Public procurement in Chile: the importance for suppliers to understand the public authorities’ ways of working

On the 10th of June 2022, I had the pleasure of meeting Pablo Prüssing Fuchslocher, a lawyer, who after a career in the public procurement sector, is advising private clients, mainly in the healthcare system, on how to answer public calls for competition, in Chile.

Chile’s public procurements are regulated by the Constitution and several regulations like the Administrative Contracts Bases for Supply and Provision of Services (Act No. 19,886/2003, also referred to as the “PPL”) and its Decree (No. 250 of 24th of September 2004). A new Constitution is currently discussed, and some aspects of public procurement could be modified. Chile is not part of the GPA but is a former Observer (since the 29th of September 1997). The country is also working closely with the OECD with conjoint work between the 2 public organisations (for example, a review was done in 2017, and was entitled “Public Procurement in Chile – Policy Options for Efficient and Inclusive Framework Agreements”).

Unlike countries like France, Chile is using a single platform to advertise public opportunities (Mercado Publico - https://www.mercadopublico.cl/Home). This single system helps to reduce corruption, for Pablo, as the information is not split in different places. 4 years ago, in 2018, this system was connected with the National Financial Management System, enabling more clarity on government spending. Another interesting insight was the mention of the Public Procurement Court, a special authority created in 2003 by the PPL law. The Court is competent to hear the challenge action against acts or omissions, illegal or arbitrary, occurred in the administrative procedures for contracting with public bodies governed by this law.

The challenge action will proceed against any illegal or arbitrary act or omission that takes place between the approval of the bases of the respective bidding and its award, both inclusive. When there is a problem regarding the contract itself, complications could arise. Indeed, the contracting public body is in charge of determining sanctions or can even put an early termination on the contract. This is unfair and can give rise to clear arbitrariness as the public administration is judged and being judged. If that were the case, there is the possibility of going to the courts of justice or, the Comptroller General of the Republic.

In the sustainable chapter, Chilean public authorities are considering the total cost of ownership of a purchase. Pablo mentioned that, for instance, when buying computers, public organisations have to consider the decommissioning aspect of the purchase, particularly the recyclable element and the cost associated. Regarding a more recent topic, Covid, public authorities over-utilised direct awards contracts to fulfil their needs which could have created distortion in the market. There was also a disparity between the buyer’s requirements (having the shortest lead time possible) and the market reality (long delay as the goods were coming from China).

During our discussions, Pablo underlined that not all companies fully completely understand the public sector and, thus, can struggle to answer a call for competition. One of the reasons is the long administration process, for companies, to respond to a tender as they need to go through different internal layers of approbation. The second one is regarding the application of fees. Indeed, when answering a call for competition, companies need to be careful and do a pro and con of the opportunity to respond. The application of fees, by public authorities, is a common practice and calculated based on a percentage of the estimated value of the contract. So, for an agreement evaluated at $400k and a fee equal to 30% of this amount, the fee could be up to $120k. But this percentage can be even higher. Last but not least, for international companies wishing to bid for tenders, they will have to translate from Spanish to their own language as there is no obligation to translate tenders’ documentation.

It has been, as usual, an insightful discussion, on public procurement and how it works in a different country. I remembered, when I was at Uni, one of my teachers underlying the importance of applying fees and that, at that time, in France, it wasn’t a common practice. So, it is insightful to see that other countries have a different approach. ???

Thanks for reading,

* If you would like more information, or want to share your experience, please feel free to send me a private message.