COMMISSION OF THE EUROPEAN COMMUNITIES 
C0MC89) 402 final 
Brussels, 7 August 1989 
^EVELOPJIEN^^ 
IN THE COMMUNITY 
COMMUNICATION FROM THE COMMISSION 
and 
Draft 
COUNCIL RESOLUTION 
Çjarn yoi J* 
COMMUNICATION PROM THE COMMISSION ON THE DEVELOPMENT OP 
SUBCONTRACTING IN THE COMMUNITY 
INTRODUCTION P 1 
I - SUBCONTRACTING - A BUSINESS STRATEGY 
FOR 1992 P 2 
A - Economie importance of subcontracting p 2 
B - Subcontracting and the single market p 3 
1. Structural changes in subcontracting p 3 
2. New requirements for subcontractors p 4 
C - The role of the European Community p 5 
II - CREATION OF THE RIGHT ENVIRONMENT 
FOR SUBCONTRACTING IN THE INTERNAL 
MARKET p 5 
A - Subcontracting and Community rules 
of competition p 5 
-.. _ B - Completing the single market and 
measures on the business environment 
for SMEs p 6 
C - Standards and certifications p 6 
D - Payment periods p 7 
E - Liability p 8 
III - BETTER INFORMATION AND COMMUNICATION 
FLOWS BETWEEN MAIN CONTRACTORS AND 
SUBCONTRACTORS p g 
A - Multilingual sector glossaries p 9 
B - Tools to assist in the search for 
partners p 9 
C - Electronic data transmission p 9 
D - A European Information Centre on 
subcontracting 
IV - PROMOTING SUBCONTRACTING AND PARTNERSHIP 
RELATIONS p 11 
A - Educating partners on the 
partnership approach p 11 
B - Enhancing the status of subcontractors p 11 
1. Practical guide to legal aspects 
of industrial subcontracting P H 
2. Subcontracting and public procurement p 12 
3. Promoting cross-border cooperation 
between subcontractors P 12 
C - Support for subcontractors in 
modernizing and adapting their technology p 13 
D - Making European subcontracting 
attractive to foreign investors and 
promoting it outside the Community p 13 
CONCLUSION F-^1*-"' 
INTRODUCTION 
The recourse to subcontracting is increasingly becoming a 
strategic choice for businesses which are confronted to the need 
of improving their competitiveness. The completion of the single 
market in 1992 will most probably emphasize even more the scale 
of this evolution, more particularly with regard to cross-border 
subcontracting. Moreover the relationships between main 
contractors and subcontractors are now radically different from 
what they were in the past when subcontracting was mainly a 
short-term phenomenon. 
Most Community subcontracting businesses work mainly for local or 
regional markets and have only a limited knowledge of market 
opportunities in other Member States. When a subcontractor shows 
initiative and explores the possibility of entering the larger 
Community markets, he is often discouraged by his lack of 
knowledge of the different laws and different national 
certification and registration, commercial and public contract 
procedures. 
The Commission considers that the competitiveness of Community 
businesses in key sectors such as aerospace, motor manufacturing, 
electronics, transport equipment and energy production systems 
will be determined partly by the technological capacity and 
competitiveness of European subcontractors, the majority of which 
are small or medium-sized businesses. The measures taken by the 
Commission to encourage subcontracting SMEs are therefore an 
important aspect of its policy to improve the business 
environment and promote the development of businesses.(1) 
On the basis of the mandate given to the Business Cooperation 
Centre (2 ) and the Community action programme for small and 
medium-sized enterprises (3 ), a number of initiatives have been 
prepared and the Commission considers that the time has come to 
present these to the Council and the Parliament for them to draw 
the appropriate conclusions with regard to future action and 
propose that, where appropriate, the initiatives be a with those 
planned at national or regional level. 
Any current or future action should form part of a consistent 
whole clearly setting out the extent and limits of Community 
policy in this matter, respecting the principle of subsidiarity 
and reflecting the Commission's role as coordinator and 
instigator. The general lines of the policy are: 
to create an environment suited to subcontracting; 
to improve the flow of information and communication 
between main contractors and subcontractors 
to promote subcontracting and partnership relations. 
