Government Contracting in Colombia
Feb 02, 2012 QuickCounsel Download PDF
By Gustavo Tamayo, Tomás Calderón
This QuickCounsel will provide an overview on key aspects of Colombia's government contracting which are critical in order to avoid common mistakes that can be the difference between a successful selection or a disqualification, or entering into a good or bad contract with a government agency. More specifically, this QuickCounsel addresses the above-linked matters related to government contracting.
The Unique Proponents Registry (Registro Único de Proponentes) or RUP (by its initials in Spanish) is a mandatory registry for most government contracts that should be obtained, with due advance considering the short terms of government procurement processes, by all national or foreign individuals or legal entities or branches of foreign companies in Colombia that are willing to enter into contracts with state entities. Contracting parties register by filling the corresponding form and documents with the Chamber of Commerce of the principal domicile of the interested party.
More information regarding the RUP is available at the following link of the web page of the Chamber of Commerce of Bogotá for proponents domiciled within its jurisdiction. Contracting parties can also make the virtual registry, renovation or update of the RUP through such web page.
Interested parties should verify and update the RUP before a government procurement process begins and not change it during such process in order to avoid disqualifications.
All State Entities have the obligation to draft and publish at the web page of the Sistema Electrónico para la Contratación Estatal -SECOP- all basic documents of their government procurement processes with respect to the pre-contractual stage (during which the interested parties may make comments to the drafts of RFP), the contractual and post-contractual stage of the processes.
Since the terms of government procurement processes tend to be very short, it is important that an interested party follows up the process from the start, so that all information and documents required can be gathered on due time.
In general, most state entities are subject to the government contracting regulation, comprised primarily by Law 80/1993 and Law 1150/2007, and their regulatory provisions. However, there are certain exceptions on which some contracting processes and/or state entities are subject to other regulation such as private law and/or special legislation without regard to the above mentioned government contracting regulation.
Government contracting regulation is based on a series of principles that are applicable on all of its procedures, which are:
Contractors in a government contract can be all individuals or legal entities considered as legally able to enter into contracts (either local or foreign), another state entity, or a group of individuals or legal entities (either local or foreign) which may bid jointly through a consortium, a temporary union (which are similar figures to a joint venture) or a promise of a future company (which shall be incorporated if the contract is awarded).
Despite Colombia only being an observer and not a party to the Government Procurement Agreement of the WTO, under the reciprocity principle set forth in Law 80/1993, either by virtue of a treaty, agreement, convention or in practice, foreign individuals or legal entities may participate in a government procurement process with state entities in Colombia, under the same terms and conditions as a Colombian national may participate in a government procurement process in the foreign bidder's country of origin.
It is important to mention that Law 80/1993 establishes that legal entities (national or foreign) have to evidence during the process that their corporate term (the term for the existence of the legal entity established in the by-laws of the company) is not less than the term of the State Contract and at least one year more, otherwise, they would be disqualified.
In order to guarantee the fulfillment of the objective selection principle, there are four different types of processes set forth by law. Such types are:
The general rule is that the selection of the contractor must go through public tender processes, unless the law sets forth another type. Since each type of process has different rules, it is important that the interested party has knowledge of the specific rules of the type of process in which it intends to participate.
For the company that is considering bidding on a government procurement contract, knowledge of the specific rules included in the RFP to that bid is essential. The bidder may request amendments or clarifications to the RFP during a part of the pre-contractual stage, but in any case, it is important to bear in mind that a bid made under terms different to the RFP would be considered a counteroffer and would be disqualified, since it would violate the equality principle.
Furthermore, it is noteworthy to mention that the template of the contract between the contracting party and the state entities is an attachment to the RFP, thus, the bidder has little margin for negotiation upon its terms and conditions.
Pursuant to previous decisions of the State Council, the material component of the RFP (as contrary to the rules of the bidding process contained in the RFP) forms an integral part of the Contract and is binding upon the parties that enter into a government contract once it has been awarded (see State Council, Contentions Administrative Chamber, Third Section, ruling of July 19, 2011, internal process number 12037).
