License-free options for your business

A client approached us with the following question: the procurement under 44-FZ requires the participant to hold a license to perform certain types of work. Is it possible to comply with this requirement if the participant does not have a license, but a third party who intends to participate as a subcontractor does? 

The question is extremely relevant, given the extensive list of licensed activities. Examples include medical device maintenance, fire safety equipment installation, and passenger transportation. 

It is worth noting that if the contract does not require the contractor to perform the work personally, he has the option to hire subcontractors. (Letter of the Ministry of Finance of Russia from 12.03.2020 N 24-01-08/18895). 

If the draft contract requires you to do the work yourself or prohibits you from involving third parties, then the question of compliance with the requirement for a license through a third party does not arise. 

But if there are no such restrictions, the question arises: is it possible to meet the requirement for a participant to have a license by hiring a subcontractor who has one?
The Russian Federation's Supreme Court has established a practice in which it is necessary to determine whether the works for which a licensed type of activity is required are independent or related. 

If the works are an independent object, the participant must hold the license directly and cannot provide it through the involvement of subcontractors. 

According to paragraph 7 of the Review of judicial practice in the application of the Russian Federation's legislation on the contract system in the sphere of procurement of goods, works, and services to meet state and municipal needs (approved by the Presidium of the Supreme Court of the Russian Federation on June 28, 2017) : “If the performance of works or the provision of services that constitute a licensed type of activity is an independent object of procurement, the customer establishes requirements for procurement participants in terms of their license for such type of activity.”

In the aforementioned review, the Supreme Court uses a state contract as an example of work performed on the installation of fire safety equipment for buildings and structures. The auction documentation requires procurement participants to obtain a license to perform the purchased work. The installation of fire safety equipment for buildings and structures requires a license. 

In this regard, it is legal for the customer to include in the auction documentation the requirement for a license to perform the purchased works, which are an independent object of the purchase. The possibility of involving other people (subcontractors) to perform the state (municipal) contract does not waive the requirement for procurement participants to hold a valid license. 

In another case, the arbitration court determined that there were no violations on the part of the customer. He, among the requirements for participants in the procurement for the performance of work on the building's capital repairs, failed to indicate the need for licenses for each type of work, including the installation, maintenance, and repair of fire safety equipment. 

The court determined that the procurement's purpose was to award contracts for major building repairs. The tender documentation required a license to perform construction and installation work, and the winner of the tender had one. Work on the installation of fire safety equipment was not an independent object of the procurement, but had to be completed by the contractor in conjunction with other major repairs. 

Thus, if the work is related, it is permissible to engage a subcontractor with the necessary license, which should be mentioned in the application's text. 

As a result, when negotiating a contract, it is critical to determine whether the licensed activity is independent or related. Sometimes it is difficult to understand: when purchasing for the maintenance of medical devices (with the corresponding name), customers frequently want to buy spare parts for repairs. The cost of such spare parts can far exceed the cost of installation. In such cases, it is unclear whether repairs are the independent activity or merely a related one. To avoid making a mistake in complying with licensing requirements, we recommend that in such cases, you ask the customer for clarification on whether the main activity is work that requires a license or delivery for which a license is not required.