Joint Venture in Romanian Public Procurement Contracts

Drd. Eugen Sarbu, attorney-at-law

Eva-Cara Costache, attorney-at-law

Abstract

The article examines key legal and practical aspects of the association in participation in public procurement, the most widely used forms of cooperation between economic operators involved in procedures for awarding public contracts in Romania.

It provides an integrated analysis of the entire lifecycle of public procurement contracts, addressing essential considerations both at the award stage (including qualification requirements, and use of combined capacities) and at the contract execution stage (such as allocation of responsibilities, role of the lead partner, and joint and several liability among members of the joint venture). In addition, the article also covers post-execution implications, particularly in relation to liability, internal settlement of obligations, and potential disputes arising between partners after contract completion.

Through this practical approach, the article is of particular relevance for companies operating or intending to enter the Romanian public procurement market, highlighting the legal framework governing associations in participation, as well as the practical risks and structuring considerations that economic operators must take into account.

Keywords: public procurement in Romania, joint venture, joint venture agreement under Romanian law, joint liability, lead partner, members of joint venture, termination of joint ventures

The joint venture is regulated by Articles 1949–1954 of the Romanian Civil Code, being defined as the contract by which two or more persons agree to carry out a joint activity without forming a separate legal personality, contributing with assets, knowledge, or services and participating in the profits and losses resulting from the activity. This contractual form is essentially internal in nature, legal relations producing effects exclusively between the partners, without opposability to third parties, under the conditions of Article 1951 of the Romanian Civil Code.

In public procurement matters, the concept of economic operator is defined by Article 3(1)(jj) of Law No. 98/2016 on public procurement, including any natural or legal person, public or private, or group or association of such persons offering on the market the execution of works, supply of products, or provision of services. In connection with this definition, Article 53(1) of the same law provides that “economic operators defined under Article 3(1)(jj) have the right to participate in award procedures as individual bidders, associated bidders, candidates, third-party supporters or subcontractors”.

A combined interpretation of these provisions shows that the legislator expressly recognises the possibility of joint participation of several economic operators within the same procurement procedure, without requiring the formation of a separate legal entity.

The main purpose of the joint venture in public procurement is the pooling of technical, professional, and financial capacities of several economic operators in order to meet qualification requirements and perform the contract.

The requirement of similar experience, as a qualification criterion, is assessed at the level of the Joint Venture and not at the level of each individual member, since the purpose of a joint venture is the mutual cooperation of the partners in order to pool contributions of different nature, including know-how.

Article 185(1) of Government Decision No. 395/2016 expressly establishes that, in case of joint participation in an award procedure, technical and professional capacity (including similar experience) is assessed through the aggregation of the resources of all members of the joint venture, the contracting authority being obliged to take into account each member’s contribution to the fulfilment of qualification requirements, alongside the establishment of joint and several liability for contract performance.

In concrete terms, similar experience refers to the proof of the technical and professional capacity of the economic operator (the Joint Venture) regarding experience in implementing similar contracts both in terms of type and complexity, as well as in terms of the result or functionality pursued through the purpose of the public procurement contract, as provided by Article 1 of ANAP Instruction No. 2/2017.

Pursuant to Article 193 of Law No. 98/2016, each member of a joint venture participating in a public procurement procedure must complete and submit the European Single Procurement Document (”ESPD” or ”DUAE” in Romanian), through which it demonstrates compliance with qualification and selection criteria.

The DUAE (ESPD) is particularly relevant in practice when supporting documents are requested for the similar experience declared therein, such documents usually being required from the successful bidder prior to contract signing. If the supporting documents do not confirm the accuracy of the declarations made in the DUAE, the contracting authority proceeds to evaluate the next-ranked tender and requests supporting documents from the next bidder.

The joint venture agreement concluded for participation in a public procurement in Romania procedure must contain, unless the Tender Documentation imposes specific requirements, at least:

(i) the name, registered office, and identification details of all members of the association;

(ii) the firm intention of the parties to associate for the purpose of submitting a joint bid within a specific award procedure;

(iii) the designation of the lead partner and the strict delimitation of its powers (especially regarding representation in relation to the contracting authority);

(iv) the allocation of participation shares and responsibilities of each member, both in the preparation phase of the joint bid and subsequently in the performance of the public procurement contract (if awarded to the association);

(v) the express assumption of joint and several liability of all members towards the contracting authority.

