2015 Edition of The International Comparative Legal Guide to: Public Procurement (Chilean Chapter)

Public Procurement 2015The International Comparative Legal Guide to:

Advokatfirmaet Thommessen ASAllen & Gledhill LLPAnderson Mori & TomotsuneAndreas Neocleous & Co LLCAshurst LLPBaker & McKenzieCMS Cameron McKenna LLPDebarliev, Dameski &Kelesoska Attorneys at LawDeHeng Law OfficesDentonsFried, Frank, Harris, Shriver & Jacobson LLPGürlich & Co., attorneys-at-lawIbáñez Parkman AbogadosKALO & ASSOCIATESKruk & Partners Law Firm

Latournerie Wolfrom & AssociésLedwaba MazwaiLenz & StaehelinM & M BomchilMannheimer Swartling Advokatbyrå ABMcCann FitzGeraldMcCarthy Tétrault, LLPMorais Leitão, Galvão Teles, Soares da Silva & AssociadosPareja & Associats, AdvocatsPhilippi, Yrarrázaval, Pulido & BrünnerSchoenherr S. Friedman & Co.StibbeVASS Lawyers

Published by Global Legal Group, with contributions from:

A practical cross-border insight into public procurement

7th Edition

General Chapter:

1 EU Public Procurement Rules - Donald Slater & Edward McNeill, Ashurst LLP 1

www.ICLG.co.uk

DisclaimerThis publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice.Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication.This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations.

Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720

The International Comparative Legal Guide to: Public Procurement 2015

Contributing EditorsDonald Slater & EdwardMcNeill, Ashurst LLP

Head of BusinessDevelopmentDror Levy

Sales DirectorFlorjan Osmani

Commercial DirectorAntony Dine

Account DirectorsOliver Smith, Rory Smith

Senior Account ManagerMaria Lopez

Sales Support ManagerToni Hayward

Sub EditorAmy Hirst

Senior EditorSuzie Levy

Group Consulting EditorAlan Falach

Group PublisherRichard Firth

Published byGlobal Legal Group Ltd.59 Tanner StreetLondon SE1 3PL, UKTel: +44 20 7367 0720Fax: +44 20 7407 5255Email: [email protected]: www.glgroup.co.uk

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Printed byAshford Colour Press Ltd.December 2014

Copyright © 2014Global Legal Group Ltd. All rights reservedNo photocopying

ISBN 978-1-910083-26-0ISSN 1757-2789

Strategic Partners

Country Question and Answer Chapters:

2 Albania KALO & ASSOCIATES: Endri Jorgoni 10

3 Argentina M & M Bomchil: María Inés Corrá 18

4 Australia Baker & McKenzie: Geoff Wood & Anne Petterd 25

5 Austria Schoenherr: Johannes Stalzer 32

6 Belgium Stibbe: David D’Hooghe & Arne Carton 40

7 Bulgaria CMS Cameron McKenna LLP: Kostadin Sirleshtov & Angel Bangachev 47

8 Canada McCarthy Tétrault, LLP: Brenda C. Swick 55

9 Chile Philippi, Yrarrázaval, Pulido & Brünner: José Luis Lara

& Luis Eugenio García-Huidobro 66

10 China DeHeng Law Offices: Ding Liang 73

11 Cyprus Andreas Neocleous & Co LLC: Chrysanthos Christoforou 80

12 Czech Republic Gürlich & Co., attorneys-at-law: Richard Gürlich & Jan Bárta 87

13 England & Wales Ashurst LLP: Donald Slater & Edward McNeill 94

14 France Latournerie Wolfrom & Associés: Jean Latournerie

& Karine Hennette-Jaouen 106

15 Germany Dentons: Dr. Maria Brakalova 113

16 Ireland McCann FitzGerald: Jenny Mellerick & Orlaith Sheehy 121

17 Israel S. Friedman & Co.: Gil Hagay 129

18 Japan Anderson Mori & Tomotsune: Reiji Takahashi & Makoto Terazaki 136

19 Macedonia Debarliev, Dameski & Kelesoska Attorneys at Law:

Jasmina Ilieva Jovanovik & Dragan Dameski 142

20 Mexico Ibáñez Parkman Abogados: Juan Fernando Ibáñez Montaño

& José Álvarez Márquez 150

21 Norway Advokatfirmaet Thommessen AS: Eivind J Vesterkjær

& Kirti Mahajan Thomassen 155

22 Poland Kruk & Partners Law Firm: Aleksandra Matwiejko-Demusiak

& Jarosław Kruk 162

23 Portugal Morais Leitão, Galvão Teles, Soares da Silva & Associados:

Margarida Olazabal Cabral & Ana Robin de Andrade 173

24 Romania VASS Lawyers: Iulia Vass & Bianca Bello 181

25 Singapore Allen & Gledhill LLP: Kelvin Wong & Tan Wee Meng 192

26 South Africa Ledwaba Mazwai: Metja Ledwaba & Lungile Mazwai 200

27 Spain Pareja & Associats, Advocats: Carles Pareja Lozano & Norma Munné Forgas 207

28 Sweden Mannheimer Swartling Advokatbyrå AB: Johan Carle & Niklas Sjöblom 221

29 Switzerland Lenz & Staehelin: Dr. Astrid Waser & Dr. Benoît Merkt 226

30 USA Fried, Frank, Harris, Shriver & Jacobson LLP: James J. McCullough

& Michael J. Anstett 233

EDITORIAL

Welcome to the seventh edition of The International Comparative Legal Guideto: Public Procurement.

This guide provides the international practitioner and in-house counsel with acomprehensive worldwide legal analysis of the laws and regulations of publicprocurement.

It is divided into two main sections:

One general chapter. This chapter outlines EU public procurement rules.

Country question and answer chapters. These provide a broad overview ofcommon issues in public procurement laws and regulations in 29 jurisdictions.

All chapters are written by leading public procurement lawyers and industryspecialists and we are extremely grateful for their excellent contributions.

Special thanks are reserved for the contributing editors Donald Slater andEdward McNeill of Ashurst LLP for their invaluable assistance.

Global Legal Group hopes that you find this guide practical and interesting.

The International Comparative Legal Guide series is also available online atwww.iclg.co.uk.

Alan Falach LL.M.Group Consulting EditorGlobal Legal [email protected]

Chapter

ICLG TO: PUBLIC PROCUREMENT 2015 ICLG TO: PUBLIC PROCUREMENT 2015© Published and reproduced with kind permission by Global Legal Group Ltd, London

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Chapter 9

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Chile

1 Relevant Legislation

1.1 What is the relevant legislation and in outline what doeseach piece of legislation cover?

The Chilean legislation regarding public procurement has a uniqueattribute: its fragmentation and dispersion. In principle, everycontract or agreement is treated with its respective law and/ordecree, with rules and requirements procedures particular to eachentity.

Notwithstanding what is stated above, the Law No. 18.575establishes as a general rule that every administrative contract hasto be preceded by a public tendering in which the contractor will beselected. In exceptional cases, it will be possible to have recourseto private tendering or direct contracting, provided there are enoughgrounds for it. The rules and principles of the Law No. 19.886 havebeen applied in a supplementary matter regarding legal vacuums inregulations for the different contracts.

The following public procurement laws are considered as the mostrelevant:

Law No. 19.886 and the Supreme Decree No. 250 of 2004dictated by the Ministry of Finance, both regulate supplycontracts, sale, maintenance, leasing of movable propertyand service contracts celebrated by public entities. Inaddition, this law is used as a supplementary law for theloopholes or gaps existing in other specific rules treated bydifferent administrative contracts.

Law No. 18.803 allows a majority of the StateAdministration to contract with private organisations for theoutsourcing of the necessary support activities for theaccomplishment of their duties.

The Constitutional Law of Municipalities (Law No. 18695)allows the municipalities to conclude any contract needed forthe accomplishment of their duties. Furthermore, it regulatesthe granting of concessions to private organisations for therendering of municipal services and/or the administration ofthe municipal property.

The executive order No. 1.939 regulates the sale, lease andconcession of State-owned real estate.

1.2 Are there other areas of national law, such asgovernment transparency rules, that are relevant to publicprocurement?

There are different rules regarding different matters that have agreat influence on public procurement. Among others, there is theOrganic Law of General Basis of State Administration (Law No.

18.575), which contains the rules regarding administrative probityfor government employees in public bidding and execution ofcontracts; the Defense Competition Law (Decree Law No. 211)which punishes bid rigging; the Public Information Access Law(Law No. 20.285) which allows access to documentation related tobidding or public procurements in possession of public entities;and, finally, the Criminal Code which punishes bribery,prevarication and other corruption forms.

Additionally, there are many other applicable laws and regulations,as for example, in budgetary rights, prior legality control ofcontracts, among others.

1.3 How does the regime relate to supra-national regimesincluding the GPA, EU rules and other internationalagreements?

Although they do not have a generalised implementation, there arediverse Free Trade Agreements which contain public procurementregulation, as those signed with the United States of America or theEuropean Union. Likewise, the Principles for Integrity in PublicProcurement of the OECD are used as a reference.

