Getting the Deal Through: Public Procurement
- Aug 09, 2017
- by Jorge Inchauste | Alejandra Guevara
1. What is the relevant legislation regulating the award of public contracts?
The main regulation applicable to the award of public contracts is Supreme Decree 0181, 28 June 2009 (Supreme Decree 181). Although this regulation is only a supreme decree and, as a consequence, hierarchically inferior to a law, given the current legislative strategy of the Bolivian administration, it was the fastest and most efficient way in which to standardise public procurement procedures.
Given the many limitations included in Supreme Decree 181 (such as, the limitation of awards of public procurement contracts to foreign companies and the limitations to the negotiation of certain types of contracts), the Bolivian government issued a series of other regulatory supreme decrees whereby certain ambiguities were corrected. An example of one of these regulations is Supreme Decree 26688, modified by Supreme Decree 2030, which provides that public entities will be able to award public contracts to foreign companies when such awards are justified through legal and technical reports, and as long as such goods and services are not available in the domestic market and offers cannot be received in the country. Before Supreme Decrees 26688 and 2030, foreign companies wishing to take part in public procurements had to be incorporated in Bolivia.
In addition to Supreme Decree 181, the government created a series of productive public entities (PPEs) in economic areas into which the current administration was planning to venture, such as the export of almonds and almond-based products, the sale of paper and carton-based products, and the creation of a state bottling company. These PPEs are regulated and supervised by an entity called the Service for the Development of Productive Public Companies (SEDEM). The crea- tion of PPEs and SEDEM, in turn, gave the government an opportunity to expand the application of Supreme Decree 181 and take foreign negotiation and contractual principles into consideration during public procurement procedures.
2. Is there any sector-specific procurement legislation supplementing the general regime?
Several sectors have been classified as ‘strategic development enter- prises’. Such enterprises include the national oil and gas company; the national electricity company; the Bolivian mining corporation; and the national telephone company. Such strategic development enterprises have their own sector-specific procurement regulations. Regulations that, following the general principles of the general procurement norms (Supreme Decree 181), may have different requirements and exceptions.
In addition, as stated above, the government created a series of PPEs, which are currently dedicated to the following areas: milk, carton- based products, sugar, almonds and almond-based products, cement, bottles and any other public entity that the government believes that would be beneficial for the state. Each of these companies is supervised and ‘developed’ by SEDEM. In order to differentiate public procurement procedures applicable to every other public entity from PPEs, the government issued a special regulation for SEDEM and Supreme Decree 2030, which allows PPEs to contract foreign companies for the provision of goods and services, as long as such goods and services can- not be procured within Bolivia and are beneficial for the state.
3. In which respect does the relevant legislation supplement the EU procurement directives or the GPA?
Bolivia is not a part of the EU procurement directives or the GPA. In this regard, it is worth mentioning that Supreme Decree 181 provides principles that are manifestly the opposite to the governing principles of the GPA, mainly the difference in treatment between national and foreign companies, and the fact that dispute settlement may only be carried out pursuant to Bolivian law and generally before Bolivian tribunals.
4. Are there proposals to change the legislation?
No, there are no proposals to adapt the current legislation to comply with EU law requirements.
Applicability of procurement law
5. Which, or what kinds of, entities have been ruled not to constitute contracting authorities?
Law 466, also called the Law of Public Companies. This law provides the conditions under which public or mixed (a combination of both state and privately controlled) entities or companies, may be called ‘public entities’.
Article 1 of Law 466 specifies that according to article 248 of the Bolivian Constitution, the executive power in Bolivia has the faculty to create and incorporate public entities and companies. In this regard, any state-owned enterprise, mixed enterprise, joint ventures and intergovernmental state enterprises, or any other legal entity in which the Bolivia state takes part and carries out its activities within a state-private level, is considered a public entity under Law 466’s spectrum.
As a consequence, any company or entity not controlled or that does not have the participation of the Bolivian State is not considered a public entity and as such, may not fall within the standards applicable to contracting entities included in Supreme Decree 181, described above, for public procurement procedures.
