Understanding Public Contracts: Types, Elements, and Procedures

Posted on Nov 22, 2024 in Law & Jurisprudence

Unit 5: Review of Public Contracts

A contract is a voluntary agreement creating rights and obligations for both parties, such as a sales contract. A public contract involves the public administration as one party.

Types of Public Contracts

  • Contract work
  • Contract management services
  • Supply contract
  • Public-private collaboration agreement
  • Mixed contracts

Competition to Hire

Contracts can be made under contract law by ministers and secretaries of state. Not all governmental bodies can hire directly; Recruitment Boards exist at various sites.

Elements of Public Procurement

There are three key elements: subject, object, and price.

1. Subject

Ability to Hire

The administration can contract with natural or legal persons, Spanish or foreign, who have full legal capacity and demonstrate economic, financial, technical, or professional solvency. This capacity is evidenced by a registered deed of incorporation or modification.

Financial Solvency

Financial solvency is proven by:

  • Report from financial institutions
  • Presentation of annual accounts
  • Statement of overall turnover
Technical Soundness

Technical soundness is demonstrated by:

  • Presentation of academic or professional work
  • Available machinery and equipment
  • Services provided to the Administration

Ineligibility to Contract

The following are ineligible to contract with the administration:

  1. Those convicted by final sentence for forgery, contract estate crimes, socioeconomic offenses, bribery, embezzlement, influence peddling, disclosure of secrets, or privileged information.
  2. Those declared bankrupt, insolvent, or who have filed for bankruptcy.
  3. Those who have caused the termination of a previous contract with the Administration due to their fault.
  4. Those penalized for a serious administrative offense in terms of market discipline and the integration of disabled people.
  5. Those with incompatible roles within the Administration.
  6. Those not current on tax or social security obligations.
  7. Those guilty of serious misrepresentation in supplying the Administration with payable claims.

2. Object

The object of the contract must be lawful, determined, and justified by public interest.

3. Price

The price must be in euros, or if in a foreign currency, expressed in the national currency. Deferred payments are generally not permitted, except in specific cases.

General Recruitment Process

Public administration contracts involve preparatory steps before conclusion:

  • Clearly defining the contract contents.
  • Accrediting the existence of records and necessary credit authorizations, including technical conditions. Approved records lead to the contract award.

Contract Award

Procedure

  • Open: All employers can submit proposals.
  • Restricted: Only pre-selected employers can submit proposals.
  • Negotiated: The Administration awards the contract to an entrepreneur after negotiating with several candidates. This is only permissible as allowed by law.
  • Competitive Dialogue: The Administration dialogues with candidates to develop solutions, typically for technically complex cases where the Administration doesn’t know the exact contract contents.

Form

  • Auction: The contract is awarded to the lowest bidder. Exceptions exist for abnormally low bids.
  • Competition: The contract is awarded to the most advantageous offer, considering various factors beyond price.

Contract Formalization

Contracts are formalized in writing by a civil servant and registered in a public record. The document should include:

  • The signing authority.
  • The administrative record.
  • The work to be performed.
  • The price to be paid.
  • The granted bail.

Financial Balance of the Administrative Contract

University management contracts can be modified, but compensation (indemnización) must be provided.

Ius Variandi: The Administration has the right to modify the contract, but compensation is always due for damages (daño emergente) and lost profits (lucro cesante).

Contract Termination

  • On Completion: When the contract has been fulfilled. The Administration issues a Certificate of Acceptance within one month of completion, including guarantees for hidden defects (liability for 15 years).
  • By Order: Contracts can be terminated before completion due to:
    • Contractor bankruptcy or insolvency.
    • Mutual agreement.
    • Non-execution of contract terms.
    • Contractor delays.
    • Late payment by the Administration.

Upon termination without completion, a financial settlement is reached for expenses incurred and damages caused.

Invalidity of Administrative Contracts

If the Administration doesn’t act according to the law, contracts may be null and void or voidable.

  • Null and Void (serious errors): For example, if the contract is executed by an incompetent body, if the procedure is entirely ignored, if the contractor is ineligible, or if there is no budget credit.
  • Voidable (less serious errors): Defects in signature or form, minor legal infractions. These errors can be corrected.