1.4 What are the basic underlying principles of the regime(e.g. value for money, equal treatment, transparency) andare these principles relevant to the interpretation of thelegislation?

There are mainly five guiding principles in public procurement:

1. Principle of Public Bidding: as a general rule, a tender orpublic bidding must precede the celebration of any publicprocurement in which the contractor is selected.Exceptionally, it will be possible to have recourse to privatetendering or direct contracting, if there is a legal cause whichallows it and there are founded and exceptional grounds thatjustify it.

2. Principle of Strict Execution to the Terms of Tendering: thebidding procedures and the following of the contractualrelation must be developed with strict compliance andenforcement to the terms of tendering which have governedthe tender. This principle binds both the public entities andthe bidding participants, and consequently the contractor. Itis important to consider that, even though the biddingprocess has ended, and the contract has been concluded, thetendering terms have to be considered at all times, as theyhave primacy over the contract.

3. Principle of Free Concurrence or Competence: this principlesupposes that the Administration will not establish morerestrictions or limitations on the participation of the publicbiddings than the ones specifically indicated by the law. This

Luis Eugenio García-Huidobro

José Luis Lara

WWW.ICLG.CO.UKICLG TO: PUBLIC PROCUREMENT 2015© Published and reproduced with kind permission by Global Legal Group Ltd, London

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Philippi, Yrarrázaval, Pulido & Brünner Chile

principle, designed to ensure competition during thecontractor selection procedure, is concretised by prohibitingthe administration to establish limitative conditions whichrestrict access or participation in the procedure.

4. Principle of Equality among Participants: everyone whoparticipates in a public tender must be treated on equal terms,without privileges or discrimination to any participant.

5. Principle of Transparency: all the records and documentsdestined to rule the bidding procedure have to be known byevery participant. Secrecy and reserve may be allowed inexceptional and justified circumstances. The latter can beauthorised when for example a presentation includesindustrial secrets or elements of industrial property.

1.5 Are there special rules in relation to procurement inspecific sectors or areas?

Yes. As it has been mentioned, the general rule in Chile is that eachadministrative contract has its particular regulation.

In general terms, the following areas can be remarked upon:

Armed Forces: there are special rules and norms relative tocontracts about war material and military vehicles, systemsand equipment of information, command, communication,intelligence and computational matters. In reference toremaining cases, the general law will not be applicable tocontracts about properties and necessary services to preventexceptional risks for national or public security. Thesecontracts will be ruled by Laws No. 13.196 and 18.928, andDecree No. 124/2004 of the Ministry of Defense.

Construction of State Civil Works: there are special rules for:(i) the celebration of a concession contract of public works(Decree No. 124/2004, Ministry of Public Works); (ii) forconstruction of social housing entrusted by the Housing andTown Planning Service (Decree No. 236/2003, Ministry ofHousing); and (iii) when the urban shared financing betweenpublic and private actors is required (Law No. 19.865) for thepurposes of the acquisition of property or the execution,operation and maintenance of urban works.

Health: the health benefits that the State contracts to privateestablishments are regulated by special rules (Decree-LawNo. 2.763).

Notwithstanding the above, it should also be considered that,confronting a legal vacuum, Law No. 19.886 is applied as asupplementary law to every administrative contract.

2 Application of the Law to Entities and Contracts

2.1 Which public entities are covered by the law (aspurchasers)?

Law No. 19.886 has a vast application. Complying with theregulation is mandatory for every public entity that is part of theState Administration, for the Municipalities and for every publicservice. In addition, the Congress, the Judicial System, and theGeneral Comptrollership of the Republic have voluntarilysubmitted to the mechanisms recognised in this law.

Concerning State Enterprises, even though they can use aconstitutional rule which states that they will be ruled by the normswhich regulate private organisations, the jurisprudence emitted bythe General Comptrollership of the Republic has ruled that theprinciples of public procurement are applicable to them.

2.2 Which private entities are covered by the law (aspurchasers)?

The foundations and associations in which public entitiesparticipate or belong to, in spite of being of private character, willbe ruled by the principles of public procurement, as stated by thejurisprudence of the General Comptrollership of the Republic.

2.3 Which types of contracts are covered?

The law No. 19.886 is applicable to every onerous contractcelebrated by public entities for supply of movable properties, andthe required services for the development of their functions.

The supply contract involves every contract of sale, option, leasingor maintenance of products or movable properties.

On the other hand, the Decree-Law No. 1.939 involves everycontract of trading, leasing, concession, use or easements ofmovable properties that belong to the State.