1 Com (89) 102 final 
2 Sec (76) 4397 final 
3 Com (86) 445 final 
i 
I. SUBCONTRACTING - A BUSINESS STRATEGY FOR 1992 
So far there is no universally accepted definition of 
subcontracting. France is the only country, which adopted a law 
on subcontracting in 1975 and a standard for the definition of 
industrial subcontracting in 1987. 
In most of Community countries it is not identified formally, 
either from a legal or accounting point of view, nor is it 
referred to in a specific case law , that could help clarify its 
field of application or define its specific character. 
Although subcontracting is sometimes carried out by big 
companies, in particular in the field of motor manufacturing for 
first tier subcontractors, in most cases subcontractors are small 
or medium-sized enterprises. 
Subcontracting exists in a variety of sectors. It occurs in 
public works and the building industry where it traditionally 
takes the form of a relationship between three partners (the 
contracting authority, the main contractor and the 
subcontractor). In a more strictly industrial situation there are 
only two partners involved (the main contractor and the 
subcontractor). This form is encountered in motor manufacturing, 
aerospace and the textile industry. 
There are also different ways in which subcontracting is 
practised. Japan for instance, has a pyramidal type of 
organisation with different layers of subcontractors, while in 
Europe main contractors were, until now, in direct contact with 
a very large number of subcontractors. 
Nevertheless, if subcontracting can be considered as a specific 
type of relationship between enterprises, it may be assumed that 
a subcontracting relationship exists wherever a business 
(frequently small and referred to in what follows as the 
"subcontractor") acts for the account of another undertaking 
(frequently large and referred to in what follows as the "main 
contractor") in the process of working and making a specific 
product to plans and technical specifications supplied by the 
main contractor, who has final economic responsibility. 
A. Economic importance of subcontracting 
An immediate consequence of the difficulties of defining 
subcontracting is the absence of statistics and the problem of 
obtaining quantifiable data on which to base a reliable economic 
assessment. 
France is the only country which since the early 1970s has been 
measuring the amount of work contracted out through annual 
business surveys carried out by INSEE. According to statistics 
published by the INSEE, the aerospace, shipping and motor 
manufacturing industries are the largest main contractors but 
subcontracting is also increasing in electrical and electronic 
manufacturing and in the textiles and clothing industry in 
particular. 
Six out of every ten industrial undertakings with more than 20 
employees subcontract work occasionally or regularly. But the 
weight of large undertakings (with over 500 employees) is the key 
factor since they account for two thirds of all subcontracting. 
The vast majority of subcontractors are SMEs and, according to 
certain local surveys, half of these are also main contractors. 
An empirical assessment suggests that the European industrial 
subcontracting market is worth ECU 100 000 million. 
Whereas only a few years ago, the share of external source of 
supplies was estimated, in Europe, at some 40% (purchases and 
subcontracting) it now accounts for some 60% (over 80% in Japan). 
B. Subcontracting and the single market 
The completion of the internal market will bring on a 
liberalization of intra-comrounity exchanges and will enable the 
more systematic recourse to cross-border subcontracting. For 
example, the opening of public markets will provide increased 
market opportunities for both main contractors and 
subcontractors. However, by reinforcing intra-coramunity 
competition, the internal market will urge businesses to increase 
their competitiveness and specialization. 
Thus, the internal market will emphasize a certain number of 
structural changes in the subcontracting relation, generated by 
the increased externalization of the production. They bring a 
profound modification in traditional attitudes and consequential 
in subcontractors' demands and new requirements. 
1. Structural changes in subcontracting 
These structural changes are three-fold: 
- an increasing demand for subcontracting 
- a greater specialization of subcontractors 
- a modification in the relation between main contractor and 
subcontractor 
In order to maintain their flexibility and their ability to 
adapt, an increasing number of large companies are putting out an 
increasing proportion of their production to subcontractors. The 
possibility of getting supplies from alternative and competitive 
sources enables them to contain their costs and become more 
competitive. In addition to this quantitive change in the demand 
for subcontracting, there is a qualitative one. The main 
contractor intends to pass on more and more complex operations to 
his subcontractor and expects him to master a process or a 
technology that he himself does not possess (or that he considers 
not profitable to acquire) as well as the realization of sub­
assembly or whole-function operations. 