6. Are contracts under a certain value excluded from the scope of procurement law? What are these threshold values?
As long as the procurement is carried out by a public entity, no contract and no value is excluded from public procurement conditions.
The threshold values are divided as follows:
- minor procurement: 1-20,000 bolivianos;
- national support for production and employment: 20,001-1 million bolivianos;
- public bidding: from 1,000.001 bolivianos;
- contracting by exception: unlimited amount;
- emergency contracting: unlimited amount; and
- direct contracting of goods and services: unlimited amount.
7. Does the legislation permit the amendment of a concluded contract without a new procurement procedure?
Supreme Decree 181 allows for the modification of concluded contracts without the need of a new procurement process as long as the following conditions are met:
- the modifications are supported by technical and legal reports and contained in a modification contract;
- the modifications must not exceed 10 per cent of the principal amount; and
- there may be a máximum of two modifications, provided they do not exceed the term of the main contract.
In case of construction contracts (EPCs), modifications may be carried out through change orders, and again, such orders may only be applica- ble when the required change involves a modification of the price of the contract or its term, without giving rise to the increase of unit prices or the creation of new items.
Change orders must be approved by the entity responsible for monitoring the work and may not exceed 5 per cent of the principal con- tract’s amount.
8. Has there been any case law clarifying the application of the legislation in relation to amendments to concluded contracts?
There have been many cases regarding modification contracts. However, no case law amends the regulation applicable to concluded contracts or discusses modifying contracts in depth.
9. In which circumstances do privatisations require a procurement procedure?
Since the current administration reached office in 2009, no privatisation procedure has been concluded. The applicable regulation to the subject at the moment only focuses on expropriation and nationalisation of private entities.
10. In which circumstances does the setting up of a public-private partnership (PPP) require a procurement procedure?
At the moment, there are no PPP regulations applicable in Bolivia. This situation has mainly been caused by the current administration, which relies on public works. Projects such as massive hydroelectric and gas production companies are funded by public finances as well as loans from international organisations such as the Inter American Bank, the China Investment Bank and others.
However, based on current economic markers, there is a remote possibility that Bolivia will use the experience of neighbouring coun- tries, such as Ecuador and Peru (which created a public entity specifically in charge of PPPs), and start looking into the possibility of creating regulation for PPPs, which would then be applicable to future projects such as the transatlantic railroad, which will need the participation of foreign financial entities as well as foreign governments. If this is the case, then based on applicable international case law and practice, it is very likely that public procurement procedures will be enforced for PPPs.
Advertisement and selection
11. In which publications must regulated procurement contracts be advertised?
Procurement contracts must be advertised in the official state website called the system for public contracting (SICOES).
12. Are there limitations on the ability of contracting authorities to set criteria or other conditions to assess whether an interested party is qualified to participate in a tender procedure?
Supreme Decree 181 does provide for certain specific criteria when contracting for tender procedures. Based on a publication by the Ministry of Finances on 29 June 2006, the day on which Supreme Decree 181 was issued, this regulation provides convenient criteria for contracting, but also incorporates mechanisms of social control. Among the modifications, article 14 provides that the reference price will be public, and included into the Basic Document of Contracting (DBC). This will avoid the discretionary use of information and, therefore, of corruption.
Supreme Decree 181 provides criteria and parameters that limit certain contracting procedures. Another example of these types of limita¬tions is article 30, which provides that certain conditions will be given an additional margin when grading. In this regard, companies with participation of Bolivian partners holding more than 51 per cent of the com- pany, get a 5 per cent margin increase when competing against other international companies.
In conclusion, Supreme Decree 181 does provide for a series of limitations when organising public tender procedures and most of such limitations are based on the preference of contracting Bolivian nationals over international competitors.
13. Is it possible to limit the number of bidders that can participate in a tender procedure?
Article 59 of Supreme Decree 181 states that an indeterminate number of bidders may take part in a tender procedure. Generally when there are less than three bidders the tender may be declared deserted and a new tender should be convened, with bidders that took part in the first tender invited to bid again.