2.4 Are there financial thresholds for determining individualcontract coverage?

As a general rule, the public entity is responsible for resolving if itis necessary to request guarantees, to ensure the contract coverage.Nevertheless, in reference to contracts with an amount of 1,000monthly tax units (US$7,200 approximately), the guarantees aremandatory. The only limitation to the amount of the guarantees isthat they do not constitute a disincentive to the bid participation.

2.5 Are there aggregation and/or anti-avoidance rules?

The regime does not provide any aggregation special rules. Inrelation to anti-avoidance rules, the seventh article of Law No.19.886 indicates that it is not possible to fractionate or separate thecontracts in different minor contracts to avoid bid obligations andall other legal obligations (e.g. General Controllership of theRepublic legality control).

2.6 Are there special rules for concession contracts and, if so,how are such contracts defined?

There are many concession contracts in the Chilean legislation.Among them, the following ones must be mentioned:

Public Work Concession: in this concession, the Ministryentrusts a private organisation with the execution, repair orconservation of a public work, in exchange for theexploitation that the private organisation may do for it, for alimited amount of time, which cannot exceed 50 years.

Immovable Property Concession: this is a contract that theMinistry of National Properties awards to the administrationof immovable properties to private organisations, with a pre-ordered object and determined conditions for every case.This concession can only be granted to Chilean legalpersons.

Municipal Concession: in this case, the concession is grantedto private organisations in order to administer municipalproperty, and for the execution of municipal services (e.g.refuse collection). It also may be used in order to award toprivate organisations the use of the underground withdifferent objects (e.g. underground parking).


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In addition to the mentioned concession, there are port concessions,public transport, free trade zones, telecommunications, sanitaryservices, etc.

2.7 Are there special rules for the conclusion of frameworkagreements?

Yes. They are named ‘Convenios Marco’, and they consist inmassive procedures of contraction with catalogues or listselaborated by the Directorate of Public Procurement. The productsor services of the Convenios Marco are previously selected througha public bid and, when they become effective, the public entitiesmay contract them directly through the web page (www.mercadopublico.cl).

Although the product or service that is required is available at theConvenios Marco catalogue for their review, its utilisation ismandatory, and it is forbidden to call for public bids and to create acontract directly omitting it.

As an exception, these rules are not obligatory for municipalitiesand armed forces, however, the Convenios Marco have been usedfor these cases.

2.8 Are there special rules on the division of contracts intolots?

The article No. 5 of the Law No. 19.886 indicates that the public bid isalways obligatory for every contract which amount exceeds 1,000monthly taxation units (US$72,000 approximately). Following theabove, the article No. 7 provides a rule which orders that contractionsmade by a public entity can not be fractionated or separated in order toavoid the mandatory bidding procedure.

3 Award Procedures

3.1 What types of award procedures are available? Pleasespecify the main stages of each procedure and whetherthere is a free choice amongst them.

There are four great procedures that precede the celebration ofpublic procurements:

1. The framework agreements or Convenios Marco: as stated,these consist in massive procedures of contraction withcatalogues or lists elaborated by the Directorate of PublicProcurement. For the elaboration of the catalogues, theDirectorate of Public Procurement calls for a bid, in whichthey select those applicants who comply with therequirements indicated in the bid basis. After finishing theselection list, it is uploaded to the web page(www.mercadopublico.cl) where public entities can contractproperties or services required by them.

If the property, product or service required is available in the‘Convenios Marco’ catalogues, its utilisation is obligatoryand it is forbidden to call for a bid or direct contract. As anexception, municipalities and armed forces do not have tocomply with these rules, nevertheless, the frameworkagreements have been used in these cases.

2. Public Bid: this exists in a contest procedure, where a publicentity realises an open call inviting interested actors topresent their offers, where upon the public entity will selectand accept the most convenient presentation.

If the property or service is not available in the frameworkagreements, the public bid constitutes the general rule, andregarding contracts for more than 1,000 monthly taxationunits (US$72,000 approximate), it is always compulsory.

Regarding the procedure, it could eventually start with aprequalification or preselection stage designed to indicatewho could participate in the bid, and it has to be based ingood engineering judgments.

Nevertheless, the bid is initiated with the publication of theirterms in the web page of the Directorate of PublicProcurement (www.mercadopublico.cl). Subsequently, theparticipants can make questions and clarificationapplications to the public entity responsible for the bid,which shall answer providing a prudent time for preparingtheir offers. The bid submission must be realised at the dateand time previously indicated; it generally contains atechnical and an economic offer. Once the submission iscomplete, there will be an offer opening in only one act thatguarantees adequate transparency and publicity, after whichthe public entity shall proceed to evaluate every offer inequal conditions, for which it may appoint an evaluationcommittee. Finally, the decision of selecting a tenderer mustbe executed in a transparent way, communicating this to theother participants.