The form of subcontracting known as 'capability subcontracting' 
and which was used in the past to counter the fluctuations of 
main contractors' production capacities is increasingly changing 
into specialist subcontracting. Therefore, in order to remain 
competitive, subcontractors have to specialize in a specific 
field. 
These new demands also bring a change in the relation between 
main contractors and subcontractors. 
By acquiring a product (that he no longer produces) as well as a 
know-how (that he does not possess), the main contractor has 
every interest in establishing more stable and balanced relations 
with his subcontractors, and in certain cases involving them in 
his research and development works. It is in this sense that one 
can speak of partnership. 
At the same time, main contractors commit themselves to reduce 
the number of direct subcontractors with which they will have 
this type of relation and on to which they will pass on the 
responsibility of whole assemblies. 
We are thus in presence of a phenomenon of "cascading 
subcontracting" whereby first level subcontractors will turn to 
other subcontractors of the second or third level to manufacture 
the various components. Finally, in order to preserve, as much 
for themselves as for their subcontractors a threshold of 
dependency low enough not to threaten their mutual existence in 
case of difficulty, main contractors encourage their 
subcontractors to diversify their customers, and develop products 
of their own. 
This new conception of the organization of production, in which 
subcontracting plays a positive role in improving 
competitiveness, also covers the respect of the legislation on 
working conditions and already approved conventions. 
2. New requirements for subcontractors 
The demands for specialization and for diversification entail a 
profound change in the role of the subcontractor. Mainly 
constituted by small businesses that are bound to a single or 
more main contractors geographically close and for which they 
have until now, realized capacity functions, subcontractors are 
in most cases, ill-prepared for these new imperatives of 
competitivity. They are thus facing new requirements that 
express themselves in terms of the improvement of the business 
environment, of information and of strategy adaptability. 
A more widespread use of European norms, a greater transparency 
of certification procedures, a clarification of the situation of 
subcontracting with regard to public procurements will all 
contribute to improve the environment of subcontracting and are 
the conditions ensuring a more systematic and fairer recourse to 
cross-border subcontracting. On the other hand, information on 
the capacities of subcontracting as well as market opportunities 
offered as much in the framework of public procurements as in 
that of important European projects, must be available at 
Community level, more particularly to enable subcontractors to 
diversify their customers. In addition, a good knowledge of new 
technologies, of innovation, normalization and of the evolution 
of the markets are necessary for them to specialize. 
If an information which is easily available, simple and up to 
date is a vital condition in preparing subcontractors for a 
Community wide market, then they also have to define the notion 
of a more global strategy. In view of this, any measure 
promoting innovation, marketing and management, are most 
important. 
In order to make the necessary investments related to innovation 
and specialization, subcontractors need to establish more stable 
and balanced relations as well as a more regular and anticipated 
dialogue with their main contractors. 
Finally, the elaboration of partnership and cooperation 
strategies with other subcontractors will enable them to reach 
the critical size on the Community market, to have access to new 
markets and to specialize in very sharp and competitive fields. 
C. The role of the European Community 
The institutional framework for subcontracting varies from 
country to country mainly because of variations in industrial 
structure, the extent to which subcontracting has developed and 
the role traditionally played by representative economic bodies 
and the public authorities. 
With regard to the above mentioned requirements of subcontracting 
businesses, the role of the Community authorities is on the one 
hand to ensure that a legal and financial environment favouring 
subcontracting - particularly cross-border subcontracting - is 
created. On the other hand, it must help improve the flow of 
information and communication between the main contractors and 
subcontractors in different European regions as well as the 
promotion of subcontracting and partnership relations so that 
they are in a better position to exploit the potential of the 
internal market. 
The measures taken by the Commission will therefore complement 
national actions and consist of a series of initiatives which aim 
to create conditions which will foster the development of 
harmonious relations in subcontracting and promote their cross-
border dimension. 
II CREATING THE RIGHT ENVIRONMENT FOR SUBCONTRACTING IN THE 
INTERNAL MARKET 
A Subcontracting and community rules on competition 
In 1978 the Commission assessed subcontracting agreements in the 
light of Article 85 of the Treaty of Rome (4). 