14. How can a bidder that would have to be excluded from a tender procedure because of past irregularities regain the status of a suitable and reliable bidder? Is the concept of ‘self-cleaning’ an established and recognised way of regaining suitability and reliability?
Article 43 of Supreme Decree 181 provides for problematic conditions in tender procedures. In this regard, this article divides such conditions into two categories, those which cannot be regulated and those which, after a certain amount of time has elapsed, may be regulated.
The first category includes the following situations: having unresolved debts with the state; executed sentences prohibiting the bidder to exercise trade activities; executed criminal sentences regarding crimes included in Law No. 1743 of January 1997, which approves and ratifies the Inter-American Convention against Corruption or its equivalent crimes provided in the Bolivian Criminal Code; bidders who are associated with consultants who advised in the elaboration of the content of the DBC; bidders declared as bankrupt; bidders whose legal representatives or whose shareholders or controlling partners have a marriage or kinship relationship with the maximum authority in charge of the tender, up to the third degree of consanguinity and second degree of affinity, in accordance with the provisions of the Bolivian Family Code.
The category that allows for the regulation of impediments includes the following situations:
- former public servants who performed functions in the convening entity, until one year before the publication of the tender, as well as the companies controlled by them;
- public servants who currently exercise functions in the convening entity, as well as the companies controlled by them;
- bidders who, after having been adjudicated, have withdrawn from executing the contract, may not participate until one year after the date of withdrawal, except for reasons of force majeure or fortuitous events, duly justified and accepted by the entity; and
- suppliers, contractors and consultants with whom contracts have been terminated due to causes attributable to them, causing damage to the state, may not participate until three years after the date of the termination, according to information registered by the corresponding entity in SICOES.
The procurement procedures
15. Does the relevant legislation specifically state or restate the fundamental principles for tender procedures: equal treatment, transparency and competition?
The relevant legislation specifically states the fundamental principles for tender procedures, providing such principles from the public officer’s perspective.
16. Does the relevant legislation or the case law require the contracting authority to be independent and impartial?
Supreme Decree 181, which includes every type of public procurement, does provide that public officers in charge of public procurement procedures must be impartial in their decisions. The principle of independence for contracting authorities is not mentioned.
17. How are conflicts of interest dealt with?
Conflicts of interest are taken seriously within public procurement procedures. This principle is included in article 236 of the Bolivian Constitution, providing that public officials are prohibited from acting when their private interests conflict with those of the entity where they provide their services, and enter into contracts or conduct businesses with the public administration directly, indirectly or on behalf of a third person; and are prohibited from appointing individuáis in public positions with whom they are related up until the fourth degree of consanguinity and second of affinity.
This principle is, in turn, repeated in Supreme Decree 181, which provides that officers in charge of reviewing the bidding participants’ documents, may not delegate their responsibility ‘except in cases of conflict of interest’; and article 44, which specifically deals with conflicts of interest by providing that individuals or companies, whether associated or not, advising a public entity in a procurement process, may not participate in such process, under any reason or circumstance; and that individuals or companies, or their corresponding subsidiaries, contracted by the convening entity to provide goods, perform works or provide general services, may provide consulting services in respect thereof.
18. How is the involvement of a bidder in the preparation of a tender procedure dealt with?
In accordance with article 44, any consultant participating during the drafting of the bidding may not take part in such process, under any circumstances. As a consequence, the prohibition is absolute.
19. What is the prevailing type of procurement procedure used by contracting authorities?
The prevailing type of procurement procedure depends on the goods being bought or the service needed.
For example, and given the many restrictions for foreign bidders to take part in national bidding procedures, practice has shown that many specialised services or technological goods are often contracted by means of the direct contracting of goods and services process, which bypasses the bidding phase completely. The reason for this is because there is no minimum or maximum amounts to these types of contracting procedures and offices such as SEDEM, as well as strategic development sectors (mining, hydrocarbons, energy, telecom) developed their own regulations, whereby they may be allowed to turn to foreign bidders whenever the specific services or goods that are needed cannot be found in Bolivia.