3. Private Bid: this is a contest procedure, where a public entityinvites certain people who, holding on to bidding basis, makeoffers to select the contractor. This only proceeds if there isa founded resolution that authorises it, and only if there is aforeseen cause for it (e.g. when there are no participants in apublic bid, in emergency cases, confidential services or whenits announcing could affect national security, etc.).

Private bids have the same procedure as public bids.

4. Direct Contraction: this is a type of procedure where thecontract conditions are negotiated directly, without anyprevious contest.

Just like the case above, it only proceeds after a founded resolutionthat authorises it, only if there is a foreseen cause to justify it, andonly if it is strictly necessary, depending on the nature of thenegotiation.

3.2 What are the minimum timescales?

The timescale between the call to participate in the bid and the datewhen the offers must be presented will be set by each public entityin reference to the amount and complexity of the acquisition, takinginto consideration the amount of time required by the participantsfor the preparation of their offers. Nevertheless, if the contract isfor an amount of 1,000 monthly tax units or more, the call toparticipate must be made at least 20 calendar days before the dateof the offers’ reception, which could be modified in exceptionalsituations.

If the contracting is for a lower amount, the call to participateshould be made at least 10 calendar days before the date of the offerreception. Finally, if it is a contract amounting to 100 monthly taxunits or less (US$7,200 approximately) the timescale will be fivecalendar days.

In every case, the closing time for tender reception could not expireon a public holiday, a Monday or the next day to a public holidaybefore 15:00.

Notwithstanding the stated above, the rules applied in currentcommercial agreements subscribed by Chile will be valid for thecontract.


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3.3 What are the rules on excluding/short-listing tenderers?

There are a series of rules which impede private organisations frompresenting offers in bids called by public entities: (i) if the applicanthas been judicially condemned within the previous two years,because of anti-union practices or affecting the fundamental rightsof employees; (ii) if the person has been judicially condemned,within the previous two years, because of bankruptcy offences; (iii)if there are unpaid security debts to their workers at the moment ofhiring; (iv) if the person is an official in the public body that hiresor if he maintains family ties with any of them; and (v) if there is aprovider who has been judicially condemned for breach of contractin respect of an earlier public procurement, arising from negligenceor lack of diligence in the discharge of their duties, provided that therelevant public body requests the Directorate of Public Procurementsuspension.

3.4 What are the rules on evaluation of tenders?

The offer evaluation will be accomplished through an economic andtechnical analysis of both actual and future benefits and costs of theproperty and services proposed in every offer. For purpose of theanalysis, the public entity must be submitted to the standards ofevaluation specified in the bid basis that should have the only objectof selecting the best offer or offers. The public entity mustdetermine in the bid basis the standards, factors, sub-factors to beused and the mechanisms for the point assignation for each of them.

In public bids in which the offer evaluation involves a greatcomplexity, and in all bids higher than 1,000 monthly tax units, acommittee will be in charge of the evaluation of the offers. Thecommittee will be composed of at least three public officials,whether they belong to the public entity that was invited to thepublic bid or not, guaranteeing impartiality and competencebetween the bidders.

The criteria considered as technical or economic can be price,experience, method, technique quality, technical assistance orsupport, after sales services, deadlines, transportation surcharges,environmental considerations, energy efficiency, the previouscontractual behaviour, the accomplishment of formal requirements,etc.

3.5 What are the rules on awarding the contract?

The general rule is that the contracts will be awarded to theparticipant who presents the better offer to satisfy the interest of thepublic entity, considering the conditions and evaluation ofeconomic and technical criteria established in the bid basis. Inconsideration of the latter, it is important to indicate that there areplenty of judicial decisions that indicate that the economic offer isnot necessarily the most advantageous one, because it representsonly one of the characteristics of the offer to evaluate.

3.6 What are the rules on debriefing unsuccessful bidders?

The public entity shall communicate at the same time the decisionof the bid to each participant, whether it was awarded to them ornot. It should be reported, also simultaneously, if the offers areinadmissible for failing to meet the minimum requirements.

As a rule, the communication will be through the web page(www.mercadopublico.cl), in which the reasons founding thedecision will be properly explained.

3.7 What methods are available for joint procurements?

There are no special rules on this matter under Chilean legislation.

3.8 What are the rules on alternative/variant bids?

Although there is no rule that considers this characteristic, with theapplication of the principle of strict compliance to public bids, thepossibility of presenting alternative/variant bids, is strictlyprohibited. All bids which depart from a minimum of therequirements of the bidding shall be declared inadmissible.

