Law modernizing public procurement is published

The initiative also aims to strengthen transparency, strengthen Mipymes and promote innovation.

On December 11, 2023, Law No. 21,634 was published in the Diario Oficial, which seeks to improve the quality of public spending, increase the standards of probity, transparency and introduce circular economy principles in government procurement.

This initiative seeks to create a new public procurement institutional framework with higher standards of probity, transparency, efficiency and effectiveness by introducing modifications to the procurement procedures, improvements to the Public Procurement Court, new powers for the Public Procurement and Contracting Directorate, better planning of public procurement and promotion of small companies and local suppliers.

The law increases the number of institutions regulated by the Public Procurement Law, thus extending the coverage of the public market platform. The general rule will be that, if there are public contributions, acquisitions must be subject to the Procurement Law.

Similarly, it will apply to autonomous constitutional bodies, such as the National Congress, the Public Prosecutor’s Office, the Comptroller General’s Office and the Judiciary, among others.

It is important to note that the rules of probity and transparency have already come into force with the publication of the law. The rest of the provisions will enter into force one year later, to allow time for the development of regulations, the development of new technological platforms and the training of the teams of the institutions governed by the system. The exception will be the rules related to circular economy, electronic reverse auction, competitive dialogues and contracts for innovation that will start 18 months later.

Procurement rules

• We will now review some of the most relevant aspects:
• Express recognition that public procurement is governed by public law, and in the absence of such rules, by private law.
• The range of bodies obliged to follow the public procurement system is broadened.
• The possibility of appealing to the Public Procurement Court and the application of rules related to probity and transparency in administrative procurement is extended to other types of procurement that were not under this sphere of control.
• It is expressly recognized that the general rule in government contracting is public bidding, relegating private bidding, direct contracting and direct contracting with advertising to a secondary and exceptional position, always subject to a well-founded and properly accredited administrative act.
• The possibility of including social award criteria in contracting processes is recognized.
• Savings and sustainability in contracting become objectives to be pursued by state agencies.
• Direct contracting is redefined. It is also called “Exceptional direct contracting with advertising”. In addition, its requirements are increased.
• As its name indicates, the “Direct or Exceptional Direct Contracting with Advertising” will only proceed in exceptional circumstances or due to the fact that the goods or services to be acquired have a sole supplier.
• The direct contracting with publicity will proceed in the case of acquisitions of less than 30 UTM (about $1,890,000) and that privilege matters of high social impact.
• In public bids under 500 UTM ($31,500,000), municipalities, regional governments and territorially decentralized or deconcentrated public agencies may establish evaluation criteria that prioritize local suppliers, although they may not be the only scores or weightings to be considered.
• Special contracting procedures are created for the acquisition of specific goods and services within a certain price range.
• The possibility of generating other special contracting procedures through regulations is included when so required by the purchasing needs of the service in question.
• Each institution must prepare and periodically evaluate an Annual Procurement and Contracting Plan to plan its own supply with a methodology determined by the Treasury.
• Obligation of registration for officials involved in administrative purchases, information to which the Public Prosecutor’s Office, the Comptroller’s Office and the National Economic Prosecutor’s Office will have direct access.
• Legal recognition of hypotheses of modification of contracts during their term, such as force majeure and fortuitous event.
• New grounds for termination of contracts are added, where the impossibility of performing the service under the terms initially agreed upon is a new hypothesis.
• It establishes the need and obligation of the agency in question to always contemplate a procedure for the application of reactive measures for non-compliance: fines, execution of guarantees and early termination of the contract.

Standards of probity and transparency

In terms of probity and transparency, the universe of related persons disqualified from contracting with government agencies has been expanded to include not only managers of the services that make the purchase (up to department heads) but also all civil servants, even if they are not managers, and persons related to them by kinship, as well as companies in which they are part or have the quality of final beneficiaries.

In the case of executives, the disqualification will be extended for up to one year from the termination of the position. In addition, the personnel participating in the purchasing processes will be published in the system.

Also, the grounds for ineligibility to participate in the Register of Suppliers are expanded and the regulations applicable to related business groups and the concept of “beneficial owners” are strengthened, together with the regulation of the inadmissibility of bids in the event that simultaneous bids are submitted for the same good or service by companies of the same business group or companies related to each other in a contracting procedure.

The rules of Probity and Transparency will also apply to the Central Bank, public companies and companies in which the State has more than 50% participation.

Support for Smaller Companies

Chile Compra shall promote the participation of smaller companies in the system, as well as local suppliers and companies led by women. It may also enter into collaboration agreements with regional, provincial or communal agencies to carry out promotional actions for the access of these companies and local suppliers in procurement procedures.

Agile Purchasing will be a purchasing mechanism exclusively for smaller companies and local suppliers for amounts up to 100 UTM, which previously had a limit of 30 UTM.

Temporary Consortiums of Suppliers -which are formed exclusively for a particular procurement process- may only be formed by smaller companies and their term may not be less than the term of the awarded contract, including a possible renewal or extension.

Public Procurement Tribunal

It is doubled in size and staffing. It will now be made up of six regular judges and two alternate judges and will operate in two chambers, with three judges in each, with exclusive dedication and a remuneration equivalent to grade VI of the upper echelon of the Judicial Branch.

As part of the rules for strengthening these courts, disqualifications and prohibitions for their members are regulated and the procedural rules are improved. In addition, their competence is maintained for the action of impugnation against illegal or arbitrary acts or omissions occurring during contracting procedures with State agencies. However, its competence is extended to acts occurred during the execution of the contract.

It includes its competence against acts of the Public Procurement and Contracting Directorate and the nullity action against contracts entered into in violation of the organs of the State Administration. Finally, the Court and its procedures are included in the electronic processing system of Law No. 20,886.

For more information on these issues, please contact our Public Law and Regulated Markets team:

Antonio Rubilar | Director Public Law and Regulated Markets Group | arubilar@az.cl

María Campeny | Senior Associate | mcampeny@az.cl

Francisco Alarcón | Associate | falarcon@az.cl