The resulting communication clarified under what conditions 
contracts of this type were not caught by that Article, and 
removed certain doubts about the compatibility of this form of 
division of labour with Community competition rules. The 
Commission thereby supplemented, in respect of subcontracting, 
its earlier communications on cooperation and agreements of minor 
importance, and helped to establish more balanced relationships 
between enterprises, thus expanding the scope for fruitful 
cooperation. 
4 OJ CI 3/1/79 
S 
B Completing the single market and measures on the business 
environment for SMEs 
The work launched by the Commission pursuant to the White Paper 
on the completion of the internal market will facilitate 
subcontracting in general and cross-border subcontracting in 
particular. The initiatives proposed in the Council decision of 
July 1989 relating to the improvement of the business environment 
and the promotion of the development of enterprises, in 
particular SMEs, also contribute towards this objective. 
Also, as there is subcontracting in many sectors of economic 
activity, most Community policies, whether on regional 
development, social matters, innovation or technology transfer, 
affect subcontracting. For instance, some of the measures 
introduced under the SPRINT programme help promote cross-border 
cooperation between subcontracting intermediaries and 
enterprises. In the same way, in the framework of Community R&D 
activities concerning industry, such as the BRITE-EURAM 
programme, research proposals regarding the interface and common 
problems between main and subcontractors are considered. 
C Standards and certification 
Commission policy following the Council's adoption of Directive 
83/189/EEC and the resolution of 7 May 1985 by the Council is 
contributing significantly towards the reduction of technical 
barriers to trade and the clarification of the conditions, 
particularly on safety, health etc...with which European products 
have to comply. 
The substitution of harmonized standards for in-house purchasing 
specifications or rules is of fundamental importance for 
subcontractors in as much as they enable a more balanced and 
transparent technical dialogue between main and subcontractors as 
well as a reduction of costs of toolings, certification controls 
and audits. In addition, harmonized standards are drawn up on the 
basis of the fundamental principles of standardization: 
participation by all the parties concerned through the 
intermediary of standardization bodies and with full 
transparency, public enquiries, etc. 
The Commission intends to pursue its policy of promoting European 
standards, particularly through harmonization directives and the 
"public contracts" directives. 
A 
Sufficient information on standards is also particularly 
necessary to subcontractors who want to take on cross-border 
subcontract work. A feasibility study is being made in order to 
improve the transmission and transparency of information on 
standards and standard projects. 
The now generally accepted role of quality in economic progress 
and commercial success inevitably results in more narrowly drawn 
specifications and in companies requiring their suppliers to 
conform more strictly. 
Suppliers therefore have to undergo proliferating and complex 
type approval procedures which give rise to disproportionate 
costs on the supplier's side and therefore constrain any effort 
to expand into cross-border contracting. 
The Commission's action which aims at mutual recognition of 
certification and testing procedures, is three-fold: 
establishing common transparency criteria for use in 
assessing the competence and operation of certification 
bodies and test laboratories and in approving them; 
the adoption of a Council Decision incorporating a number of 
modules on different aspects of certification procedure for 
use in Community legislation; 
setting up a European structure to organize mutual 
certification and testing recognition on the basis of the 
common transparency criteria. 
A policy statement and a proposal for a Decision have recently 
been addressed by the Commission to the Council (5). 
The Commission will also analyse the cost - in terms of finance, 
equipment and human resources - to European subcontractors of the 
multiplicity of certification procedures and will take action to 
ensure that businesses and certification bodies are aware of the 
problem. 
D. Payment periods 
"Another major problem for subcontractors is that of payment 
periods. There are still enormous differences on this point. 
For instance Italian subcontractors have to accept periods of up 
to 120 days whilst German firms generally pay their 
subcontractors within 30 days. 
Eight of the twelve countries have laws on terms of payment and 
in at least seven of them contractual practice on this point is 
the source of particularly difficult problems for subcontractors. 
5 Com (89) 209 final 
so 
8 
The cost of the inter-company credit generated as much by late 
payment as by the difference between the periods of payment to 
suppliers of raw materials and payment by the main contractor, 
may be estimated at between 2 and 3% of a company's turnover. 
Practices of this type can undermine the very existence of some 
SMEs. 
The Commission considers that the problem of payment deadlines is 
a key factor in the viability of SMEs and that the differences 
between the laws and practices of the Community countries could 
hamper intra-Community trade. It will therefore be conducting 
in-depth discussions on the question with the national 
authorities and trade circles of the Member States. 
