The Goverment Procurement Review - Chapter 1 Argentina
June 2012, the Executive Branch issued Decree 893/2012 aimed at regulatingand further implementing, for certain kind of contracts, the General Regime for PublicProcurement approved by Decree 1023/2001 (‘GR’). As stated in the whereas of Decree893/2012, these regulations introduce different treatments for each type of selectionproceedings and regulate new types of contracts and set clear rules, in order to strengthenand deepen the efficiency, effectiveness, economy and simplicity in managing publicprocurement.
To that end, Decree 893/2012 provides that the National Contracting Office (‘ONC’) is the governmental body empowered to ensure a high degree of uniformity in the standards applicable to all procurement proceedings. In particular, the ONC will take part in the consultations aimed at reinforcing the relationship between Mercosur and the EU, in all matters related to public procurement.
Procurement proceedings ruled by Decree 893/12 are applicable to the central government and to all entities of the Executive Branch, apart from government whollyowned companies, which are not obliged to adopt the GR and, therefore, are free to adopt other procurement rules. The provisions of Decree 893/12 are mandatory to sales contracts, supplies, services, locations, consulting, rent to own, swaps, permits to use government property and those contracts not expressly excluded.
On the contrary, Decree 893/12 does not apply to public works, public utilities, public employment contracts, small purchases or agreements held with foreign states, public international entities or multilateral lending institutions.
Among the specific set of regulations applicable to contracts entered into with the government that are excluded from Decree 893/12 it is worth mentioning the Public Works Act (Law 13,064), the private initiative regime (approved by Decree 966/05), the public-private partnership (‘PPP’) regime (approved by Decree 967/05), and the Public Utilities Concession Act (Law 17,520).
II YEAR IN REVIEW
Decree 893/12 points towards a new policy implemented by the central government, directed at establishing a management programme for procurement. Thus, among the main innovations of Decree 893/12 are the enactment of sustainable procurement procedures, the possibility of negotiating general framework agreements to purchase goods or hire services for all jurisdictions within the central government and the duty of all contracting authorities to submit an annual plan for procurement. This annual plan should be approved by the highest authority of the jurisdiction within which the contracting authority is operating. The ONC will centralise all the information resulting from those plans, which must be publicised on the ONC’s website.2
III SCOPE OF PROCUREMENT REGULATION
i Regulated authorities
The GR is mandatory for procurement procedures in which the federal government, its ministries, departments as well as any other central government bodies or decentralised agencies, comprising social security institutions, take part. Conversely, the GR is not applicable to procurement procedures carried out by the Judicial or Legislative Branch. All contracting authorities must comply with the selection proceedings set up by the GR. The GR will bypass the bidding procedure under the following exceptional circumstances:
a the contracting authority can prove the objective need for urgency and the genuine impossibility of allowing the normal periods prescribed for bidding procedures;
b the previous call for bids failed due to the absence of interested bidders; and
c it is evident that, for particular reasons, only a specific supplier is able to satisfy a concrete government need (Section 24, Decree 1023/01). As those exceptions are likely to restrict competition, they are construed in a narrow sense. In any event, the contracting authority may not manipulate these rules (i.e., value thresholds) to avoid compliance with the applicable procedure. There is also sector-specific procurement legislation, such as the Public Works Act, which obliges the contracting authority to call for a public bid before the contract is awarded.
ii Regulated contracts
The GR and Decree 893/12 are both mandatory for sales contracts, supplies, services, locations, consulting, rent to own, swaps, concessions to use public property and to any other agreement except for those expressly excluded.
The GR is supplemented by sector-specific procurement legislation as explained in Section I, supra. Argentina also has a special procurement regime for the army. Law 20,124 creates a permanent administrative commission empowered to set up the rules for military procurement and to award contracts. The acquisition of military equipment must comply with the requirements set by the administrative commission and also be approved by the competent head of the armed forces and later ratified by the Ministry of Defence (Law 24,948).
The GR provides for three different kinds of procedures for awarding public procurement contracts: public bid (broad call to tender), private bid (invitation to tender addressed to certain bidders already enrolled with the ONC’s Procurement Registry (‘SIPRO’)), and direct award and auction for the purchase of real or personal property, including art or other property of historical interest. The procedure to be used
will depend on the threshold value of the contract. However, the contracting authority may choose to call for a public bid even if this procedure is not mandatory (Section 15, Decree 893/12).
