Introduction

Whether for a question of profitability, strategic planning or even managing tight deadlines, outsourcing is an option that more and more companies are considering. It is often associated with the field of construction; however a large majority of companies can outsource certain processes of their organization. Also called outsourcing, subcontracting brings many advantages, but presents important issues to be aware of also requires good contractual formalization.

In this article, I introduce you to the outsourcing agreement.

What is an outsourcing agreement?  

The outsourcing agreement is a business contract that connects two parties: the ordering company and the subcontracting company. The ordering company entrusts the subcontracting company with the partial or total execution of a mission to which it has generally committed itself contractually, within the framework of a commercial contract or a public contract, For example. Subcontracting in no way changes the responsibility of the ordering company: even if it does not carry out the mission, it remains responsible for the proper execution of the task with its customers. There are several forms of subcontracting that can be the subject of a contract.

The outsourcing agreement: for what type of activities ?

The outsourcing agreement is not necessarily specific to the construction sector, but it is regularly concluded by construction companies and certain subcontracting companies. This is an essential element in order to guarantee the smooth running of relations between the main company and its subcontractor. In order to ensure its relevance and effectiveness, the drafting of the subcontract must include various important information. When drafting a subcontract for the construction sector, it is necessary to include general conditions and special conditions.

Minimum conditions in an outsourcing agreement

General conditions refer to clauses integrated into all subcontracts used in the construction sector. This is the essential information that allows a good understanding of the contract:

• The object of the contract and the contractual documents

• The application of legal and contractual provisions

• The methods of carrying out the work

• The obligations of the contractors

• Provisions concerning prices

• The payment guarantee as well as the terms of payment

• The rules relating to deadlines and execution schedules

• The conditions concerning the acceptance of the works

• The holdback

• The responsibilities of the subcontractor

• Provisions relating to insurance

• The rules concerning common expenses

• Industrial property

• Termination conditions

• Retention of title

• Appeal and dispute procedures in the event of disputes

All likely modifications must be the subject of an amendment to the subcontract

When should a subcontract be concluded?

There are several scenarios that can make the use of subcontracting relevant:

1. « Capacity » subcontracting: frequently used by a company that can no longer fulfill its orders or that is unable to honor new ones. In this case, she calls on a subcontractor to relieve her.

2. So-called « specialty » subcontracting: the company does not have the necessary know-how to produce a product. It therefore combines the skills of a specialized company

3. « Strategic » subcontracting: used by a company that wishes to verify the real opportunity to enter a market or simply to gauge the reliability of a company prior to its takeover

Who must draw up the subcontract?

The relationship between the principal and the subcontractor is formalized by a subcontractor. There is no standard model for this contract, but it must be drawn up by the two parties, the ordering company and the subcontracting company. The end customer, sometimes called project owner, the one who has concluded a contract with the ordering company for the execution of a mission, is not concerned by this contract: its only commercial relations are with the ordering company.

Minimum elements to be legally valid

The subcontract must contain several elements to be legally valid:

• Name of the two contracting companies

• The social form

• The amount of share capital

• The address of the head office

• The legal representative

• Registration in the trade and companies register

The subject of the contract must be specified, with both the main mission of the subcontractor and the details of the tasks to be performed. The duration of the contract (which can be fixed or indefinite) as well as the price of the service, the terms of payment and the penalties for delay are also to be specified.

Attention must also be paid to the terms of execution (schedule, possible sanction in the event of non-compliance with deadlines), to the management of disputes (applicable law, competent court, procedures to be followed) and to the reasons and terms for breach of contract ( automatic termination, when a party does not respect its obligations, or linked to the end of a main contract on which the subcontract depends).

It is also possible to add additional clauses such as a confidentiality clause (the subcontractor is prohibited from disclosing the information in the contract), an approval clause (the client who has contracted with the principal must agree to the use of the subcontractor for the subcontract to be valid) or an arbitration clause (to provide for the terms of resolution of any conflicts, with recourse to an arbitrator).

What documents must a subcontractor provide?

The subcontractor must provide the elements that attest to the accuracy of the information contained in the subcontract:

• Proof of registration as a company: K Bis extract, business directory card, professional document mentioning the registration number with the trade and companies register or the business directory, registration with the business formality center , etc.

• A certificate of vigilance which confirms that the company is up to date with its declarations and payments of social security contributions, dated less than six months ago

What are the obligations of the subcontractor?

As part of the conclusion of a subcontract, the subcontractor undertakes to perform the various services mentioned in the document. Conversely, the main contractor will be in a position to engage its contractual liability or to ask its subcontractor to respect the resolutory clause stipulated in its subcontract or the penalty clause, which obliges the subcontractor contractor to compensate for its non-performance by the payment of a lump sum. The obligation to carry out the assignments may be an obligation of means or of results. This must be specified in the contract.

On the other hand, if the principal finds faulty workmanship, he has the right not to pay the expected balance. He can also go to court to force his subcontractor to reimburse him for the payment of late payment penalties that he had to pay to his client. The subcontractor also has an obligation to inform the principal: he must inform him of the difficulties encountered.

What are the principal’s obligations?

For his part, the principal’s main prerogative is the payment of the sums provided for in the outsourcing agreement and compliance with the terms of payment. This payment can be made in one or more instalments according to the methods established by the parties concerned. In the event of non-payment, the subcontractor may not deliver the product or service that was the subject of the contract. This is called the right of retention. Legal action can also be brought by the subcontractor to force the client to pay him for his work.

The signature of a outsourcing agreement does not attenuate the responsibility of the principal in the execution of the contract towards a possible contracting authority: he is responsible to the latter for any faults committed by his subcontractor. -treating. The instructing party must also allow the subcontractor to perform its tasks correctly, not to show bad faith or to act in such a way as to hinder the proper performance of the tasks entrusted. At least for France, for a contract over 5,000 euros, the principal is subject to an obligation of vigilance: he must check that his subcontractor is fulfilling his obligations in terms of declaration and payment of social security contributions. He is therefore required to request the documents attesting to compliance with these obligations. He also has the obligation to verify the authenticity of these documents.

Conclusion 

Subcontracting allows you to perform a service that your company is unable to perform on its own due, for example, to a lack of time, resources or know-how. Nevertheless, delegating part of its production or service also implies entrusting part of its image to a third party.

You should be aware of the benefits and risks that come with this practice.

The drafting of a outsourcing agreement is not mandatory, but is essential to ensure optimal legal certainty. A professional and specialist lawyer should be consulted.