Consultation document

The Director of Execution: how to perform the functions of coordination, direction and technical-accounting control of contract execution

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1. Topics submitted for consultation

Article 111, paragraph 2, of Legislative Decree No. 50 of April 18, 2016 (hereinafter, the “Code”) provides that ANAC shall formulate, jointly with that for the Director of Works, a proposal to the Ministry of Infrastructure and Transport for the subsequent approval (by DM) of guidelines that fully identify the procedures for carrying out the control activity entrusted to the Director of Contract Execution, according to criteria of transparency and simplification.

Pursuant to the aforementioned Paragraph 2, the Director of Execution of a service or supply contract is, as a rule, the single person in charge of the procedure (RUP) and is responsible for coordinating, directing and technical and accounting control of the execution of the contract entered into by the contracting station, ensuring proper execution by the executor, in accordance with the contract documents.

In order to prepare the proposal act to be forwarded to the Ministry of Infrastructure and Transport for the approval of the decree containing the guidelines on the aspects identified by the Code outline, ANAC considers it appropriate to launch a public consultation. In this document, also having as reference the regulatory framework prior to the Code, the elements that are intended to be addressed in the proposal act and the possible solutions envisaged are indicated.

Participants in the consultation are invited to send comments, indications regarding any additions, alternative solutions, elements to be simplified, appropriateness of the indicated deadlines also in view of the use of telematic tools, specifying the reasons.

1. General profiles of the figure of the execution director

The Code expressly states in Article 101 that the execution of service and supply contracts (as well as works contracts) is directed by the RUP, which ensures control over the quality levels of performance. The same provision also specifies that the RUP also makes use, among others, of the Director of Execution, ascertaining the proper and effective performance of the functions entrusted. Article 102 further specifies that the RUP monitors the execution of the contract jointly with the Director of Execution. In Articles 31 and 111, paragraph 2, it is also established that the Director of Execution of the service or supply contract is, as a rule, the same RUP and that ANAC, by its own act, defines the maximum amount and type of services and supplies for which the RUP may coincide with the Director of Execution of the contract; on this aspect, please refer to the consultation document on the role and duties of the RUP. Where there is no such coincidence, the RUP and the Director of Execution must carry out their respective activities in close coordination. The Director of Execution represents, in relation to the company, the contracting administration, and his activity of coordination, direction and technical-accounting control of the execution of the contract is an expression, on the one hand, of the contracting station’s duty of cooperation with the contracting company, and on the other, of the administration’s power of interference and control over the execution of the contract.

III. Duties of the Director of Enforcement

Article 111(2) of the new Code generally sets out the duties of the director of execution, identifying them as the coordination, direction and technical-accounting control of the execution of the contract entered into by the contracting station, so as to ensure its smooth execution.

Direction of execution takes the form of a set of activities aimed at ensuring that the execution of the contract takes place on time and in accordance with the requirements contained in the contract documents and the conditions offered at the time of the award or assignment. To this end, it is necessary for the contract signed between the parties to detail, among other things, the improved conditions offered as part of the most economically advantageous offer and the manner in which the service will be performed and/or the supply delivered. They must also be indicated, in a precise manner, the controls on the regularity and quality of the service rendered, the penalties for any non-performance, the cases of suspension, termination or withdrawal of the contract and those relating to any premiums or incentives, specifying the procedures for the imposition of penalties, for the suspension, termination or withdrawal of the contract or for the payment of premiums. The contract must also indicate the means and resources made available, if any, by an auxiliary company, attaching the relevant contract of performance, as well as the intention to use subcontracting, specifying for which part of the assignment.

In the performance of his duties, the Director of Execution is also required to use the diligence required by the activity exercised under Article 1176, paragraph 2, Civil Code and to observe the canon of good faith under Article 1375 Civil Code.

1. Stages of the execution activity

The execution director, based on the directions of the RUP:

1. after the contract has become effective, it initiates the execution of the service, providing the executor with all necessary instructions and directives in this regard. It is considered appropriate that of the start of execution, a special report signed by the Director and the executor should be drawn up, indicating the areas and environments where the activity will take place, a description of the means and tools, if any, made available by the contracting station, including a statement that the current state of the environments is such that it does not prevent the start or continuation of the activity. Early performance may be ordered in cases of extreme urgency or when the contract relates to goods or services that, due to their nature or the place where the contract is to be performed, must be delivered or performed immediately; in this case, the Director of Execution shall take into account what has been prepared or administered by the executor for reimbursement of the related expenses;
2. orders the suspension of the execution, if it is temporarily prevented by special circumstances, pursuant to Article 107 of the Code; even in this case, compiling special minutes in which the reasons for the suspension and the imputability of the same must be indicated, the services already carried out, any precautions for the resumption of the execution of the contract without any further charges being required, the existing means and tools that may remain in the place where the contractual activity was being carried out. The report must be signed by the performer and sent to the RUP. In case of suspension, the time limit for contract execution shall be calculated in consideration of the duration of the suspension and the effects produced;
3. transmits to the company the provision for resumption of contract execution ordered by the Rup, as soon as the causes of suspension have ceased; in this case, too, the appropriate minutes are prepared, signed by the executor and sent to the RUP. In the resumption report, the director reports the new deadline for the execution of the contract indicated by the Rup in the work resumption order;
4. issues the certificate attesting to the completion of services when it appears that the executor has completely and regularly performed the contractual services. The certificate of verification of conformity is forwarded for acceptance to the performer, who must sign it within fifteen days of its receipt. At the time of signing he may add such contentions as he deems appropriate, with respect to the conformity verification operations. The person in charge of the conformity verification shall report to the RUP on any objections made by the performer, also for the purpose of the possible application of penalties. Following the issuance of the certificate of compliance verification, the balance of the services performed and the final release of the security deposit provided by the executor as a guarantee of non-performance or inexact performance of the obligations deduced in the contract shall be made.