If the contract to be awarded is valued at under 75,000 pesos, the contracting authority is free to award the contract at its own discretion (simplifed direct award for small purchases). If the contract is valued at over 75,000 pesos but under 200,000 pesos the contracting authority is authorised to award a contract without a competitive procedure. If the contract to be awarded is valued at over 200,000 pesos a competitive procedure is required. Therefore, if the contract is valued at over 200,000 pesos but under 800,000 pesos, the contracting authority shall call for a private bid submitting invitations to tender to bidders already enrolled with SIPRO. All contracts valued over 800,000 pesos must be awarded after a public bid procedure which implies a broad call to submit offer and general announcement.
As an exception to the mandatory selection proceedings, the contracting authority is authorised to award a contract without following a procurement procedure (direct awarding) in certain cases expressly authorised by the GR and Decree 893/12. In general terms, direct awarding is possible when the potential contract involves exclusive IP rights, extreme urgency or an emergency situation, when a prior competitive procedure has failed and in case of certain services that can only be rendered by a determined supplier. Please see Section V, infra, for further details.
IV SPECIAL CONTRACTUAL FORMS
i Framework agreements and central purchasing
The ONC is entitled to enter into framework agreements with suppliers to seek the direct supply (no competitive procurement is required) of goods and services for certain government department or agencies. Contracting authorities are obliged to buy under the framework agreements that were in force, interacting directly with suppliers selected by the ONC.
ii Joint ventures
Under Argentine companies law joint ventures (‘JVs’) are contractual arrangements to perform a certain activity, execute a contract or render a service for a limited period of time. JVs do not therefore involve the establishment of a separate legal entity. According to Section 67 of Decree 893/12 bidders can submit tenders individually or as part of a group, JVs, association or a different legal persona. In any case, JVs are not bound by the rules on public contracts.
On the other hand, as a result of the PPP regime (approved by Decree 967/05), individuals and companies may, under certain circumstances, enter into a cooperative agreement in order to develop a project of public interest. According to Decree 967/05, the contracting authority is always obliged to perform the corresponding procurement procedure, depending on the applicable threshold, and PPPs are bound by the rules on public contracts.
V THE BIDDING PROCESS
Decree 893/12 carefully states specific rules for public procurement publicity.
In case of public bids, the contracting authority shall advertise the call for tenders for two days in the Official Gazette at least 20 days in advance of the fixed date for the opening of tenders. In addition, the call will be advertised on the ONC’s website as of the day the call was published in the Official Gazette. The contracting authority shall also address notices advertising the call to chambers of commerce or similar associations that bring together suppliers, producers, manufacturers and traders that can furnish the goods or render the services related to the contract to be awarded. Finally, the contracting authority is obliged to send invitations to at least five suppliers for the category.
For advertising private bids, the contracting authority shall send invitations, a minimum of seven days in advance of the date for the opening, to at least five suppliers that are already enrolled with SIPRO for the category of goods or services to be awarded. In addition, the call for private bid shall be advertised on the ONC’s website.
If the private or public bid call is addressed to foreign suppliers, then the contracting authority is obliged to advertise the call at least 40 days in advance of the date for opening. In addition, the contracting authority shall advertise the call on the United Nations website called UN Development Business.3
The call for auction shall be advertised on the ONC’s website at least 10 days in advance of the date fixed for the auction.
In case of direct awarding, the contracting authority shall send invitations to at least three suppliers when possible, and make available procurement information on the ONC’s website, in certain cases (see subsection ii, infra, for further details). It is important to highlight that the contracting authority shall consider and evaluate the tenders submitted by those who were not invited to participate in the procurement procedure. Therefore, the invitation to submit offers is only a means of advertising and does not imply an exclusive right to participate in the tender. The advertising notice and the invitations addressed to potential bidders shall contain the following information:
a details of the contracting authority;
b the type and modality of the applicable procurement procedure;
c details of the administrative dossier;
d the cost of the tender specification (if any);
e the place, term and time for purchasing the tender specifications;
f the place, date and time for submitting tenders and for the opening; and
g the e-mail address of the contracting authority.
As explained in Section III, supra, the contracting authority shall adopt the applicable procurement procedure in light of the financial threshold stated by Decree 893/12.
Notwithstanding the foregoing, the contracting authority is always entitled to call for a competitive procedure (i.e., a private or public bid, depending on whether the call is addressed to a determined or undetermined number of potential bidders).