E. Liability 
The entry into force of Directive 85/374/EEC on the approximation 
of the laws, regulations and administrative provisions of the 
Member States concerning liability for defective products 
directly concerns subcontracting in so far as it lays down the 
principle of the manufacturer's no-fault liability in the event 
of damage caused by a defect in his product, the word 'producer' 
being defined in Article 3(1) as "the manufacturer of a finished 
product, the producer of any raw material or the manufacturer of 
a component part ...". 
The latter is not liable where "...the defect is attributable to 
the design of the product in which the component has been fitted 
or to the instructions given by the manufacturer of the 
product..." (Article 7(f)). 
As the burden of proof lies with the producer, the wording of the 
contract setting out the main contractor's specifications and the 
controls required is particularly important, since the contract 
may be taken to represent the "instructions given by the 
manufacturer". 
Furthermore, Article 5 of the Directive provides for the joint 
and several liability of the producers where more than one person 
is liable for the damage. The subcontractor's liability could 
therefore be invoked in this respect. 
In view of the specific nature of subcontracting, the Commission 
will charge a group of experts to examine the implications on 
subcontracting businesses of this directive. 
III. BETTER INFORMATION AND COMMUNICATION FLOWS BETWEEN MAIN 
CONTRACTORS AND SUBCONTRACTORS 
Under the action programme for SMEs,the Commission has taken a 
series of measures aimed at improving information and 
communication between main contractors and subcontractors at 
Community level. 
S* 
A. Multilingual sector glossaries 
As the products of subcontracting are not standard products, they 
are not listed in conventional nomenclatures. One of the 
Commission's first tasks was therefore to draw up multilingual 
sector glossaries to facilitate contacts between main contractors 
and subcontractors in different countries. The glossaries are 
also used in setting up data banks and subcontracting exchanges, 
which can be linked up across borders by means of compatible 
electronic data transmission systems. 
The Business Cooperation Centre has continued with the task begun 
in 1976 and, by the end of 1989, six further volumes will have 
been added to the range. This means that most sectors in which 
work is contracted out (metal, plastics and rubber, textiles, 
wood, electronics, industrial services, ceramics and general 
services for businesses) will be covered. 
B. Tools to assist in the search for partners 
The systems available to the Business Cooperation Centre in the 
search for partners, whether traditional advertising of business 
cooperation or the new computerized BC-NET system, are useful 
means of improving communication between main contractors and 
subcontractors and facilitating the search for partners in other 
Community countries. 
The Commission is currently evaluating and improving these 
systems so that they can be put to good use specifically in 
subcontracting. 
C. Electronic data transmission 
Electronic data transmission is spreading rapidly in Community 
trade and represents a particular challenge for SMEs. 
In this connection the TEDIS programme, introduced under Council 
Decision 87/499/EEC, aims to encourage the a development of 
electronic data transmission systems. 
Some pilot projects devoted to small and medium-sized businesses 
are already up and running under the programme. It would seem 
desirable to continue with this measure in order to obtain guide­
lines on how to educate the subcontractors. 
D. A European Information Centre on Subcontracting 
The completion of the single market in 1992 and the new demands 
on subcontractors that this will bring in terms of technological 
adjustment, diversification of their outlets and increasing 
complexity in legal and technological standards bring an 
increased need for information of businesses, more particularly 
for information of cross-border nature. The Commission has asked 
for a feasibility study on a European Information Centre on 
Subcontracting. This study has highlighted the needs of 
businesses for information as well as the conditions of viability 
for such a Centre. In order to check the guide-lines set out in 
the study, the Commission consulted those parties mainly 
JL 
10 
concerned (businesses, intermediaries, local and national public 
authorities, etc...). There have already been consultations 
through the work of the committee of government experts on 
subcontracting. 
An operational proposal for the Centre is currently being 
circulated to as many potentially interested bodies as possible 
(chambers of commerce, development agencies, etc...). Depending 
on their reactions, the Commission will then take things a stage 
further with a view to launching the project. If approved, the 
Centre could be operational some time during 1990. 
This European Information Centre on Subcontracting should not be 
an arm of the Commission but an independent body providing, the 
extension and interface, at Community level, of the local, 
regional and national bodies that represent, assist and advise on 
subcontracting matters. It should have a simple structure and 
should soon become self-financing. 