20. Can related bidders submit separate bids in one procurement procedure?
There is no provision regarding an applicable procedure whenever related bidders submit bids during procurement processes. As a consequence, and given that it is not prohibited, the requirements and conditions applicable are the same as with any other bidder.
21. Is the use of procedures involving negotiations with bidders subject to any special conditions?
Supreme Decree 27328 of September 2015, provides for two types of situations when bidders may negotiate bidding terms with public officials:
- Small bidding procedures (equal to or less than 160,000 bolivianos), in which case, public officers may use negotiation tables and inverse fairs, which consist of fairs organised by public entities and governmental authorities in order to offer their different programmes to possible bidders. In order to be applicable, these types of negotiations may only be for amounts that are less than 160,000 bolivianos and may be granted through direct contracting procedures or comparison of prices procedures.
- Calls for bids based on expressions of interest, which consist of bidding procedures for consulting firms and may only be applicable to amounts equal or more than 800,000 bolivianos. The only additional condition is included in article 105 of Supreme Decree 27328, which provides that under no conditions may the negotiations carried out between the bidders and the entity calling the bid, modify the contract.
22. If the legislation provides for more than one procedure that permits negotiations with bidders, which one is used more regularly in practice and why?
Given the difference in prices, each negotiation is applicable to different situations and as such, they cannot be equally compared. However, and given recent advertising, we could conclude that the negotiation most regularly used in recent practice is the one carried out by means of negotiation tables and inverse fairs.
23. What are the requirements for the conclusion of a framework agreement?
A framework agreement is called a basic document for contracting (DBC) in Bolivia.
Supreme Decree 181 provides one draft DBC that may be adapted by the corresponding entity calling for bids, in accordance with the conditions issued by the maximum executive authority (MAE), and it must include the necessary technical conditions, evaluation methodology, procedures and conditions for the hiring process under which the public procurement procedure shall be based.
Given its importance for public procurement procedures, and with the intent of equalising and making such procedures more transparent, the current administration included a draft DBC to be included in every public procurement above 20,000 bolivianos. Any modification to this draft must be first informed and approved by the applicable MAE. In consequence, the strength of this document surpasses that of a mere contract, given that its terms are provided by a national regulation, and are very difficult to modify, if at all.
As was previously mentioned, and depending on each procurement process, some aspects of the contract contained in the DBC may be modified by the contracting entity and the adjudicated bidder, as long as such modifications do not exceed 10 per cent of the main contract’s price and units.
24. May a framework agreement with several suppliers be concluded?
Article 24 of Supreme Decree 181 provides that in cases of technical or economic advantage procurement processes, the contracting of goods and services may be adjudicated by items, lots, tranches or packages, through one single call and framework agreement.
In order to be applicable, the DBC must list and refer to each item, lot, tranche or package, individually.
Only in cases when one of the items, lots, tranches or packages is not awarded is an additional competitive procedure necessary.
25. Under which conditions may the members of a bidding consortium be changed in the course of a procurement procedure?
There are no specific provisions regarding changes in consortiums dur- ing the course of a procurement process. However, and given the pro- visions of Supreme Decree 181 with regard to the various forms that need to be filled by consortiums in order to take part in procurement procedures, we believe that such a change would lead to the rejection of such consortium.
26. Are there specific mechanisms to further the participation of small and medium-sized enterprises in the procurement procedure ? Are there any rules on the division of a contract into lots? Are there rules or is there case law limiting the number of lots single bidders can be awarded?
The specific mechanism included to increase the participation of small and medium-sized enterprises in procurement processes is provided by article 31 of Supreme Decree 181, which provides that in the procurement of goods and services under the modalities of public biddings and national support for production and employment (ANPE), a margin of preference of 20 per cent shall be granted to the price offered for micro and small companies, associations of small urban and rural producers and farmers.
Regarding the division of contracts into lots, as it was previously pointed out, DBCs may be divided into items, lots, tranches or packages, in cases when construction of services require so. There is no limit to the proponents who may bid, since each condition would be provided by the corresponding DBC.
