Is an obligation to maintain specific equipment with a condition of using spare parts classified as a work or a service in the context of public procurement?

During the long-term maintenance of certain equipment (e.g., an elevator), the need to replace certain parts typically arises, even if no equipment repair was required at the time of the public procurement for such maintenance.

Accordingly, the organizers (customers) of public procurement specify requirements in the characteristics of the purchased maintenance services for equipment, including, if necessary, the replacement of certain parts using spare parts.

However, according to subparagraph 8) of Article 2 of the Law of the Republic of Kazakhstan "On Public Procurement" (hereinafter referred to as the Law), works are activities resulting in a tangible outcome, as well as other activities classified as works under the laws of the Republic of Kazakhstan. In accordance with subparagraph 12) of Article 2 of the Law, services are activities aimed at meeting the customer"s needs that do not result in a tangible outcome.

In this regard, state audit authorities, citing these provisions, sometimes issue remarks stating that the organizer (customer) of public procurement has unjustifiably included requirements for the service provider to perform actual repair work using spare parts. In their opinion, this constitutes a tangible outcome and does not fall within the scope of services.

According to Part 1 of Article 121 of the Civil Code of the Republic of Kazakhstan (hereinafter referred to as the Civil Code), if diverse items form a single entity that can be used for a purpose defined by the nature of their combination, they are considered a single item (a composite item).

Equipment, parts, and components forming a single entity serviced under the purchased services are, in accordance with this provision, considered a single item (a composite item).

In this regard, individual components (parts) of a single object are not considered separate items under the Civil Code and, consequently, their replacement does not, in itself, constitute evidence of a de jure tangible outcome (no new separate item is created).

Thus, in our opinion, maintenance services for equipment with an obligation to replace certain parts using spare parts, if necessary, do not result in a de jure tangible outcome. Accordingly, such a service may include a requirement for the replacement of parts of a single piece of equipment as needed.