Top Ten Considerations to be considered in a Public Procurement Process in Colombia
May 29, 2015 Top Ten Download PDF
By Carlos Carvajal, Associate, Lloreda Camacho & Co, Frederico Pardo, Associate, Lloreda Camacho & Co.
As a result of the notable economic growth in Colombia, many national and foreign companies have increased their interest in investing in Colombia via the selling of goods and services to a wide array of Colombian procuring entities in all sectors of the economy.
Colombian procuring entities are one of the major buyers of goods and services in Colombia, reason why it is important to understand the main features of a public bidding processes, from a practical perspective. This Top Ten will explain the most relevant aspects to be considered in order to access to public procurement opportunities, including the way to obtain information and some general guidelines and recommendations when submitting a bid.
1. Public Procurement Regulation and Principles
In general, most State-owned entities are ruled by Law 80 of 1993, Law 1150 of 2007 and their regulatory Decrees. However, there are certain exceptions on which some bidding processes and/or procuring entities are subject to private law and/or to special laws. In any case, the following set of Constitutional principles will always be applicable:
- Economic equilibrium of the contract
- Objective selection
- Due process of law
According to the applicable regulations, and in order to comply with the transparency principle, Colombia has an e-procurement platform that contains, among others, the main public procurement laws and regulations, notices of invitation of tenders, specific platforms containing the tender documents of each procurement process, procurement plans, bidding results and the respective contracts.
As a general rule, the information contained in the e–platform is in Spanish language. However, exceptionally certain State-owned agencies carry out specific procurement processes in English, for example in case of purchase of goods that are not available in Colombia, for which the agency carries out an international bidding process.
3. Who can Participate in Bidding Processes
In Colombia, all individuals or legal entities – whether local or foreign – considered as legally able to enter into a contract, other State-owned entities, and a group of individuals or legal entities, may participate in a public procurement processes. However, a legal entity wishing to participate in a public bidding process in Colombia must exist at least as long as the contract's term and one additional year, otherwise it would be disqualified.
In order to guarantee the fair treatment of bidders throughout the procurement process, the applicable regulation provides for certain restrictions aimed at avoiding conflicts of interest. Public officials, entities which directors have a family or other close connection with other bidders, among others, are not allowed to participate in a public bidding process.
4. Consortiums and Temporary Unions
Bidders may join efforts by putting together their specific experience and capacities with any other individual or company through a joint venture agreement, namely a consortium or a temporary union. In these JV agreements, as a general rule all members have a sizable stake in the project. Bidders may also participate through a promise of a future company which must be incorporated if the contract is awarded to it.
The members of the consortiums and of the temporary unions are joint and severally liable for the submission of the proposal and for the performance of the contract, if awarded to the JV. However, in the case of a consortium, all members will be joint and severally liable even in the case of penalties; in the temporary union, although all members are joint and severally liable for the performance of the contract, in the event of a penalty resulting from the breach of contract the members would be liable for such penalties but limited to their participation in the performance of the contract.
In order to facilitate the participation in the bidding process and in the performance of the corresponding contract, it is advisable for a foreign company to enter into a JV agreement with a local entity that understands the local market and the mechanics of the bidding process. Also, local counsel is paramount for understanding the complex regulations and the usually too formalistic requirements in the bidding process.
5. National Bidders Registry
In Colombia, suppliers and bidders are required to be registered in the National Bidders Registry (Registro Único de Proponentes - RUP). The interested bidder must file for registration in the RUP before the Chamber of Commerce, by providing a rather straightforward set of documents related to the company's legal, financial and organizational capacity and experience. Since the RUP is a public registration, any person may have access to it and verify all the information provided therein.
Foreign entities without a subsidiary or a branch in Colombia are not required to be registered in the RUP in case they want to participate in a bidding process. However, such entities must fulfill in any case the specific requirements set forth in the tender documents, e.g. the financial information by means of its financial statements, and its experience by means of copies of the contracts entered into with its clients.
In case a bid is awarded to the foreign entity and the contract is intended to be performed in Colombia, as a general rule the company will be required to incorporate a branch in Colombia, provided that the performance of the contract will entail a permanent activity in Colombia. In such case the entity will also be required to be registered in the RUP in order for it to participate in another bidding process.
6. Types of Procurement Processes
For purposes of complying with the "objective selection" principle, there are four different types of processes set forth under the applicable laws, namely:
- Public tender
- Abbreviated selection process
- Merits-based selection; and
- Direct contract
7. Main Stages of a Procurement Process
Since each type of process has different rules, the interested party must identify in advance the specific rules concerning the type of process in which it intends to participate.
The main stages of a bidding process are the following:
- The procuring entity prepares a document so-called "Previous Studies" (i.e., studies based on the goods and services required by the entity, designs, architectural plans, budget, the entity's specific needs, etc).
- The procuring entity issues a "Budget Availability Certificate" (Certificado de Disponibilidad Presupuestal -CDP-) through which the entity guarantees the existence of budget to get into a contract.
- The procuring entity drafts and publishes the draft tender documents.
- The interested parties submit their comments to the draft tender documents.
- The procuring entity publishes the comments to the draft tender documents and its answers to said comments.
- The procuring entity formally opens the public tender, and publishes the final version of the tender documents.
- The procuring entity carries out a public hearing to allocate the risks arising from the contract. In this hearing the procuring entity may also specify/clarify the content and the scope of the tender documents.
- The bidders submit their offers (closing of the process).
- The procuring entity verifies and evaluates the offers and issues an evaluation report.
- The bidders submit their comments to the evaluation report.
- The procuring entity carries out a public hearing to award the bid or to declare it failed (e.g., when none of the bidders comply with the requirements set forth in the tender documents).
During the bidding process, any bidder may actively participate in the construction of the tender documents by submitting questions and observations aimed at clarifying or modifying said documents.
The bidding process foresees a preliminary phase in which the procuring entity publishes a first draft of the tender documents to be commented by any interested party. Also, once the final draft of the tender documents has been published, any interested party may also suggest introducing modifications and, if the procuring entity finds them acceptable, will modify the tender documents through the respective addendums.
Furthermore, bidders may challenge the evaluation report issued by the procuring entity, either in connection with the results of its own offer, or in connection with the results of the other competitors' offers. All the answers of the procuring entity related to the tender documents or to the evaluation reports must be published in the e-procurement platform, therefore, the information would be available to all the interested parties.
9. Knowledge of the Tender documents
Any potential bidder must have a thorough knowledge of the corresponding tender documents, since the latter contain the information related to the evaluation and awarding rules. If a bidder submits an offer that is contrary to the tender documents, its offer will be disqualified. Moreover, the tender documents include the draft contract that would be entered into between the bidder and the procuring entity; consequently, the bidder will have the chance to suggest modifications to the contract's terms and conditions.
10. Additional Recommendations for Participating in a Bidding Process
When considering participating in a bidding process in Colombia, it is advisable to follow these practical recommendations:
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