In the event that the director of contract execution does not coincide with the RUP, the minutes must be sent to the latter for the exercise of control and supervisory powers, within a reasonable period of time, which can be identified as five days from the date of their preparation.

1. Control activities of the director of execution

For the purposes of defining the contents of the control function attributed to the Director of Execution (jointly with the RUP), it is necessary to recall first of all what is established in Article 102, paragraph 2, of the Code, according to which service and supply contracts are subject to compliance verification “to certify that the subject of the contract in terms of performance, objectives and technical, economic and qualitative characteristics has been realized and executed in accordance with the contractual provisions and the conditions offered in the award or entrustment.”

The control activities of the Director of Execution must, therefore, be closely related to what is defined and regulated in the contract documents, which must refer to the services indicated by the performer in its bid. In particular, the control activity is aimed at verifying that the provisions of the contract are fully complied with, both with reference to time deadlines, delivery methods, quality and quantity of products and/or services, for the main activities as well as for the ancillary services. In general, control activities should be directed at assessing, for example, the following profiles:

_the quality of the service/supply (adherence/compliance with all quality standards/SLAs required in the contract and/or specifications);

– _the adequacy of performance or achievement of objectives (referring, for example, to energy efficiency/savings contracts for buildings and public lighting, property management contracts);

– _the adherence to time and delivery methods;

– _the adequacy of reporting on performance and activities performed;

– _customer/end-user satisfaction (for those goods/services that are not instrumental – e.g., personal and child services);

– _compliance with regulations on security and traceability of financial flows;

– _compliance with labor regulations and collective agreements;

– _compliance with environmental regulations;

– _the contractor’s compliance with worker health and safety regulations.

These audits are conducted throughout the duration of the relationship – in itinere and ex post – and must be carried out with criteria of measurability of quality, not limited to the generic recall of the rules of art. The results of these must be recorded in special minutes, in order to ensure the transparency of administrative activity.

It is, moreover, useful to highlight, as a further confirmation of the importance attributable to the verification activities of the Director of Execution, how the failure to use in execution the tools of control of the quality level of the services provided by the contractor makes it difficult, if not impossible, to make use of the possibility of excluding from subsequent tenders those contractors who have carried out previous contracts with negligence and bad faith. The concrete use of the faculty to exclude from subsequent tenders, those contractors who have not complied, during the execution phase, with the quality levels required in the tender and/or offered by them, represents an extremely important lever to discourage the submission of overly aggressive bids on price and/or with concretely unsustainable quality levels.

During the execution of the contract, the Director also:

1. provides for the control of expenditure related to the execution of the service or supply, through the keeping of contract accounts and, therefore, the accurate and timely compilation of accounting documents, by which the ascertainment and recording of the facts producing expenditure is realized. Accounting documents shall be prepared in accordance with the manner of the system of individual contracting stations. It should be noted that in order to be able to proceed with payments to the contractor, a prior ascertainment by the Director of Execution, confirmed by the RUP, of the performance carried out, in terms of quantity and quality, with respect to the requirements set forth in the contract documents, is required. The performer’s right to submit written objections at the time of payments also remains unaffected;
2. promptly reports to the RUP any delays, dysfunctions or failures to comply with contractual requirements, also for the purpose of applying the penalties included in the contract or its termination for serious non-performance in the allowed cases. The importance of this task emerges considering that penalties serve to reduce the risk of moral hazard often present in contracts, through two avenues: the reduction of the sums paid as consideration for the services performed; and the difficulty of participating in subsequent tenders called by the same contracting station (see Art. 80, paragraph 5(c) of the Code);
3. communicates to the Director of Execution the disputes that have arisen in relation to the technical aspects that may affect the execution of the contract, drawing up in cross-examination with the contractor a report of the disputed circumstances or, failing these, in the presence of two witnesses. In the latter case, a copy of the minutes shall be communicated to the contractor for his comments, to be submitted to the Director of Execution within eight days from the date of receipt. If no comments are received within the time limit, the findings of the minutes shall be deemed finally accepted. The executor, his representative, or witnesses shall sign the minutes, which shall be sent to the RUP with the executor’s comments, if any. Disputes and related service orders shall be noted in the accounting records;
4. Transmits appropriate report to the RUP without delay, if personal injury or property damage occurs in the execution of the contract;
5. in order to ensure the regular execution of the service and to avoid infiltration by organized crime, verifies the presence at the place of execution of the service of the authorized subcontractors; checks that they actually perform the part of the subcontracted services in compliance with the regulations in force and the contract entered into; ascertains the disputes of the executor on the regularity of the services performed by the subcontractor and, for the purpose of suspending payments to the executor, determines the extent of the share corresponding to the service subject to dispute verifies that the contractor practices, for subcontracted services, the same unit prices resulting from the award, with a discount of no more than twenty percent, in compliance with the quality and performance standards provided in the contract and that the contractor pays the safety costs, related to the subcontracted services, to the subcontractors without any discount (see Art. 105, paragraph 14, of the Code). Similar checks must also be carried out on the provision of means and resources by the auxiliary company, if any.