3.9 What are the rules on conflicts of interest?

According to article No. 4 of Law No. 19.886, public entities cannotcelebrate administrative agreements with their employees or theirfamily members. In the same way, they cannot contract withcompanies or firms in which officials or their families have somedegree of participation.

In addition, those who have the task of evaluating the tenders submittedin a bid may not have conflicts of interest with the bidders. It isconsidered a conflict of interest if the official involved in theevaluation:

1. Has a personal interest involved in the outcome of the tenderor contract of execution.

2. Has a family relationship with one of the bidders, or if afamily member is involved in a company or business whichparticipates in the bid.

3. Friendship or enmity with one of the bidders.

4. The official has had professional or business relationships withone of the participants, in the previous two years.

4 Exclusions and Exemptions (including in-house arrangements)

4.1 What are the principal exclusions/exemptions?

According to article No. 3, Law No. 19.886, the following contractsare excluded from its application.

Public employment contracts.

Contracts between public entities.

Concession and Public Works Contracts.

Contracts relative to transfers of financial instruments.

Contracts executed with foreign governments or internationalpublic entities.

4.2 How does the law apply to “in-house” arrangements,including contracts awarded within a single entity, withingroups and between public bodies?

Exceptionally, the ‘in-house’ arrangements only proceed after priordetermination, if there is a cause explicitly foreseen for it and onlyif it is strictly necessary, according to the nature of negotiation.

5 Remedies

5.1 Does the legislation provide for remedies and if so what isthe general outline of this?

There are different alternatives to consider if the public entityengages in any illegality or arbitrariness. The first will be


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requesting to the public entity the reconsideration of the decisionand, in case of a negative answer, it is possible to request thesuperior to review it.

In the judicial sphere, the main remedy is the action for annulment,which must be presented to the Public Procurement Court, in orderto take necessary measures to correct the illegality or arbitrarinessand ensure the legality of the bidding process measures.

5.2 Can remedies be sought in other types of proceedings orapplications outside the legislation?

Yes. We must distinguish between special and ordinary remedies.Among the special remedies, the complaint of illegality andconstitutional protection stand out. Firstly, the affected issues a reportto the person in charge of the audit of public bodies regarding thecommission of any illegality or irregularity, while the second remedy,considers the presence of an action or arbitrary or unlawful actresulting in the affectation of constitutional rights. These, however,have little chance of success because it has constantly been said, thatthey are not the right way to formulate contractual allegations.

5.3 Before which body or bodies can remedies be sought?

The action for annulment comes before the Court of PublicProcurement; the complaint of illegality to the General Comptrollerof the Republic; and the constitutional protection before thecompetent Court of Appeal.

On the other hand, the ordinary procedures shall be filed in thelower civil courts.

5.4 What are the limitation periods for applying for remedies?

The deadlines are the following:

Reconsideration of decision to the public body: five businessdays.

The action for annulment before the Court of PublicProcurement: 10 business days.

Complaint of illegality to the General Comptroller of theRepublic: there is no deadline.

Constitutional Protection Action before the Court ofAppeals: 30 calendar days.

Common Actions: Although there is no deadline for filing,there is a limit to the general procedure of civil law.

5.5 What measures can be taken to shorten limitationperiods?

Limitation periods are peremptory and set forth by law. Thus,neither the public nor private bodies are allowed to shorten them.

5.6 What remedies are available after contract signature?

There are no actions specifically established for the contractualstage. However, the special and ordinary actions described aboveare applicable.

5.7 What is the likely timescale if an application for remediesis made?

Although it is variable and depends on several factors, the estimatedtime can be the following:

Review request: one to two months.

Action for annulment: eight months to one year.

Complaint of Illegality: six months.

Constitutional Protection Action: six months to one year.

Common Actions: five years or more.

5.8 What are the leading examples of cases in whichremedies measures have been obtained?

We can highlight the fact, that the Public Procurement Court hasrepeatedly declared illegality in the performance of variousadministrative bodies during a bid, especially in the currentaccounts of public bodies tenders. This year we have accomplishedmodification by the Court of Appeals, of an important decision ofthe Court of Procurement on a tender by a municipality, which hasrarely happened in our jurisprudence.

On the other hand, we have also seen that the General Comptrollerof the Republic declared the illegality of the imposition of acontractual penalty, decreasing it by more than a million dollars.

5.9 What mitigation measures, if any, are available tocontracting authorities?

During the execution of the contract, the first and principalmitigation measure is the imposition of fines against the contractorfor infringement of its obligations or the possibility to enforce theguarantees stated in the contract. Similarly, the public body isallowed to terminate the contract early in case of a serious breachof the obligations stated by the contractor or if he turns insolvent.