In addition to public procurement legislation, the joint venture agreement is governed by Article 1949 of the Romanian Civil Code, which enshrines the principle of contractual freedom, allowing the parties, provided that they comply with the minimum content set out in the Tender Documentation, to regulate in a broader and more detailed manner the relevant aspects of their cooperation, such as detailed allocation of activities, participation in guarantees, recourse rights between members, interactions with subcontractors and suppliers, and payment distribution mechanisms.

The duration of the joint venture is initially equal to the duration of the award procedure, and if the contract is awarded to the association, its duration is extended accordingly for the duration of contract performance.

In public procurement matters, the contributions of the partners consist of the performances undertaken by each member of the joint venture for the performance of the main public procurement contract.

Thus, participation in profits (distribution of the share of payments received from the contracting authority) is conditioned, by the very nature of a joint venture established for the performance of a public procurement contract, on the provision of the individual contribution, i.e. the performance of the obligations assumed by each member.

These contributions, depending on the nature of the public procurement contract (works, services, or supply of products), are defined at the time when the partners delimit the contractual scope and, unless otherwise provided in the joint venture agreement, should include all resources (labour force, materials, equipment, indirect costs, etc.) necessary for each partner to perform its share of works/services or goods under the procurement procedure.

A common misconception observed in Romanian public procurement disputes is the assumption that partners are entitled to a redistribution of profits (the share of payments received by the Lead Partner from the contracting authority) merely on the basis that payment has been received and the joint venture has achieved its objective. In practice, matters are more complex, as the Joint Venture may fulfil its obligations towards the contracting authority not because each member has individually performed its obligations, but because other members, under the risk of joint liability for damages, have also performed the obligations of a defaulting member.

Thus, in the absence of relevant evidence proving the actual performance of its own contribution by each member, the view that profits should automatically be distributed equally is legally incorrect.

The lead partner is the economic operator designated by the joint venture agreement to represent the group of economic operators in relation with the contracting authority.

The main duties of the lead partner include:

• submission of the joint bid;
• handling clarification requests and official correspondence;
• signing the public procurement contract;
• coordinating contract implementation;
• invoicing, collecting payments, and distributing proceeds to the other members.

From a practical perspective, the lead partner controls the flow of information and the institutional relationship with the contracting authority, which gives it a dominant position within the association.

The mandate of the lead partner is established through the joint venture agreement, which is essential both for internal relations and for the validation of the joint venture in the award procedure.

Although contractual freedom allows for broad powers to be granted, practical issues frequently arise, such as:

• exceeding the limits of the mandate;
• making decisions without consulting other members;
• assuming obligations affecting the entire association.

In the absence of clear provisions, the lead partner is deemed authorised to carry out acts necessary for participation in the procedure and contract performance. However, in public procurement, such “acts of administration” may include major decisions such as acceptance of contract amendments or handling disputes with the contracting authority.

Therefore, clearly defining the lead partner’s mandate in the joint venture agreement is one of the most important measures for preventing disputes.

Even though the lead partner represents the Joint Venture, there are situations in which it cannot act without the express consent of the other members, including:

• changes in the association structure (replacement or admission of members);
• assumption of additional obligations beyond the tender;
• waiver of contractual rights or financial claims;
• conclusion of legal acts exceeding ordinary contract performance (assignments, guarantees, financing).

These limitations are particularly important since the contracting authority treats the association as a single entity and liability is generally joint and several.

From practical experience, the most common issues include:

• lack of clear delimitation of responsibilities;
• unilateral decisions with financial impact;
• conflicts regarding execution responsibilities;
• difficulties in controlling the relationship with the contracting authority.

To avoid deadlock or costly disputes, the joint venture agreement should clearly regulate:

• limits of the lead partner’s mandate;
• decision-making mechanisms;
• situations requiring unanimous consent;
• management of relations with the contracting authority.

Participation in joint ventures under Law No. 98/2016 involves, beyond operational advantages, a specific legal liability regime.

The legislator expressly established, under Article 185(1) of Law No. 98/2016, the joint and several liability of the members for contract performance. This special rule is complemented by Article 1953(1) of the Romanian Civil Code, which also establishes joint liability of partners in relations with third parties.

