The article will consider the term that is often used in procurement - the enforcement of the contract. Consider the main issues that arise with customers or suppliers participating in the auction. What nuances should you know when making these collateral funds?
Definition of the term
Securing the execution of the contract, or in short the DEC, is a certain pledge, which must be provided by the supplier of goods, work or services, which is a certain guarantor that the contract will be executed in good faith, all obligations under it will be fulfilled within the specified time.
Enforcing the contract and application: what is the difference?
Law No. 44-FZ establishes a mandatory requirement for securing applications only for auctions and tenders. This means that for other procurement methods - request for proposals or quotation - a guarantee for the application is not provided.
To apply for bidding in an electronic auction, you need to have the required amount of security on your personal account on the trading floor. The amount of collateral is set from 0.5% to 5 percent, depending on customer requirements. If a closed auction or tender is held, you can provide a bank guarantee.
In turn, the enforcement of the contract is already being made by the supplier, with whom, according to the results of the procurement, it was decided to conclude the contract. Therefore, the steps here are different.
OIC regulations
This type of collateral is governed by federal procurement law No. 44 of April 5, 2013. Thus, the enforcement of the contract is established in article 96 of this law, and the security of the application in article 44.
According to paragraph 1 of this article 96, the customer is obliged to submit requirements for DECs - if the purchase is closed. This requirement should be spelled out in the notice of the procurement, the draft contract, procurement documentation, as well as in the invitation to participate, which is sent to the suppliers - participants of the upcoming purchase.
However, in part 2 of the article it is indicated that the customer in some cases, for example, when the contract value is not more than 500 thousand rubles, when requesting quotes or offers, can use this requirement or not.
How to deposit a contract?
The ways to ensure the execution of the contract after the procurement results can be as follows:
- Provide a bank guarantee. This document is provided by banking institutions that are authorized to issue them - their list is established by Article 176.1 of the Tax Code. These guarantees must be irrevocable, and their validity period must exceed the term of the agreement (contract) by at least one month.
- Deposit money to the customer’s account. The deposit is sent to the current account and returned to the supplier when the contract expires.
Thus, the contract is concluded only with the bidder who sent the OIC. If it is not provided, then this participant cannot be allowed to purchase and is considered to have declined to conclude a contract - be it an auction, tender, or any other method of purchase.
What to choose as security for the contract?
Use a deposit or a bank guarantee to enforce the contract - choose the suppliers as they like.Of course, making a pledge in the form of cash before the completion of the contract seems to be a simpler method that does not require special expenses. However, often the contract can last more than one year, the funds of the provider of services and goods are frozen and out of circulation. For large enterprises this may not be too noticeable, however, for example, small businesses may need free cash in circulation - to purchase materials, wages, make collateral for other tenders, etc.
Therefore, many prefer to present a bank guarantee to enforce the contract. This is a document according to which the guarantor in the form of a bank will pay compensation to the Customer (beneficiary) - to the state or municipal body, if the Supplier (principal) does not fulfill the conditions of the contract. It is important to choose a reliable banking institution here - due to the high demand for this service, there are a lot of gray banks with low legitimacy on the market. The best option is to purchase a bank guarantee on an electronic platform through the appropriate financial service.
OIC size
The requirements for ensuring the execution of the contract by the customer are presented in accordance with the initial maximum price of the contract:
- if initially the value of the contract (contract) is less than 50 million rubles, then the security is from 5 to 30% of the initial or maximum price:
- if the contract value is more than 50 million, the size of the OIC is from 10 to 30%.
If during the course of the bidding the contract value was reduced by more than a quarter of the original cost (by 25%), then the pledge is provided taking into account anti-dumping measures, that is, exceeding 1.5 times, but not less than the advance amount.
Features of the application of collateral funds
If the supplier of a particular product, any service or work decides to take part in the tender, he needs to consider the following: the return on the execution of the contract is fully implemented only after the fulfillment of the obligations taken as a result of the purchase. After all, contracts can be both short-term and long-term.
For the customers organizing the procurement, the OIC is not only a guarantee that the contract will be concluded on the basis of timely and complete fulfillment of obligations. The pledge also serves as a kind of filter that will allow you to filter out small and unskilled suppliers at the stage of consideration of applications.
Example for suppliers
For example, consider the purchase of construction works.
The customer - a certain enterprise - announces a purchase for the construction of a multi-storey building and establishes a requirement for ensuring the execution of the contract so that it is at least 30 percent. The deadline is 4 years, the contract amount is 20 million. It turns out that potential participants need to transfer at least six million DECs.