With regards to the award of certain items or lots to single bidders, article 24 provides that when a bidder submits his or her proposal for more than one item, lot, tranche or package, he or she must only submit one set of legal and administrative documentation; and one technical and economic proposal for each item, lot, tranche or package. As a consequence, there are no limits to the lots a single bidder may be awarded.
27. What are the requirements for the admissibility of variant bids?
Typically variant bids are not acceptable, and the bidder must present only one bid. The only case in which variant bids may be presented is where there are different items or lots being bid simultaneously, in which case bidders may be allowed to provide as many as they can, provided the DBC allows for various lots and items within the procurement process.
In this regard, bidders must adjust their proposals to the DBCs published by the bidding authority at SICOES.
28. Must a contracting authority take variant bids into account?
During the presentation stage of procurement procedures, article 27 of Supreme Decree 181 provides that public officials may declare a bid as void: if no proposal had been received; if all economic proposals exceed the reference price; or if no proposal complies with what was specified in the DBC, among others.
As a consequence, we can conclude that if a variant bid is filed that does not comply with the DBC, then such bid will be declared void.
29. What are the consequences if bidders change the tender specifications or submit their own standard terms of business?
The applicable regulation provides that whenever bids do not comply with the conditions of DBCs, where the tender specifications and technical standards are included, the procurement process must be declared void.
30. What are the award criteria provided for in the relevant legislation?
Article 23 of Supreme Decree 181 provides that the following methods of selection and adjudication will be considered for procurement procedures of goods and services: quality, technical proposal and cost; fixed budget; lower cost; and lowest evaluated price, according to what is established in each DBC.
Each of these adjudication conditions are in turn supported by preference margins, which range from products and services created and provided in Bolivia, to a preference margin for companies where less than 49 per cent is owned by foreign companies or individuals.
31. What constitutes an ‘abnormally low’ bid?
There is no definition of what constitutes an ‘abnormally low’ bid. However, looking into published DBCs, abnormally low bids do not have a specific amount but do include a verification procedure, which includes a comparison between the estimated price that was included in the framework agreement, and the price list provided by the bidder, in order to confirm the consistency with the methods and proposed calendars.
32. What is the required process for dealing with abnormally low bids?
As in question 31, bids containing abnormally low prices must be compared with the original price proposed by the framework agreement. If the price of the offer proves to be abnormally low, the offer may be rejected for lack of consistency. If adjudicated, and having evaluated the price, taking into consideration the terms of payment envis- aged, the public entity may request that the amount of the complianceguarantee is increased by the bidder to a sufficient level in order to protect the state from any loss in case of non-compliance with the terms of the contract.
33. Which authorities may rule on review applications? Is it possible to appeal against review decisions and, if so, how?
The authorities that rule on review applications are organised in a ratings commission, each member being appointed by the person responsible for the recruitment process, who is, in turn, appointed by the MEA in charge of the procurement process.
It is possible to appeal against review decisions, by means of an administrative challenge recourse, which may only be filed against decisions regarding the content of the DBC, adjudication decisions and bids that were declared void.
34. If more than one authority may rule on a review application, do these authorities have the power to grant different remedies?
The only authority in charge of ruling over administrative challenge recourses is the MEA in charge of the conflicted procurement process.
35. How long do administrative or judicial proceedings for the review of procurement decisions generally take?
Article 97 of Supreme Decree 181 provides that these types of procedures should take up to 10 days. However, in practice, administrative proceedings for the review of procurement decisions take between two to four months.
36. What are the admissibility requirements?
In order to be admissible, an administrative appeal must be accompanied by a renewable, irrevocable and immediate execution guarantee.
Regarding the standing capacity of bidders, article 11 of the Administrative Procedure Law provides that any individual or entity, public or private, whose subjective right or legitimate interest is affected by an administrative action, may appear before the competent authority (in this case the MEA) to assert their rights or interests, as appropriate, without having to prove personal and direct interest in relation to the act that motivates their intervention.
