In this article
- 1. What qualifies as a service contract
- 2. Difference with supply and works contracts
- 3. Specific framework: arts. 308-315 LCSP
- 4. Prohibition of illegal worker transfer
- 5. Maximum duration and extension regime
- 6. Contract modification and price revision
- 7. Subcontracting
- 8. Specific penalties
- 9. Minor service contracts (art. 118)
- 10. Common errors and how to avoid them
- 11. Frequently asked questions
1. What qualifies as a service contract (art. 17 LCSP)
Article 17 LCSP 9/2017 defines the service contract as one whose object is a "doing" performance consisting of carrying out an activity or aimed at obtaining a result distinct from a work or a supply, including those where the awardee undertakes to deliver the service on a recurring basis for a unit price.
In municipal practice, service contracts include: building cleaning, waste collection and treatment, green space maintenance, IT maintenance, legal or urban planning technical support, sports facility management, citizen telephone support, private security, school meals services, school transport and external audits.
All these performances are subject to the general LCSP regime plus the specific regime of articles 308 to 315, which introduces safeguards absent in supply or works contracts.
2. Difference with supply and works contracts
Correct classification of the contract determines the applicable regime. The three types are:
- Works contract (art. 13 LCSP): civil engineering or building work, or renovation of existing buildings.
- Supply contract (art. 16 LCSP): acquisition or lease of products or movable goods.
- Service contract (art. 17 LCSP): "doing" performances, with or without ancillary delivery of goods.
In mixed contracts, the rule is to look at the main object. IT maintenance that includes delivery of parts remains a service contract if the main performance is the technical intervention, not the sale of material.
3. Specific regulatory framework: arts. 308-315 LCSP
Articles 308 to 315 LCSP regulate matters specific to service contracts: contract content (308), execution (309), staff subrogation (310), contractor liability (311), modification (312), suspension (313), performance and reception (314) and resolution (315).
Of all of these, paragraph 2 of article 308 is the one that creates most practical problems and demands most attention in drafting the Administrative Clauses. It is analysed in detail in the next section.
4. Prohibition of illegal worker transfer (art. 308.2)
Article 308.2 LCSP is clear: in service contracts, the awardee company must retain direction of its staff. The contracting body cannot give direct instructions to the contractor's workers, nor decide on their hours, holidays, sanctions or duties. If it does, illegal worker transfer occurs.
The consequences of illegal transfer are serious: the Labour Inspectorate can declare that the contractor's employees are, in fact, permanent council staff. This is not theoretical; there are multiple labour court rulings to this effect, especially in public-facing contracts, cleaning and maintenance.
Warning signs of illegal transfer: the contractor's workers receive direct orders from council staff, share space and hours with civil servants without distinction, use council equipment, appear in the internal directory with a council email, or the service manager decides on them without the company's mediation.
The solution: the Administrative Clauses must include an express clause stating that staff management falls to the contractor. The relationship with the council is channelled through the "contract manager" (art. 62 LCSP), designated by both parties, who communicates service needs but never issues direct labour orders. In practice, this figure orders what needs to be cleaned or repaired, not when or how each specific worker should do it.
5. Maximum duration and extension regime
Article 29 LCSP sets as a general rule that service contracts have a maximum duration of 5 years, including extensions. For contracts linked to asset investments (e.g. specific IT systems) a longer duration may be permitted if duly justified.
Extensions must be expressly provided for in the specification, with their duration and conditions. Their acceptance is mandatory for the contractor when the foreseen triggers occur, and must be notified at least three months before expiry (art. 29.2 LCSP). If the organisation does not notify the extension in time, the contract expires and a new tender is required.
Recommendation: add to the procurement officer's annual calendar an alert six months before the expiry of each contract. If an extension is decided, three months before. If not, start the tender for the new contract at least four months in advance, to avoid provisional delivery or verbal contracting (null and void).
