Public Contracts: wider options for contracting authorities for direct payment to subcontractors

Public Contracts: wider options for contracting authorities for direct payment to subcontractors

The transposition of Decree no. 145/2013 (known as “Italia Destination” decree) into Law n. 9/2014 has introduced significant changes to the provisions contained in art. 118 of the Code of Public Contracts (Legislative Decree n.163/2006) regarding payments to subcontractors.

Against the general economic downturn and with a view to enhance the support to subcontractors, whilst at the same time avoiding to face slowdowns in the execution of public contracts, the Legislator’s intervention has made available to contracting authorities wider options of direct payment to subcontractors to be used whenever the contractor is under financial pressures or else is subjected to a composition with creditors procedure on a going concern basis (so called “concordato preventivo con continuità aziendale”).

As a matter of fact, overall, the possibility of direct payment was already provided for under the para 3 of art 118 (now amended) subject to the condition, however, that specific reference was to be made in the call for tender to said alternative and replacement intervention.

On the contrary, the current change implies that, against the backdrop of a cash-flow crisis for subcontractor, the contracting authority can directly pay the same disregarding any specification on the contrary contained in the call for tender or even by way of derogation from the same.

Specifically, art. 13, para 10 of the recently transposed law-decree n. 145/2013 has introduced a brand new sentence in para 3 of art. 118 whilst at the same adding-in new paragraphs 3-bis and 3-ter.

• The sentence added to the bottom of para 3 art 118 Legislative Decree 163/2006 entitles the contracting authority to pay directly subcontractors, piece workers, principals and companies – also consortia – which may have been incorporated for the joint execution of works (pursuant to art. 93 Presidential Decree n. 207/2010).

The direct payment can be made in the event contractor faces economic difficulties which must be “substantiated by repeated late payments to subcontractors and piece workers or else to the different subjects who may work with contractor” and ascertained by the contracting authority which, actually, has to first consult the contractor in order to assess the nature of the events hindering the payment. Although said regulation does not explicitly extend to involve co-opted companies or sub-suppliers, apparently nothing prevents from interpreting the same to their benefit.

• New para 3-bis of art 118 Legislative Decree 163/2006 provides that, pending a composition with creditors procedure on a going concern basis, the contracting authority is always entitled to pay directly sub-contractors, piece workers, principals and companies – also consortia – which may have been incorporated for the joint execution of works (pursuant to art. 93 of Presidential Decree n. 207/2010). Please note however that said payments must be made at the terms set forth by the competent Court in charge of deciding on the admission to composition procedure, it being necessary to protect the equal treatment of the contractor’s creditors.

As is well known, in case of a composition with creditors procedure on a going concern basis, the contracts entered into with the Contracting authority are not automatically terminated as a consequence of the procedure, as long as all the provisions of bankruptcy law are complied with.

It is once again obvious that, in synergy with the provisions of bankruptcy law, the contracting authority has been granted the power to take action in lieu of the contractor facing economic troubles and – presumably – unable to meet the obligations undertaken vis-à-vis sub-contractors.

• New para 3-ter art 118 of Legislative Decree 163/2006 imposes on the contracting authority a specific obligation to publish on its official website the amounts paid in lieu of contractors and a complete list of relevant beneficiaries.