37. What are the time limits in which applications for review of a procurement decision must be made?
Article 97 of Supreme Decree 181 provides that the MEA must issue an express decision within a period of a maximum of five days, counting from the filing of the administrative appeal. The resolution that resolves the administrative appeal does not allow further administrative appeals, opening the way to judicial involvement.
38. Does an application for review have an automatic suspensive effect blocking the continuation of the procurement procedure or the conclusion of the contract?
Article 96 of Supreme Decree 181 provides that the filing of the application for review will suspend the contracting procedure, which may restart, once the administrative recourse is exhausted.
There are no provisions regarding the lifting of such suspension. Based on administrative legislation applicable to administrative recourses, theoretically it would be possible for the suspension to be lifted if a bidder files and wins a constitutional claim (amparo) based on the grounds that the suspension has affected the bidder’s constitutional right to work, or some other constitutional right.
39. Approximately what percentage of applications for the lifting of an automatic suspension are successful in a typical year?
There are no provisions regarding the lifting of automatic suspensions, and none have taken place so far.
40. Must unsuccessful bidders be notified before the contract with the successful bidder is concluded and, if so, when?
The analysis and adjudication of a procurement process is public information, and must be published at the SICOES.
41. Is access to the procurement file granted to an applicant?
Article 22 of Supreme Decree 181 provides that once the adjudication has been made, the proposals that were not awarded will not be public, and their subsequent use for other purposes will be prohibited, unless written authorisation of the bidder is received.
In public tenders, the proposals may be returned to the correspond- ing non-adjudicated bidders, at their request, as long as the contracting entity keeps a copy. This option is not available in public procurement processes related to national support for production and employment.
42. Is it customary for disadvantaged bidders to file review applications?
Given that there is no public information available with regards to applications for review, it is very difficult to determine the exact number of filings, or the type of bidders who filed such recourses.
However, based on current practice, it is not customary for disadvantaged bidders to file review applications, given that such a procedure is very lengthy and expensive, and the outcome is almost always granted in favour of the contracting authority, given the way in which the procedure is created and given that it is the contracting entity itself that must resolve a decision of the officer appointed by it.
43. If a violation of procurement law is established in review proceedings, can disadvantaged bidders claim damages?
As long as such violation of procurement law generated direct damages to disadvantaged bidders, it is possible for them to claim damages. In order to be able to prove this, the bidder would need to prove that the violation of such procurement laws generated loss of profit and damages that were a direct consequence of such violation.
44. May a concluded contract be cancelled or terminated following a review application of an unsuccessful bidder if the procurement procedure that led to its conclusion violated procurement law?
Yes, a decision regarding review proceedings can indeed deal with the adjudication of the contract and declare such adjudication as invalid. If that is the case, the decision must specifically annul the adjudication ‘down until the oldest vice in proceedings’.
45. Is legal protection available to parties interested in the contract in case of an award without any procurement procedure?
In case of fraudulent adjudications, without a proper procurement process, the legal protection for the party interested in the contract would be based on a criminal procedure against both the officer who granted the contract and the bidder.
46. What are the typical costs of making an application for the review of a procurement decision?
The costs of making an application for the review of a procurement procedure depend on the guarantee that needs to be provided at the beginning of the procedure, the lawyer who is overseeing the case, the amount of the contract and any other miscellaneous costs, such as legalisation, translation and notary costs in case of foreign bidders.
Update and trends
With the creation of SEDEM, new regulations have been created in order to allow such entity to directly contract with foreing providers, who, otherwise, would have had to overcome too many obstacles in order to be able to provide their services or goods in Bolivia.
However, such opportunities can, sometimes, be a double-edge sword, given that practice has shown and recent news demostrated that loopholes in applicable legislation provide an opportunity for nepotism and sidestepping rules that should allow for more transparency, such as the comparison between offers, the negociation of public procurement contracts and the publication of bidder's information at SICOES.
Note. Reproduced with permission from Law Business Research Ltd. Getting the Deal Through: Public Procurement 2017, (published in June 2017; contributing editor: Totis Kotsonis, Eversheds Sutherland) For further information please visit https://gettingthedealthrough.com/area/33/public-procurement-2017