing the information required in these cases in the form of the European Single Procurement Document (art. 140 e. LCSP).
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Reasons to present in the form of a joint venture
In general, natural or legal persons wishing to contract with the public sector, whether Spanish or foreign, must prove their aptitude, i.e., they must have the capacity to act, must not be prohibited from contracting and must prove their economic and financial and technical or professional solvency or, if applicable, be duly classified.
By application of Article 92 of Law 9/2017, in relation to Article 11 of the RGLCAP (General Regulations of the Public Administration Contracts Law), in contracts whose estimated value does not exceed €80,000 for works and €35,000 for other types of contracts, bidders shall be exempt from proving solvency requirements.
Thus, from the amounts mentioned in the previous paragraph, in order to participate in a Public Bidding, the bidder must be able to prove compliance with the requirements in relation to economic solvency and technical solvency.
Among the most common requirements in relation to economic solvency will be established minimum sales figures in the best of the last 3 years, or proof of a civil liability insurance policy, among other requirements that may be demanded (net worth / certain financial ratios…).
In relation to technical solvency, what they are going to ask of us as bidders, among other specific requirements, is that we are able to accredit specific experience in the area of the contractual object in the last five years.
Well, either for economic solvency, for technical solvency, or for both requirements simultaneously, we find that a company, especially a small and medium-sized company (SME), does not comply with such solvency requirements and therefore cannot bid in a public bidding process for which it would like to be able to bid.
It is at this moment when the possibility of forming a joint venture makes all the sense and opens the door for any type of company, regardless of its size, to access opportunities offered by the Public Sector that a priori escape us.
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Advantages of participating in joint ventures - SMEs
In addition to the already explained ease of incorporation at the time of submission – in which we do not have to formally constitute the joint venture but only commit to form it in the event of being awarded the contract by means of a simple declaration with the designation of the main members, expected participation percentages and establishing a spokesperson for the joint venture – the main advantage of the joint venture formula has to do mainly with the possibility of accessing more and greater opportunities within the Public Procurement.
Thus, the main advantage of submitting a bid by forming (or rather with the commitment to form) a joint venture is explained in Article 24.1 of the General Regulations of the Public Administration Contracts Law (Royal Decree 1.098/2001), which states that:
“in temporary unions of businessmen, each of its members must prove their capacity and solvency in accordance with articles 15 to 19 of the Law and 9 to 16 of this Regulation, accumulating for the purposes of determining the solvency of the temporary union the characteristics accredited by each of its members, without prejudice to what is established for classification in article 52 of this Regulation.
As we can see in the previous section, the UTE offers us the possibility of accrediting solvency in an accumulated manner among the different members of the temporary union. That is to say, we will add up among the members of the joint venture, thus accessing opportunities that we would not be able to do individually.
By way of conclusion, both because of the formal facility to assume the aforementioned prior commitment of incorporation and, above all, because of the possibility of cumulatively meeting the required solvency commitments, it multiplies the possibilities of small and medium-sized companies to opt to be awarded much larger contracts and therefore grow in their sector of activity.
Multiply your business opportunities in the Public Sector
Whatever your sector, participation in public tenders can only offer you important business opportunities.