Subcontracting Rules (EU)

Subcontracting rules in EU procurement govern how a winning contractor may use subcontractors on a public contract, what the contracting authority can require in terms of disclosure and prior approval, and how the prime contractor remains liable for the performance of subcontracted work.

What are EU Subcontracting Rules?

The EU Public Procurement Directive allows contracting authorities to require tenderers to indicate, at submission stage, what proportion of the contract they intend to subcontract and which subcontractors they propose to use. This is distinct from relying on subcontractor capacity to meet selection-criteria, though the two often overlap. Where a tenderer relies on a subcontractor's financial or technical capacity, that subcontractor must co-sign the capacity undertaking and may be required to submit its own espd declaration of exclusion grounds.

Once a contract is underway, the authority may require the prime contractor to notify any changes to the subcontracting arrangements and may reject a proposed subcontractor that fails the exclusion grounds or selection criteria relevant to the subcontracted portion. Member states may go further and grant subcontractors a direct payment right against the contracting authority for work properly performed and not paid by the prime, which protects the supply chain in cases of prime contractor insolvency. The prime contractor remains fully liable to the authority for all aspects of contract performance, regardless of what is subcontracted.

Why Subcontracting Rules matter for bidders

EU subcontracting rules affect both prime contractors and specialist subcontractors. For primes, failing to disclose intended subcontracting arrangements or proposing subcontractors who do not pass exclusion grounds creates post-award risks, including authority rejection of the subcontractor and reputational damage. For specialist suppliers who typically operate as subcontractors, understanding that some member states provide a direct payment right from the authority is commercially important: it reduces exposure to prime contractor credit risk on large infrastructure and construction projects. Primes and subs should also be aware that authorities may cap the proportion of a contract that can be subcontracted, as some member states allow authorities to require that a minimum percentage of work is performed directly by the prime.

FAQ

Can a contracting authority require that a minimum percentage of work is performed by the prime contractor?

Some member states allow authorities to set a minimum self-performance requirement, but the EU directive does not mandate it. Any such requirement must be proportionate and stated in the procurement documents.

Do subcontractors need to submit their own ESPD?

Where a prime contractor relies on a subcontractor's capacity to meet selection criteria, that subcontractor must submit an ESPD covering its own exclusion grounds. For other subcontractors not relied upon for capacity, the authority may require ESPD submission but it is not automatically mandatory.

Is the prime contractor liable if a subcontractor performs poorly?

Yes. Under EU procurement rules and standard contract law, the prime contractor remains fully liable to the contracting authority for all aspects of the contract, including the subcontracted portions, regardless of any fault lying with the subcontractor.