Reliance on Other Entities (Subcontractor Capacity)

Reliance on other entities is one of the most important flexibility mechanisms in European public procurement selection. It allows a supplier that cannot independently meet the capability or financial thresholds set by a contracting authority to supplement its own resources by drawing on a third party's capacity, provided that the third party is genuinely committed to providing those resources for the specific contract.

What is Reliance on Other Entities?

Article 63 of Directive 2014/24/EU establishes the right to rely on the capacities of other entities. A supplier may rely on the resources of another entity, regardless of the legal nature of the links between them, to satisfy criteria for economic and financial standing and technical and professional ability. The third party does not have to be a subcontractor in the traditional sense; it may be a parent company, an affiliate, a specialist firm, or any other entity capable of providing the relevant resource.

What can be relied upon? Financial resources (such as a parent company guarantee substituting for the supplier's own turnover), professional references (where the third party has delivered comparable contracts), technical equipment or facilities, and staff qualifications. Essentially, any capability criterion can be met through reliance, subject to the conditionality rules below.

Key conditionality. The supplier must prove that the third party's resources will actually be available for the contract. A letter of intent or commitment letter from the third party is typically required. For financial standing, a binding commitment (such as a parent company guarantee) is generally expected. For technical references or key staff, a subcontracting arrangement or employment commitment may suffice.

Third-party exclusion checks. The contracting authority must require the third party to confirm it is not subject to mandatory exclusion grounds. A supplier cannot circumvent exclusion by relying on an entity that is itself excluded.

Solidary liability. Where a supplier relies on a third party to meet financial standing criteria, Article 63(1) requires the third party to be jointly and severally liable for contract performance. This creates a direct obligation on the supporting entity, not just a general statement of support.

Limits on reliance. For contracts requiring specific qualifications or licences that must be held by the contracting entity (rather than a subcontractor), reliance may not be available. If a contract requires the prime contractor to hold a specific regulatory authorisation, relying on a subcontractor's authorisation is unlikely to satisfy the requirement.

In the UK, the equivalent provisions under the Procurement Act 2023 and the Public Contracts Regulations 2015 (for contracts in the transition period) preserve the same framework: suppliers may rely on third-party capacity, subject to evidence of genuine commitment and exclusion checks on the supporting entity.

Why Reliance on Other Entities Matters for Bidders

This mechanism is the primary route for capable but smaller or less financially substantial suppliers to compete for larger contracts. Rather than accepting exclusion from competitions where their standalone resources fall short, suppliers can construct bids supported by a parent guarantee, a specialist subcontractor's references, or a consortium partner's qualifications, and legitimately meet the selection criteria.

The practical key is ensuring that the commitment is credible and specific. A generic letter of support from a parent company will not suffice if it does not name the contract, specify the resources being committed, and confirm joint liability. Buyers are entitled to reject reliance arrangements that are not supported by adequate evidence.

Example

A Hungarian SME software company bids for a large ERP implementation contract with a minimum annual turnover requirement of EUR 10 million and a requirement for at least two references for ERP implementations worth EUR 3 million or more. The SME has turnover of EUR 2 million and one qualifying reference. It enters into a formal agreement with a German ERP integrator that has EUR 30 million turnover and four qualifying references. The German firm provides a commitment letter confirming it will take joint financial responsibility for the contract and will contribute its lead technical consultant as a named key resource. The contracting authority accepts the reliance arrangement and the consortium passes the selection stage.

Frequently Asked Questions

Is reliance on other entities the same as subcontracting?

Not exactly. Reliance on other entities for selection purposes is a specific legal mechanism under Article 63. Subcontracting during contract performance is a broader operational arrangement. A supplier may rely on an entity for selection purposes and then use that entity as a subcontractor, but the two arrangements have different legal requirements and consequences.

Can a supplier rely on multiple entities to meet different criteria?

Yes. A supplier could rely on one entity for financial standing and a different entity for technical references, provided each entity satisfies the commitment and exclusion requirements independently. The key is that each supporting entity must provide specific, binding evidence of its contribution to the specific contract.

Can a contracting authority refuse a reliance arrangement?

Yes, in limited circumstances. If the authority has objective grounds to doubt the genuine availability of the third party's resources, or if the arrangement does not satisfy the legal conditions (such as joint liability for financial standing), the authority may reject the reliance arrangement and give the supplier the opportunity to substitute the entity or demonstrate that it meets the criteria independently.