1. Compliance Verification

Article 102, paragraph 2, of the Code stipulates that public service and supply contracts are subject to a conformity check to certify that the subject of the contract in terms of performance, objectives and technical, economic and qualitative characteristics has been carried out and executed in accordance with the contractual provisions and the conditions offered in the award or assignment. The verification of compliance is carried out by the Director of Contract Execution in the presence of the RUP and giving notice to the executor of the date of the inspection so that the latter can take action.

Pursuant to Article 102, Paragraph 6, the contracting station shall appoint a committee consisting of one to three members chosen from among its own employees or from employees of another administration, with qualifications related to the type and characteristic of the contract whose compensation is contained within the incentive set forth in Art. 113. In case of proven shortage of personnel with the required characteristics in the workforce, external parties may be appointed with the procedures set forth in Article 31, paragraph 8, in compliance with the provisions of Article 102, paragraph 7. The RUP or the Director of Execution shall forward the following documentation to the party in charge of the compliance check:

1. (a) copies of the tender documents;
2. (b) copy of the contract;
3. (c) accounting records;
4. (d) findings on verification of the quality of the service performed;
5. (e) certificates of any tests conducted;
6. (f) any additional documentation deemed useful by the person in charge.

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Conformity verification shall be initiated within fifteen days from the completion of performance or within the different time limit specified in the contract, and concluded within the time limit specified therein, which may not exceed thirty days from the completion of performance or sixty days in cases of complex performance. The contract shall regulate the causes and related consequences of exceeding the time limit for the conclusion of the compliance verification activity.

At the outcome of the verification activity, the person in charge of the compliance verification shall draw up appropriate minutes, which must be signed by all parties involved and promptly forwarded to the RUP for compliance.

Conformity audits may be provided for during the performance of the contract due to particular characteristics of the supplies or services that require verification during performance or in cases of supply or service contracts with continuous performance, according to the periodicity stipulated in the contract.

The executor must make available, at his own care and expense, the means necessary to perform the verification. If this is not done, the Director of Execution shall arrange for it to be done ex officio, deducting the expense from the fee due to the executor.

1. For public contracts below the European threshold, the certificate of verification of conformity, in the cases expressly identified in the decree referred to in paragraph 8, art. 102, may be replaced by the certificate of regular execution issued by the RUP at the request of the director of execution ifappointedTools for the exercise of control activity

Theservice order is the act by which provisions and instructions are issued to the performer by both the RUP and the Director of Execution, in the latter case the service order must be endorsed by the RUP. The service order shall be communicated to the executor who shall return it signed for acknowledgment and acceptance, subject to any objections. Apart from indications of an unimportant nature, which the Director of Execution also imparts orally, by the shortest possible means, the written form is indispensable in all those cases in which the order of service gives rise to significant fulfillments to be borne by the executor, variations or additions to the work and greater burdens than those of the contract.

With reference to the method of transmission of the order, it is believed that the reasons that require the order to be in writing also require a transmission system that provides certainty of notification. In general, proper management of the flow of information between the Director of Execution and the executor seems essential, not least to avoid unnecessary waste of time and energy. To this end, in view of the increased degree of computerization and digitization of administrative processes, it is considered that the transmission of acts and communications, including service orders, should be done through PEC, for the guarantees of quality, traceability and security that this tool can offer.

Other operational tools for the Enforcement Director are:

(i) the record of fact finding (of particular relevance are those relating to the initiation, suspension, resumption and completion of execution);

(ii) reports for the RUP (such as confidential reports prepared following the contractor’s entry of reservations in the accounting records, as referred to in Article 205(3) in conjunction with Article 206 of the Code);

(iii) the certificate of conformity verification;

(iv) communications.