During the course of an engineering project, it is a common practice by the company responsible for the outsourcing of certain tasks or parts (or even the entire) project, whether due to technical, economic, or time-related factors.
This type of subcontracting in Spain is regulated by the Law 32/2006 on Subcontracting in the Construction Sector. It establishes the legal framework for this practice, setting forth, among other things, the requirements for contractors and subcontractors, the allocation of responsibilities, and the legal requirements for registration and documentation with these entities. Below, we outline some of the most important aspects to consider regarding subcontracting in an engineering project.
Starting point: determine which parts need to be outsourced
Before initiating any outsourcing process, it is necessary to first determine the scope and scale of the operation. It is necessary to conduct a study of the resources and means available to the company, as well as the project and all the external factors: time frames, phases, budgets, etc.
The first thing to consider is our company's own capacity to do the work, which parts of the project the company is capable of executing based on its resources (in terms of technical capacity, time, or company policy) and which parts will be outsourced. This should be determined by company management, although it is recommended that the matter be analyzed at all levels and that any comments or suggestions deemed appropriate be made.
Phase One: The Subcontract
All parts of the work that are to be subcontracted must be governed by a contract between the company responsible for the construction project and the subcontractor. This must be drafted in accordance with the current regulations, as mentioned above. In addition, prior to signing the contract, the contractor must ensure the following:
- The requirements have been defined.
- Any disputes between the subcontractor and the company have been resolved.
- The subcontractor has the capacity to fulfill the contract.
Phase Two: Establishing Control Procedures
The only valid basis for a subcontracting arrangement is the contract entered into between the company and the subcontractor. The person responsible for project execution must review it and verify that it includes all the basic obligations arising from the subcontracting agreement. Similarly, the contract must specify the control procedures carried out by the contractor in light of the subcontractor's actions.
Phase Three: Implementation
Once all the terms have been agreed upon and the contract has been signed, the subcontractor must take responsibility for carrying out the subcontracted portion of the work, in accordance with the stipulated terms. At this stage, the primary consideration should be the division of responsibilities between the two companies:
- Salary Liability: The parent company is liable, without any legal limit, to the same extent as it would be if the employees in question were its permanent staff in the same category or position.
- Responsibility for Information: Before beginning any construction or public works project, the Labor and Social Security Inspectorate must be notified of the details set forth in Annex III of Royal Decree 1627/1997, dated October 24.
- Social Security Liability: The prime contractor shall be jointly and severally liable for the payment of Social Security debts incurred by subcontractors with respect to their workers during the term of the contract or subcontract.
- Disciplinary Liability: The contracting company may and must impose sanctions on anyone who fails to comply with the instructions issued by management regarding occupational safety and health at the subcontractor’s company.
Termination of the Subcontract
Once the work specified in the relevant contract has been completed, the subcontracting agreement is terminated. To do so, it will be necessary to “Official ”handover” by the subcontractor to the contractor of that portion of the project entrusted to it to her. To finalize the outsourcing process, both parties would sign the contract's conclusion.
