What it is and is not
Subcontracting is the contract by which a party undertakes, towards the main contractor, to perform at its own risk part of the works or services falling to that contractor, using its own labour, plant and materials. The definition distinguishes subcontracting from a simple supply.
The code has specified that the defining feature of subcontracting is that the work is carried out with an organisation of means and risks borne by the subcontractor. It is that autonomous organisation which distinguishes subcontracting from other forms of external input.
The supply of materials and dry hire, meaning hire without an operator, do not constitute subcontracting in the technical sense. The distinction has direct effects on authorisation formalities.
The removed quantitative limits and the prohibitions that remain
The code confirms the removal of general quantitative limits on subcontracting, in line with the development begun in 2021 and with the EU approach. The removal concerns the general limit and not the specific prohibitions.
Three prohibitions nevertheless remain and delimit the mechanism. The three prohibitions apply whatever the value subcontracted.
A contract providing that the entire awarded work be performed by a third party is void. The purpose is to prevent the contractor acting as a front and the successful tenderer being such in formal terms only.
In labour intensive contracts a quantitative limit remains: the prevailing performance, meaning more than fifty per cent, may not be carried out by a third party. In such contracts the personal character of the performance justifies retaining the constraint.
The prohibition on assigning the contract itself also remains; assignment is a different mechanism from subcontracting and is not permitted. Assignment transfers the contract, subcontracting assigns part of its performance.
The limit on the prevailing category
For works a specific limit applies and is worth knowing precisely. It concerns the prevailing category.
The prevailing category may not be subcontracted in a proportion exceeding 49.99 per cent. The limit is calculated on the value of the category and not of the contract.
The contracting authority may also set a lower limit in the decision to contract, and therefore in the notice, giving reasons by reference to site safety, specialist operations, the specific characteristics of the works or their complexity. The reasons are a condition of legality for the tighter limit.
Severable categories, unless a specific prohibition is set out in the documents, may be subcontracted in their entirety. The documents are worth checking before building a subcontracting strategy.
One useful clarification for temporary groupings, given by the supervisory authority: the subcontracting declaration and its percentages must be measured against the share each participant undertakes to perform. If the lead member declares it will subcontract 49.99 per cent of its own share and the other member likewise, the total share subcontracted by the grouping remains within the limit measured against the whole contract.
It has also been clarified that an incorrect declaration on subcontracting is not a ground for exclusion, but is relevant at performance stage as a limit on authorisation. The declaration should still be made with care, since it binds at performance stage.
| Subject | Regime |
|---|---|
| General quantitative limit | Removed |
| Prevailing category in works | Maximum 49.99 per cent |
| Severable categories | Subcontractable in full, unless reasoned prohibition in the documents |
| Tighter limit set by the authority | Permitted with reasons on safety, specialisation or complexity |
| Assignment of the contract | Prohibited, a different mechanism from subcontracting |
| Second level subcontracting | Permitted, subject to authorisation like the first |
Qualifying subcontracting
One specific situation has immediate strategic significance for how tenders are put together. It is qualifying subcontracting.
Qualifying subcontracting, also called necessary subcontracting, is that which serves to fill a bidder's qualification shortfall in relation to severable operations subject to mandatory qualification. Its function is therefore enabling rather than organisational.
The rules allow, where a bidder qualified only in the prevailing category lacks adequate qualification in the specialist categories, recourse to subcontracting for those operations as well. The possibility is conditional on being stated in the tender.
Case law has, however, identified a limit: where a bidder is also qualified in the specialist categories but insufficiently, it is not prohibited to confine the subcontracting to the share of qualification not held. The subcontracting therefore covers only the missing share.
A drafting rule follows: qualifying subcontracting fills the shortfall and does not replace the qualification already held. The share that may be subcontracted is calculated as the difference from the qualification held.
Cascade subcontracting
General sources diverge on this point and precision is needed. It concerns cascade subcontracting.
The 2023 code removed the general prohibition on cascade subcontracting that the previous code imposed, adopting the position of the European Commission which had found that prohibition unlawful. A subcontractor may therefore in turn entrust part of the performance to a further party.
The corrective decree amended article 119 by inserting a textual clarification: where the performance of subcontracted work is itself further subcontracted, the provisions of that article and of the other articles of the code on subcontracting apply to that further subcontract. The wording refers wholesale to the first level regime.
The operational consequence is that second level subcontracting must be authorised by the contracting authority just as first level subcontracting is, and follows the same rules on verification of requirements. The authorisation must be sought in the same way and on the same timescale.
The authority may still prohibit or limit cascade subcontracting in the tender documents, but administrative case law requires a reinforced and individualised statement of reasons for doing so: a generic prohibition does not stand. A prohibition without specific reasons is contestable.
Authorisation and joint liability
Subcontracting remains subject to authorisation by the contracting authority, and the declarations made by the subcontractor are verified through the national database. The authorisation takes time and must be sought before work starts.
The main contractor and the subcontractor are jointly and severally liable towards the authority for the performance covered by the subcontract. Joint liability cannot be varied by agreement between the parties.
The works supervisor's controls, the role of the contractor's technical director and the content requirements for the subcontract laid down by the rules all continue to apply. The subcontract therefore has a mandatory minimum content.
For an operator the consequence is that successful performance through subcontracting requires procedural management in advance: analysing the notice, filing authorisation requests correctly and rigorously verifying social security and pay compliance along the whole chain. Managing it in advance costs less than any subsequent regularisation.
The most frequent errors
Assuming that the absence of general quantitative limits means the absence of limits is the first, and ignores the prohibitions that remain. The specific prohibitions and the prevailing category limit continue to apply.
Exceeding 49.99 per cent on the prevailing category is the second, and in works contracts is the limit most frequently breached. The test is applied to the value of the category and not to the total.
Treating second level subcontracting as not requiring authorisation is the third, and contradicts the clarification introduced by the corrective decree. The reference to the first level regime is express.
Starting work before authorisation is the fourth, and produces consequences at performance stage independent of the technical correctness of the work. Subsequent regularisation does not cure an unauthorised start.
Note: the legislative references in this page relate to Italy and are current as at the date of publication. The rules on subcontracting were amended by the corrective decree and some general sources report the cascade subcontracting regime in an outdated form: the text in force and the documents of the individual award should be checked before any operational use.