On an indicative basis, the following functions could be 
fulfilled by the Centre: 
to improve the flow of information between main 
contractors and subcontractors at European and 
international level; 
to provide up-to-date and easily accessible information 
on the legal, economic, institutional and technical 
subcontracting environment in the twelve Community 
countries and others (United States, Canada, Japan); 
to give subcontractors immediate access to the data 
banks covering standards (ICONE) and certification 
systems (PROMOLOG-CERTIFICAT); 
to provide regular advance information on 
subcontracting opportunities in public procurement and 
large-scale European contracts; 
to promote the setting up of consortia, European 
economic interest groupings and other cooperative 
ventures to submit joint tenders for contracts, or to 
join commercial and administrative forces in order to 
prospect new markets, particularly export markets; 
to establish a central reference base for checking 
cross-border subcontracting capability; 
to provide a forum for exchanging experience and 
holding meetings on subcontracting; 
to promote the search and studies on subcontracting. 
^ 
11 
IV. PROMOTING SUBCONTRACTING AND PARTNERSHIP RELATIONS 
In order to accompany the structural changes in subcontracting 
within the Community, the Commission is developing a series of 
actions aimed at reinforcing the capability of subcontracting and 
promoting partnership relations between main and 
subcontractors.(6 ) 
A. Educating partners on the partnership approach 
A series of pilot projects could be planned in conjunction with 
subcontracting intermediaries and purchasers' associations with 
the aims of making undertakings aware of the need to integrate 
the concept of partnership into their forward plans and their 
negotiations, and of improving the exchange of experience at 
Community level. 
The aim of these projects would be, inter alia, to promote the 
use of European and national standards in specifications, to plan 
orders further ahead, to deal with the problem of payment 
deadlines, to promote cooperation in matters of value analysis 
between main contractors and subcontractors and to provide 
technical assistance for subcontractors. 
It would also encourage such relationships if success stories 
about partnership operations were collected and disseminated all 
over the Community. 
B Enhancing the status of subcontractors 
1. Practical guide to legal aspects of industrial 
subcontracting 
In view of the completion of the single market in 1992 and the 
increase in cross-border ventures, the Commission has started to 
draw up a practical guide to legal aspects of industrial 
subcontracting. 
This will comprise a section on the need to draw up a written 
contract and the various clauses that should be included, and a 
second part comparing the legal systems governing subcontracting 
in the twelve Member States, and will therefore serve as a 
practical handbook to subcontractors wanting to go into cross-
border ventures. 
6 the concept of partnership refers to the setting up of economic 
cooperation links between businesses as for instance, in the 
framework of the Europartenariat programme. 
J** 
12 
2 Subcontracting and public procurement 
The use of subcontracting in public contracts is increasing. 
Together with the practice of order batching, this represents one 
means of access for SMEs to large contracts. Improved access for 
SMEs is one approach adopted by the Commission in its 
Communication on the regional and social aspects of public 
procurement for the adjustment of "regional preferences" to 
Community legislation regarding free competition for these 
procurements (7 ). 
The Commission considers that, for subcontracting in public 
procurement, action is required on two fronts: 
better information must be made available on subcontracting 
opportunities; 
the legal status of subcontractors must be clearly defined 
Regarding subcontracting opportunities in particular, the recent 
Council Directive amending Directive 71/305/EEC ("public works") 
provides that awarding authorities may include in the tender 
notice information on the main contractor's intentions with 
regard to subcontracting. 
Since at that stage the main contractors may already be committed 
to using certain subcontractors, the awarding authorities should 
be prepared to make lists of possible main contractors available 
to firms interested in subcontracting. 
This information should be distributed early enough to enable 
subcontractors to contact potential tenders before the latter 
submit their tenders. The network of Euro Info Centres hooked up 
to the TED data bank disseminates tender notices and helps SMEs 
to tender for contracts in which they are interested. 
A clear and balanced legal framework would also enable 
subcontractors to tender with greater confidence and security for 
public contracts in other Community countries. 
The Commission will put forward proposals along these lines in a 
communication and recommendation on SME participation in public 
contracts. 
3 Promoting cross-border cooperation between subcontractors 
The Commission is also encouraging the development of activities 
specifically involving regions in different Community countries. 
