Ensuring government contracts will be crushed by the ceiling – Newspaper Kommersant No. 151 (7352) of 08/19/2022

As part of state construction contracts, the Ministry of Finance proposes to reduce the maximum amount of security for their execution. Thus, its amount may be limited to 15% of the cost for contracts more than 1 billion rubles. and 20% for contracts of lower amounts – it is now not uncommon for contractors to require a maximum of 30%. Market participants have already drawn attention to the high financial burden on contractors under government contracts. According to experts, the proposal of the Ministry of Finance will reduce it, but may also indicate a decrease in the capacity of developers.

The Ministry of Finance proposes to reduce the maximum amount of security for the execution of state construction contracts, which state customers can require from contractors. The execution of government contracts can be secured by a bank guarantee, which happens most often, or by depositing money into a special account specified by the customer. The Law on Public Procurement (44-FZ) provides that the customer sets the amount of security on his own if the contract provides for advance payment, which is under treasury support, the guarantee should cover no more than 30%.

The initiative of the Ministry of Finance concerns state contracts, under which an advance payment is provided, subject to treasury support. Thus, it is proposed at the level of government decree to provide that for contracts worth more than 1 billion rubles. the maximum amount of security can be no more than 15% of the initial (minimum) price of the contract, reduced by the amount of the advance, and for contracts for a smaller amount – up to 20%. Such restrictions also apply to state-owned companies, state corporations and companies that act as customers under state construction contracts at the expense of the federal budget.

As noted in the explanatory note, in practice, customers set the maximum amount of security for the performance of the contract, which entails a significant increase in the financial burden on contractors. The Ministry of Finance also explains its initiative with the intention to speed up the execution of state construction contracts in the face of sanctions. However, the idea itself arose in early February. As part of the president’s meeting with Delovaya Rossiya, the business community then complained about the additional costs of contractors for servicing bank guarantees and treasury support. Customers have the right not to use bank guarantees with full treasury support, but, as a rule, do not use it. Finance Minister Anton Siluanov then announced his readiness to “work out and propose a mechanism to reduce the burden.”

It should be noted that market participants and the business ombudsman have previously paid attention to the “duplication of responsibility” of contractors under government construction orders, since each member of the self-regulatory organization of builders (SRO) already transfers contributions to compensation funds to ensure contractual obligations totaling about 100 billion rubles. In NOSTROY, for example, they advocated the abolition of bank guarantees for SRO members under small government contracts, noting that the contract enforcement mechanism is expensive (according to the business ombudsman, since July 1, 2017, SRO contractors difficulties by 842.2 billion rubles – the payment for them amounted to 46 billion rubles; see “Kommersant” dated June 4), and state customers rarely recover losses through SRO compfunds in case of default on obligations.

Dmitry Kotrovsky, CEO of Investment Technologies LLC, ex-Ombudsman for Construction, notes that the Finance Ministry’s proposal can indeed reduce the financial burden on contractors: “Their profitability is very low, so such a restriction on collateral is aimed at expanding the number of market participants.” However, he adds, this may also indicate a decrease in the activity and commercial opportunities of developers.

Evgenia Kryuchkova