6. Contract modification and price revision
Modification of service contracts is governed by articles 203-207 LCSP (general regime) and 312 LCSP (specific). It is only permissible if the modification was foreseen in the specification with its maximum scope and conditions, or if unforeseen circumstances under article 205 apply (up to 50% of the initial price, cumulatively).
Price revision is governed by articles 103-105 LCSP. It only applies if foreseen in the specification, if at least one year has elapsed since formalisation and if at least 20% of the contract has been executed. The applicable formula must be officially published, usually linked to the consumer price index with reduction coefficients that prevent passing the full increase onto the final price.
7. Subcontracting: when allowed and when not
Subcontracting is governed by article 215 LCSP. It is allowed unless the specification prohibits or restricts it on account of the contract's nature. In personal-delivery service contracts (direct legal assistance, works supervision, technical representation), the specification may restrict it.
Where permitted, the contractor must notify the council of the subcontractor's details before starting subcontracting and prove its aptitude and solvency. The main contractor retains full liability towards the contracting body.
The solution: set in the Administrative Clauses a maximum subcontractable percentage (e.g. 30%) and a duty of prior notification. Require a responsible declaration from the subcontractor stating it is not subject to contracting prohibition.
8. Specific penalties in service contracts
Article 192 LCSP regulates breach penalties. In service contracts it is particularly important to spell them out in the Administrative Clauses with a clear table: which breaches are minor, serious or very serious, and what economic penalty each carries (up to a maximum of 10% of the contract price per partial breach).
If the Administrative Clauses do not define the penalty table, any subsequent imposition will be discretionary and easily appealable. And if accumulated penalties exceed 50% of the contract price, resolution for culpable breach applies.
9. Processing minor service contracts (art. 118)
The minor service contract (art. 118 LCSP) follows the general minor contract rules: maximum duration of one year, no extension, amount below 15,000 euros VAT excluded, and it cannot be signed with the same contractor if the cumulative annual total exceeds that limit.
To go deeper into this point, see the minor contracts guide for councils (Spanish) which details documentary requirements, article 118.3 verification and operational processing.
10. Common errors and how to avoid them
The most frequent failures in municipal service contracts:
- Failure to include an anti-illegal-transfer clause in the Administrative Clauses
- Failure to designate a contract manager (art. 62 LCSP)
- Providing for indefinite extensions without a maximum term
- Omitting a specific penalty table
- Not providing for price revision when the contract lasts several years
- Splitting recurring minor contracts for the same service
- Not checking that the contractor properly subrogates staff from the outgoing contractor when a collective bargaining subrogation clause applies
All these errors share a common cause: use of generic templates not adapted to the specific contract object. For a complete list of specification pitfalls, see the guide on common errors in procurement specifications. To explore how a specialised AI tool can detect these omissions in minutes, request a free demo.
Frequently asked questions
What happens if the contractor ends up directing my staff?
It constitutes illegal worker transfer, expressly prohibited by article 308.2 LCSP. Consequences can range from contract nullity to labour liability (declaration of the contractor's workers as permanent council staff) and administrative sanctions. The Administrative Clauses must expressly state that staff management falls to the contractor and never to the contracting body, routing the relationship through the contract manager figure in article 62 LCSP.
How long can a service contract last including extensions?
Article 29 LCSP sets the general rule that service contracts last a maximum of 5 years, including extensions. Justified exceptions exist (investment-linked services, continuous services) but must be documented in the file. Extensions must be expressly foreseen in the specification with their duration and conditions, and agreed and notified to the contractor at least three months before expiry.
Can the price be revised during execution of a service contract?
Yes, but restrictively. Price revision is governed by articles 103-105 LCSP and only applies if expressly foreseen in the specification, if at least one year has elapsed since formalisation and if at least 20% of the contract has been executed. The applicable formula must be officially published, usually linked to the consumer price index with a reduction coefficient that prevents passing the full increase onto the contract price.
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