In other words, the supplier must have a substantial stock of finances, with the help of which he will be able to purchase high-quality materials, equipment and complete all construction work in the specified time. However, he will have to postpone a large pledge for the next four years. And the payment for the work done will be transferred only after full fulfillment of obligations - in this example, if the building is built.
Thus, procurement participants should take into account this nuance when monitoring procurements, and specifically with regard to calculating their profitability.
When is collateral not necessary?
There are several circumstances when an OIC is not required:
- If the contract is concluded with a participant in a government type of institution. The state or municipal enterprise that provides certain services, performs work or other functions to provide for the statutory powers and is financed from the budget is referred to the treasury.
- If the subject of procurement is the provision of services for the provision of borrowed funds - a loan.
- If a budget institution enters into a contract for the issue of a bank guarantee.
In addition, as specified by law, enforcement of the contract may not be required if it is possible to carry out work without any collateral. These particular cases include the conclusion of a contract for the supply of goods or the provision of small services in the amount of less than one hundred thousand rubles. And also DECs may not be appointed upon the acquisition of an object of cultural, artistic or historical significance.
OIC for natural monopolies and the defense industry
You can also not require the enforcement of the contract from natural monopolists or enterprises producing military equipment and machinery that have no equivalents among Russian suppliers. And a few more examples when customers do not require collateral are:
- while protecting the interests of Russia in international courts and organizations;
- procurement to ensure negotiations with the participation of officials of foreign countries;
- procurement for events with the participation of senior officials of Russia, when customers are state protection enterprises.
Thus, the list of enforcing the contract under 44-FZ is quite wide. The full list of exceptions when the DEC is not required at the conclusion of the contract remains at the discretion of the organizers of the bidding contained in the procurement regulation law 44-FZ.
Contract security established by the Russian government
Above were listed cases where a deposit may not be levied in accordance with the procurement law. Also, the exception to the mandatory provision of DECs may be established by the government. For example, in 2015-2016. Decrees No. 199 and No. 182, issued by the Russian government, established that the customer can independently regulate whether it is necessary to enforce the contract in the following conditions:
- If the bidder is a small business - SMP and non-profit organization with a socially-oriented function.
- If the draft agreement contains a clause on which the banking support of the entire procurement process is regulated. Banking support refers to the provision by the bank of services for monitoring settlements, the conclusion of a contract with each party to the transaction, cost control in accordance with the design estimates and address transfer of funds. As a result, the customer is informed about the progress of the project and can quickly make administrative decisions.
- If the advance is transferred to the account of the territorial body of the treasury or financial institution of the subject of Russia, or its municipality in the branches of the Central Bank of Russia.
- If the amount of advance payments is not more than 15 percent, if the auction is held for national, federal needs. Subjects and municipalities themselves can choose the maximum amount of advance payment, at which the DEC will not be necessary. In this case, the procurement should be carried out for the needs of the subject or the corresponding municipal formation (MO).
- If the state or municipal contract indicates that not more than 70% of the total cost of supplying goods, providing services and performing work is paid. The balance is paid when these services or goods are fully delivered / completed. Here, the municipalities and entities can themselves determine what size of payments they initially pay for the needs of the entire subject of Russia or a single municipal formation.
- If the procurement participant is a budget institution that has offered a reduced rate on a product or service. This cost, however, cannot exceed a quarter (or 25%) of the initial contract value.
Where to specify the requirement for OIC?
It should be noted that the above examples are used to cover state and municipal needs.These requirements should be spelled out in the draft contract, as well as indicated in the notice of procurement.
If the purchase requires compulsory collateral, then the conditions for the return of collateral funds should be spelled out in the documentation: at what time, what will be the size of the provided collateral and the procedure for returning.
Conclusions on the article
So, having considered the issue of enforcing the contract under 44-FZ, we can conclude that in the procurement process this type of collateral is not always mandatory. The list when no collateral is collected is specified in the procurement law, as well as other regulatory documents that are established by the Russian government.
If the requirement for DECs is established, then it should be reflected in the notice of tenders, in invitations to participate and in the draft contract itself. There are several ways to make a security - a deposit or a bank guarantee. Which type of collateral to choose is decided by the Supplier. For example, for a small company, a guarantee from the bank will be more acceptable, since they may need funds in circulation. These guarantees can be obtained immediately through electronic trading platforms, such as RTS-Tender, Sberbank-AST, Roseltorg and others. Larger companies can also use a deposit. It should be borne in mind that the deposit is not returned until the contract is executed.