After the contract, the public body must evaluate and rate thecontractor’s performance, he may even ask the Public Procurementfor suspension for up to two years in cases of negligent defaults onits obligations.

6 Changes During a Procedure and After a Procedure

6.1 Does the legislation govern changes to contractspecifications, changes to the timetable, changes tocontract conditions (including extensions) and changes tothe membership of bidding consortia pre-contract award?If not, what are the underlying principles governing theseissues?

Regarding the pre-contractual stage, once the call to bid has beenmade, the modifications in the contract or agenda will be allowed,but if they are against the essence of the bid basis, cause damagesor affect the supplier’s participation, they will not be allowed.

On the other hand, the rule is to forbid alterations in consortiamembers.

In the pre-contractual stage, even though the legislation allows thepublic entities to modify contractual conditions (ius variandi), thereare two limitations: in the first place, the alteration cannot beagainst or different to the bid basis, because these prevail over thecontract. So, currently the only changes allowed are quantitativechanges or modifications about timescales. Secondly, thecontractual changes must take into consideration the existingeconomic balance. So, in case of alteration of contract condition,the economic conditions will have to be renegotiated.


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6.2 To what extent are changes permitted to final tenders(pre- and post-contract award)?

As a general rule, it is forbidden to modify any offer after itspresentation. Related to this, it is not allowed to modify theawarded offer before concluding the contract.

Exceptionally, it is permitted to correct formal mistakes, only if itdoes not affect the equality between participants. Once the contracthas been awarded, there are no possibilities of new alterations.

6.3 To what extent are changes permitted post-contractsignature?

They are allowed only if they are not against or different to a publicbid basis, and only if they do not disturb the necessary economicbalance between parties.

6.4 To what extent does the legislation permit the transfer ofa contract to another entity post-contract signature?

This is specifically forbidden in public procurement matters by thearticle No. 74, Supreme Decree No. 250/2004.

On the other hand, regarding concessional matters, there are regimeswhich expressly allow it, such as public works, port, health, maritime,municipal or state properties. In each one of the previous cases, anauthorisation of the corresponding public organism will be necessary.

7 Privatisations and PPPs

7.1 Are there special rules in relation to privatisations andwhat are the principal issues that arise in relation tothem?

There are no special rules in this matter, but the common rules ofpublic law are applicable.

It is necessary to distinguish if the company is completely owned bythe State, or if it just owns a share percentage. In the first case, toperform a privatisation procedure it is necessary that Congress passa special law which authorises it and establishes the form ofproceeding. This law will be subject to a special quorum (absolutemajority of both Houses). If the case is of private enterprise with ashare percentage of the State, the privatisation is ruled by thecommon norms of the Commercial Law.

7.2 Are there special rules in relation to PPPs and what arethe principal issues that arise in relation to them?

As a general rule, public bodies are not allowed to developeconomic and enterprise activities, unless there is a special lawwhich allows them specifically to act accordingly.

Because of this, the possibilities of participating in a public-privatepartnership are really rare.

Notwithstanding the provisions of the previous paragraph, there aredifferent laws which specifically allow it. For example, Law No.19.865 indicates a shared financial mechanism betweenMunicipalities and Housing Services with private organisations forthe acquisition of properties or the execution, operation andmaintenance of urban works. In the same way, privateorganisations can offer to public bodies the realisation of differentconcessionable projects, like concessions in public works of thesewage system, water or geothermal energy.

8 Enforcement

8.1 Is there a culture of enforcement either by public orprivate bodies?

There could be. In relation to private bodies, there are differentmechanisms that in the long term have created a culture of legislationcompliance. For example, when a public procurement is concluded,the private body is graded with a score according to its performance.

In addition, when the private body makes a negligent contract default,it can be suspended for almost two years without being in the suppliercatalogue, so it will not be allowed to participate in any public bid.

In relation to public bodies, we also consider there is a complianceculture, because every illegality can be reported. On the other hand,both the General Controllership of the Republic and the Directorateof Public Procurement, have a great audit in procurement matters.Exceptionally, Municipalities concentrate on a great part of theannual report and claims of illegality.

8.2 What national cases in the last 12 months haveconfirmed/classified an important point of publicprocurement law?

There have been limited pronouncements from the Supreme Courtabout this matter recently. Nevertheless, the following rulings mustbe highlighted:

Ruling dated November 5th, 2013 (No. 4292-2012): in thesituation of having an accident in privately run highways,both concessionaire and the State are responsible fordamages, because the concessionaire represents it.