The basis of this liability lies in the nature of the joint venture itself: a contractual form of cooperation based on affectio societatis, where members pursue a common goal, sharing both benefits and risks.

In practice, this allows the contracting authority to pursue any member for full performance or damages, regardless of internal allocation of responsibilities.

Under Article 1953(4) of the Romanian Civil Code, any clause limiting a partner’s liability towards third parties is not opposable to them. In public procurement, this means that internal agreements limiting liability cannot be invoked against the contracting authority.

However, where such clauses are included in the joint venture agreement submitted with the tender and form part of the procurement contract, they may become opposable under the principle of contractual relativity.

At the same time, exceeding the limits of the lead partner’s mandate is not without consequences. Such conduct may trigger the contractual liability of the lead partner towards the other members of the association, insofar as they suffer damage as a result of the acts concluded by it. In relation to the contracting authority, the effects are more nuanced and depend largely on the authority’s conduct and knowledge of the fact that the lead partner is acting beyond the limits of its mandate.

Thus, where the contracting authority knew or should have known the limits of the lead partner’s mandate – given that the joint venture agreement is, as a rule, part of the public procurement contract – and nevertheless concludes an addendum exclusively with the lead partner, without the consent of the other members, the issue of legal reclassification of the transaction may arise. In such a scenario, the provisions of Article 1613 of the Romanian Civil Code regarding novation may become applicable, with the possible effect of releasing from liability those members of the joint venture who did not consent to the modification of the initial obligations.

This perspective highlights that, although joint and several liability is the rule in public procurement, it is not absolute, as there are cases where the evidence submitted demonstrates the applicability of legal mechanisms under which the rule of joint liability may be excluded and the contractual liability of certain members may be removed.

In conclusion, the regime of joint and several liability – grounded both in the special provisions of Article 185(1) of Law No. 98/2016 on public procurement and in the general rules of Article 1953 of the Romanian Civil Code – must be carefully analysed and managed by economic operators.

In the absence of a clear delimitation of the lead partner’s mandate and effective internal control mechanisms, the risk that each member’s assets may be exposed to significant legal and financial consequences becomes real.

In jointly participation in procedures governed by Law No. 98/2016, termination of the joint ventures raises specific issues due to the interdependence between the joint venture agreement and the public procurement contract.

Although the Romanian Civil Code does not expressly regulate termination of the joint venture, it is supplemented by rules applicable to simple partnerships, in particular Articles 1930 and 1938 of the Civil Code, as well as the principle of contractual freedom under Article 1954 Civil Code.

Termination causes may be grouped into:

• contractual causes established by the parties;
• legal causes (including those under Article 1930(1)(a)-(e) Civil Code and unilateral termination under Article 1276 Civil Code);
• judicial causes.

In public procurement matters, these mechanisms must nevertheless be analysed in conjunction with the restrictions imposed by the public procurement contract.

Firstly, contractual termination remains the primary instrument available to the parties. Pursuant to Article 1930(1)(f) of the Civil Code, the joint venture may be terminated for other causes established by contract, which allows the inclusion of unilateral termination clauses, termination clauses, or withdrawal mechanisms.

Secondly, judicial termination represents an essential mechanism in cases where the joint venture agreement does not contain express clauses. Thus, under Article 1930(1)(c) of the Romanian Civil Code, the court may order the termination of the joint venture for serious reasons, in particular in the event of a significant and culpable non-performance of obligations by one of the partners. In practice, this mechanism is equivalent to a form of judicial termination, allowing the dissolution for the future of the contractual relationship between the partners. This solution is particularly relevant in situations where the conduct of a member substantially affects the performance of the public procurement contract; however, it must be borne in mind that termination of the joint venture does not automatically release the members from their obligations towards the contracting authority.

In the same sense, unilateral termination under Article 1552 of the Romanian Civil Code remains applicable to associations established for public procurement purposes. To the extent that a partner culpably breaches its obligations and is in default, the other members may resort to this contractual remedy, subject to the fulfilment of the legal conditions.

An essential aspect specific to this field is that the termination, in whole or in part, of the joint venture agreement inevitably triggers the need to reorganise the manner in which the public procurement contract is performed.

In conclusion, economic operators must treat with utmost care the regulation of termination grounds in the joint venture agreement, as well as their correlation with the provisions of the public procurement contract.