The activities are being promoted by subcontracting 
intermediaries and are aimed at bringing together firms whose 
activities complement each other and which can therefore combine 
to tender for large contracts. The EEIG is a suitable instrument 
for the purpose since it enables several SME subcontractors to 
combine on a project. 
7 Sec (89) 400 final 
> 
13 
C. Support for subcontractors in modernizing and adapting their 
technology 
Three businesses in France, Belgium and the United Kingdom have 
been involved in a pilot project to train the managers and 
employees of SME subcontractors in just-in-time methods. The 
assessment report highlights the fact that this management method 
leads to clear improvements in the way a business operates and 
that the approach depends on a number of factors arising out of 
the very nature of subcontracting businesses, particularly the 
lack of personnel and main contractors' failure to plan their 
orders. 
As regards training subcontractors to produce high quality, the 
Commission is currently completing a cross-border pilot project 
introducing quality assurance and control systems into small and 
medium-sized subcontracting businesses. There are also a number 
of current projects in Member States initiated by main 
contractors, intermediaries, public authorities or subcontractors 
themselves. There are plans for a survey of these projects. 
D. Making European subcontracting attractive to foreign 
investors and promoting it outside the Community 
To obtain a clearer idea of the detailed organization of 
subcontracting in Japan, the Commission arranged for a group of 
specialists to study subcontracting in Japan in 1988. 
Thirty-eight representatives of subcontracting intermediaries 
took part in the fact-finding mission. Their remit was to 
disseminate the information they gathered to the undertakings 
they represent. 
One of the first lessons the members of the study group learned 
was that European undertakings have to step up their efforts to 
make up the ground they have lost with regard to productivity and 
product quality. This is particularly important in view of 
Japanese investment in Europe, which represents a not 
insignificant potential subcontracting market. 
In Spring 1990 the Commission will be organizing one-day meetings 
on the response of European subcontractors to Japanese 
investment. A preparatory study will be carried out on the 
strategy used by Japanese investors and the effects of their 
Investments on local businesses. 
Also, as part of the programme to create a better business 
environment and encourage the development of enterprises, 
particularly SMEs, the Commission intends making arrangements to 
promote exports by SMEs. There will be a special section on 
subcontracting. The success of such a programme will partly 
depend on the action taken at Community level to improve the 
competitiveness of subcontractors. A more detailed examination 
will be made in the light of the results of the general programme 
on subcontracting. The potential for such experts should not be 
overlooked in the context of the present trade liberalization 
negotiations. /*' 
A 
14 
CONCLUSION 
Subcontracting is increasingly emerging in answer to the 
challenge of technology and international competition. 
The 1992 deadline is throwing new light on the challenge the 
subcontractors are facing. If we create an environment which 
favours the development of more harmonious and better balanced 
relations this will help businesses meet the objectives of 
quality and competitiveness. 
The Council is called upon to adopt the draft resolution 
accompanying this communication. 
St 
IS 
DRAFT 
COUNCIL RESOLUTION ON THE DEVELOPMENT OF 
SUBCONTRACTING IN THE COMMUNITY 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European Economic 
Community, 
Having regard to the proposal from the Commission, 
Whereas the Council adopted on 3 November 1986 a resolution 
concerning the action programme for small and medium-sized 
enterprises, and in July 1989 a decision relating to the 
improvement of the business environment and the promotion of the 
development of enterprises, in particular of small and medium-
sized enterprises in the Community; 
Whereas, following communications on an enterprise policy for the 
Community and on strengthening cooperation between European 
firms: a response to the 1992 internal market deadline, the 
Commission has sent to the Council a communication on the 
development of subcontracting in the Community; 
Whereas subcontracting is becoming a strategic choice for 
enterprises as part of their policy to use external resources; 
Whereas, the completion of the single market in 1992, by offering 
to businesses wider market opportunities, will enable a more 
systematic recourse to cross-border subcontracting and, by 
reinforcing intra-community competition, will emphasize 
structural changes in the subcontracting relation; 
Whereas the improvement of the subcontracting environment is a 
necessary condition for its cross-border development; 
Whereas appropriate and pertinent information and ease of 
communication are particularly important for establishing cross-
border subcontracting relationships; 
Whereas the adjustment to new demands for competitiveness, 
specialization and diversification represents a challenge for 
subcontractors and that establishing more balanced and stable 
relationships in subcontracting calls for special efforts on the 
part of main contractors and subcontractors alike, 
j* 
16 
Notes with interest the Commission's action so far, and in 
particular its promotion of cross-border subcontracting; 
Calls upon the Commission to continue to instigate, initiate and 
coordinate measures aimed at creating a propitious environment 
for subcontracting; 
Encourages initiatives to improve the flow of information and 
communication between main contractors and subcontractors, in 
particular the continuation of work on multilingual sectoral 
terminologies and the improvement of the systems to assist in the 
search for partners; 
Welcomes the initiative concerning the creation of a European 
Information Centre on Subcontracting and requests the Commission 
to continue its works, in close collaboration with concerned 
professional organizations; 
Stresses the importance of promoting more balanced and stable 
relationships between main contractors and subcontractors and of 
promoting European subcontracting to foreign investors; 
Considers that an improved legal framework for subcontracting is 
desirable, particularly in public procurement, and that the 
problem of payment periods should be carefully examined; 
Wishes to be kept informed of the progress of the Commission's 
work on the development of subcontracting in the Community. 