The RFP can be used to construe such contracts, and even in case of controversy between the RFP and the minute of the government contract, the RFP prevails. (see State Council, Contentions Administrative Chamber, Third Section, ruling of February 3, 2000, internal process number 10339).
State entities every year have to spend their whole assigned budget, otherwise, such budget would be reduced on the following year. Thus, it is important for interested parties to bear in mind that if a government contract is not executed and paid to the contractor before December 31, the budget reserved for such contract may be lost and the government procurement process stopped.
The limitation of the Contractor's liability is very hard and almost impossible in Government Contracts because public servants are reluctant to accept it due to the criminal, civil, fiscal and disciplinary responsibility they have as public servants and the surveillance exercised over them by control entities (Contraloría General de la República, Procuraduría General de la Nación and Físcalia General de la Nación).
Government contracts are intuitue personae, therefore, once they have been entered they can not be assigned by the contractor to a third party, without the prior written authorization from the state entity. Such authorizations are not usually granted, except in special cases on which the state entity verifies that the assignee contractor fulfills all requisites of the RFP and has the same or better financial and/or technical capacity of the assignor contractor.
Contractors should bear in mind that state agencies tend to limit the application of force majeure events in order for contractors to suspend the performance of government contracts. Statutory law and rulings in cases of Government contracts also limit the application of force majeure to unforeseen and irresistible events.
It is important to bear in mind that any challenge with respect to the legality of administrative acts that can be issued by state entities within the termination or liquidation of government contracts shall be brought to the administrative courts, since such courts have exclusive jurisdiction over such matters (see Constitutional Court ruling of October 25, 2000, ruling number C 1436/2000 and State Council, Contentious Administrative Chamber, Third Section, ruling of June 8, 2000, internal process number 16973).
Even though the Law provides that state entities and contractors have to seek to resolve disputes arising from government contracts in a flexible, rapid and direct manner using conflict resolution mechanisms, by law it is prohibited for State Entities to prohibit the application of conflict resolution mechanisms and even though the law sets forth that international arbitration can be agreed in some cases, state entities are reluctant to agree upon it whenever the contract is performed in Colombia, even when the contract is entered with a foreign party.
Furthermore, it should be noted that there are previous rulings in cases of Government contracts on which local arbitration awards of disputes between state entities and contractors have been declared void and null by the State Council because such entity considers that the procedural rules of the arbitration in government contracts has to be the one set forth in the Colombian Arbitration Statutes and the parties could not choose upon International Chamber of Commerce rules (see State Council, Contentions Administrative Chamber, Third Section, ruling of August 1, 2002, internal process number 21041).
In any case no arbitration clause is agreed between the State Entities and the Contractor, the administrative courts would have jurisdiction over any dispute arising from the Government contract.
One of the risks of entering into a state contract is that the government procurement process can be suspended by a judge due to an injunction order issued under a class action process or that the contract is declared as null and void under such process. The main causes for this type of class actions are the defense of the administrative morality and the defense of the public patrimony. However, other class actions against government contracts have been based in:
Bearing in mind the above, despite that it should be responsibility of government agencies, it is recommendable that contractors assess the risk of possible class actions that could suspend or consider null and void a government contract and verify that government agencies fulfill all legal requirements in order to reduce the risks of such action.
Government entities are among the largest business customers in Colombia, as they are in the rest of the world. Government Contracting is expected to grow steadily due to the country's political stability and sustained economic growth, especially regarding infrastructure projects that the country will require in order to keep the economic growth and profit from free trade agreements entered or that are expected to be entered by Colombia (USA, European Union, Canada, Japan, South Korea, etc…). Taking into account the above, government procurement processes in Colombia will bring new opportunities for business, but also more competition. To that end, this QuickCounsel provides in-house counsel with the necessary knowledge of the government procurement processes, government contracts and the risks that they entail.
Published on February 1, 2012
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