Ruling dated April 3rd, 2014 (No. 10637-2013): the SupremeCourt resolved that in order to make the State respond todamages and compensation, is not enough to declare anillegality in a public bid.

9 The Future

9.1 Are there any proposals to change the law and if so whatis the timescale for these and what is their likely impact?

Regarding the Law No. 19.886, there are many improvement offers,but all of them are in a preliminary stage in parliamentary discussion.Nevertheless, related to Decree No. 250/2004, the Directorate of PublicProcurement has made public that in the next months this will bereplaced with a new regulation, more actualised and open to keepdifferent questions and offers made for both private and public bodies.

On the other hand, public work concession contracts have beenquestioned by many government authorities because this model isused for the construction and administration of hospitals and jails.Because of this, there is a possibility to modify the Decree No.900/1996 in the medium term.

9.2 Are any measures being taken to increase access to publicprocurement markets for small and medium-sizedenterprises and other underrepresented categories ofbidders?

Yes. For years, the Directorate of Public Procurement has beenfocused on increasing the participation of small and medium sizedenterprises. Recurrently, informative lectures have been offered tointroduce the public procurement system, and serious efforts have beenmade to facilitate their participation, for example, reducing the timepayment.


Chile

72

ChilePhilippi, Yrarrázaval, Pulido & Brünner

José Luis Lara

Philippi, Yrarrázaval, Pulido & BrünnerEl Golf Ave. No. 40 floor 20Las Condes, SantiagoChile

Tel: +56 2 23 64 37 81Fax: +56 2 23 64 37 96Email: [email protected]: www.philippi.cl

José Luis is an attorney and he studied at Pontificia UniversidadCatólica de Chile. He is also the Senior Associate of the Public LawArea of Philippi Law Firm. He has a Master’s in Law and a Doctoratein Law, from Pontificia Universidad Católica de Chile. He is aProfessor of Administrative Law at the Pontificia UniversidadCatólica de Chile and at Universidad de Los Andes. He is the authorof several articles in Administrative and Public Procurement Law andco-author of the books Index Administrative Procedure Act (2011);and the book Administrative and Procurement Procedure (2013). Hehas advised various government agencies and private clients in theareas of government contracting. He has worked in Novoa & Co. lawfirm (2001-2005), Philippi Law Firm (2005-2010/2012) and MinistrySecretariat General of the Presidency (2010-2012). He was amember of: the Advisory Commission Rules of Purchasing andProcurement (2007-2010); the Public-Private Council Integrity inPublic Procurement Directorate of Public Procurement representingthe General Secretariat of the Presidency (2011-2012); and theExperts Committee for the Improvement of GovernmentProcurement under the Budget National Act of 2013 appointed bythe President and the Senate (2013).

Luis Eugenio García-Huidobro

Philippi, Yrarrázaval, Pulido & BrünnerEl Golf Ave. No. 40 floor 20Las Condes, SantiagoChile

Tel: +56 2 23 64 37 78Fax: +56 2 23 64 37 96Email: [email protected]: www.philippi.cl

Luis Eugenio is an attorney and he studied at PontificiaUniversidad Católica de Chile. He is an Associate of Public LawArea of Philippi Law Firm. He is a Professor at the PublicProcurement Diploma of the Pontificia Universidad Católica deChile and author of several articles in Administrative Law andPublic Procurement. He has counselled various public entitiesand private clients in the areas of public procurement. He hasserved in the Yrarrázaval, Ruiz-Tagle, Goldenberg, Lagos & Silvalaw firm (2008-2010), the Chicago Regional Office of the USCommodity Futures Trading Commission (2010) and Philippi LawFirm (2012).

Philippi, Yrarrázaval, Pulido & Brünner is one of the biggest law firms of Chile covering nearly all law areas, recognised nationallyand internationally for its reputation and excellence in the practice of law. Our lawyers are leading in the legal market and areknown to be the best in various scopes, because of their high level of expertise and deep knowledge of different activities.

For more than 10 years, Philippi law firm has been especially dedicated to Public Law (Administrative and Constitutional), withextensive experience in public procurement, advising both public and private sectors in various aspects and with a particularemphasis on litigation matters and administrative claims.

i l k

59 Tanner Street, London SE1 3PL, United KingdomTel: +44 20 7367 0720 / Fax: +44 20 7407 5255

Email: [email protected]

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2015 Edition of The International Comparative Legal Guide to: Public Procurement (Chilean Chapter)

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Transcript of 2015 Edition of The International Comparative Legal Guide to: Public Procurement (Chilean Chapter)