J*> 
MfWB¥ 
SUMMARY OF ACTIONS BROUGHT FORWARD BY 
THE COMMISSION OF THE EUROPEAN COMMUNITIES FOR THE 
DEVELOPMENT OF SUBCONTRACTING IN THE COMMUNITY 
PROJECTS COMPLETED 
Conference on "Subcontracting in Europe" - May 1988. 
Pilot project on the introduction of Just-in-Time in 
subcontracting SMEs. 
Fact-finding mission on subcontracting in Japan -
November/December 1988.. 
Terminologies in the metal and plastic and rubber sectors. 
Practical guide to legal aspects of industrial subcontracting 
in the Community. Publication of the first volume relative to 
the subcontract. 
Feasibility study on the creation of a European Information 
Centre on subcontracting. 
PROJECTS IN PROCESS 
Publication of a study on subcontracting and the integration 
of production processes in European industry. 
Practical guide to legal aspects of industrial subcontracting 
in the Community. Publication of the second volume relative 
to the legal situation of subcontracting in the twelve Member 
States. 
Consultation of subcontracting intermediary bodies for the 
definition of a European Information Centre on subcontracting. 
Pilot project on the introduction of quality insurance and 
quality control schemes in subcontracting SMEs. 
Publication of terminologies relative to the following 
sectors: 
- electronic/electrotechnic 
- textiles 
- wood 
- industrial services 
- ceramics 
- general services to enterprises. 
4o 
FUTURE PROJECTS 
Assessment and improvement of instruments for the search for 
business partners' instruments, in order that they can be put 
to good use in subcontracting. 
Update of terminologies of the "metal and plastic and rubber" 
sectors. Computerization of existing volumes. 
Study of the cost of the numerous procedures of certification 
for the subcontracting SMEs. 
Constitution of a group of experts in charge of examining the 
effects of the application of the directive 85/374 (product 
liability) on subcontracting enterprises. 
Examination of the effects of the variety of legislations and 
methods for terms of payments for subcontractors in the 
Community. 
Follow-up of work relative to the creation of a European 
Information Centre on subcontracting. Support of the 
launching of the project. 
Conference on the response of European subcontractors to 
Japanese investment in Europe. 
Propositions relative to the definition of a clear and 
balanced legal framework for subcontracting in public 
procurements. 
Initiatives for the education of partners on the partnership 
approach and cooperation between subcontractors. 
FINANCING 
All these projects are included in the framework of the 
decision of the Council of July 1989 relative to the 
improvement of the environment and to the promotion of the 
development of enterprises, in particular SMEs, in the 
Community, and will be therefore financed by the line 7770 of 
the budget, measures for the stimulation of enterprises 
(SMEs). In consequence, it entails no additional expense with 
respect to those already decided. 
M 

ISSN 0254-1475 
COM(89) 402 final 
DOCUMENTS 
EN 13 
Catalogue number : CB-CO-89-350-EN-C 
ISBN 92-77-52421-9 
Office for Official Publications of the European Communities 
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