CEOE and unions charge against public contracts for acting as a brake on wage increases

BPVMadrid Updated: 03/22/2022 18:28h

It was the year 2015, the public deficit was stagnant above 5% of GDP and the Government of Mariano Rajoy - without an ECB to buy the debt by the bucketload - did not cease in his efforts to find formulas that would allow him to reduce public spending and getting closer to the deficit target of 3% of GDP that Brussels had imposed on it in order to lend it the necessary resources to keep the financial system afloat. That was the context when the Ministry of Economy of Luis de Guindos put on the table the Law of Deindexation of the Spanish Economy, a regulation that aspired to put an end to the inclination of the Spanish economy to transfer inflationary episodes, however transitory they might be, not only to wages but to a whole range of prices and public rates
generating the newly fashionable second-round effects

The rule, promoted by the then Minister of Economy and today Vice President of the ECB, unhooked dozens of tariffs and public prices from the different administrations of the Consumer Price Index (CPI) and introduced a structural change in public procurement that has ended up becoming a problem: since its entry into force, unforeseeable changes in the costs of raw materials or components linked to public contracts are not compensated in the price to be paid to the contractor but must be absorbed by them charged to their margins, in the same way that it happens with the possible increases in salary that occur during the term of the contract.

The regulations sought to put an end to the upward revisions that had become an uncomfortable habit for public contracts in the years of the bubble, but along the way they turned them into a minefield for contractors. Many large service companies such as ISS or Eulen chose to stop submitting to many contracts tendered by the Administration due to the risk of ending up having to provide the service at a loss.

Halt to salary improvements

Without major inflationary fluctuations, the main problems in recent years have come from the wage side. The
sequence of rises of the SMI
It has resulted in dozens of complaints before the Contracting Board by companies that bid for a public contract under certain conditions and that saw their costs increase due to a government decision that the Administration later refused to compensate.

Employers and unions have been in agreement for years on the need to modify this aspect of the legislation, but it was not until this Tuesday when the service areas of the UGT, CCOO and CEOE have agreed to sign a joint manifesto to demand that the Government suspension of the Deindexation Law or, failing that, the modification of article 103 of the Public Sector Contracts Law to allow the contract award price to be revised in order to transfer to it the best wages derived either from a collective bargaining agreement or from a Government initiative, such as a rise in the SMI.

The signatories emphasize that, in the current context, the restrictions established in the law "represent a hindrance to the smooth running of collective bargaining, hindering the achievement of improvements for workers and generating conflict and continuity problems in the templates".

CEOE has tried several times without success to address this legal reform in the negotiations of the labor reform or in the decree to raise the Minimum Wage. The escalation of inflation and the decoupling between the rise in the cost of living and salary increases have advised the unions to adhere to the business demand promoted for a long time by employers such as cleaning (Aspel), who have been denouncing the coup on the margins of public contracts of increases in the SMI to the point of condemning companies to provide the services awarded at a loss.

The manifesto denounces the impact that the application of the Deindexation Law has had on the economic-contractual balance of the awarded companies each time there has been a salary variation, either by a Government decision or by a collective agreement, and claims that "the costs derived from labor obligations established by collective agreements or basic labor regulations are an essential element when determining the economy of service contracts in which the weight of said obligations is relevant, a circumstance that should not be considered a risk more typical of public procurement"

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