Without prejudice to enforceability of the applicable threshold, in all cases, the contracting authority shall follow the procurement procedure that best contributes to guaranteeing that the contracts to purchase goods or hire services are entered into with the best technology, at the right time and at the lowest possible cost.
To that end, the contracting authority is entitled to adopt any the following types of procurement modalities for competitive procedures:
a Single stage or multiple: the tender or competitive procedure will be single stage when evaluating tenders and qualities of bidders can be done in a single act. On the contrary, the procurement procedure must be implemented in the form of multi-stage when the high degree of complexity of the contract to be awarded justifies adopting two or more phases for the evaluation and comparison of the qualities of the bidders, their business and technical background, their economic and financial capacity and analysis of the economic components of the bids.
b National or international: the procurement procedure will be qualified as national when the invitation is addressed to stakeholders and bidders whose residence or principal place of business is in Argentina, or have a branch duly incorporated in the country. The procurement procedure will be international when, due to the characteristics of the goods to be purchased, the complexity of the service or contract to be awarded, the call is extended to foreign suppliers (i.e., those whose principal place of business is abroad and do not have a branch duly incorporated in the country).
The contracting authority is authorised to award a contract without following a competitive procurement procedure (direct awarding) in certain cases expressly authorised by the GR and Decree 893/12. For instance, the contracting authority may avoid a competitive proceeding when the service to be used or asset to be acquired must be entrusted to companies, artists and specialists who are the only ones who can carry them out. In addition, the contracting authority is authorised to award a contract without using a competitive procedure in the case of repairs of machinery, vehicles, equipment or engines whose disarmament, removal or prior examination is essential to determine the necessary repair. However, no direct contracting may be used for ordinary repairs.
Direct awarding is possible for the procurement of goods or services that are covered by exclusive IP rights provided they have no convenient substitutes. It is also possible to use the direct award procedure in case of failure of a previous tender or competitive procedure or when the contracting authority needs to resolve an urgent or emergency situation provided the existence of such emergency is duly accredited and approved by the highest authority of each government jurisdiction or agency.
Finally, direct awarding can be used in case of contracts entered into between the central government and decentralised governmental entities (i.e., provinces, public universities), as well as between companies in which the government has a controlling interest.
Decree 893/12 provides for different modalities for direct awarding, as follows:
a Small purchases: only applicable when the contract is valued at below 75,000 pesos.
b Procurement based on the unique characteristics of the supplier: applicable when he unique characteristics of the supplier, duly accredited, determine that there is no room for a competitive procedure. The contracting authority shall provide the background proving the scientific, technical or artistic capacity of the supplier.
c Procurement of goods protected by exclusivity rights: applicable in cases of artistic, scientific or bibliographical material protected under intellectual property rights.
d Failure of a previous competitive procedure: the GR requires that there have been calls for at least two competitive procedures before authorising direct awarding due to the failure of bids.
e Urgent or emergency situations: the contracting authority shall prove the existence of objective circumstances that prevent the carrying out of a competitive procedure to satisfy an urgent public need. Delays exclusively attributable to the contracting authority do not qualify as an urgent situation allowing direct awarding.
f Procurement for defence or national security: only the President of the Republic is authorised to use this proceeding, which is available if the transaction has been declared classified.
g Procurement among governmental department or entities: no competitive procedure is required, in principle, when the procurement is addressed to ther governmental departments or entities, including public universities and companies in which the government has a controlling interest and the company provides security, logistics or health services.
Legislation provides for the possibility of using electronic procurement, which means that the selection and awarding may be made in digital format (through the use of electronic records and digital signatures), but always respecting the type of procedure in accordance with the applicable threshold.
iii Amending bids
The principle in this regard is that no amendments that may alter the main aspect of the tender or any of the substantial duties assured by the tenderer are allowed after submission. Therefore, the possibility of altering, amending or complementing an already submitted tender is very limited. In fact, the amendment of tenders is supported only when correcting data or information that is already included in databases of public bodies, or when it does not affect the principle of equal treatment for bidders, which requires that tenders must conform substantially to the procurement documents.
i Qualification to bid
Parties may be disqualified from bidding if they are classed as companies that are not allowed to have contracts with the government according to Section 28 of Decree 1023/01. The following are also disqualified from bidding:
a bidders who have been sanctioned by the ONC for infringements committed in previous tenders or where the government has terminated a previous contract due to the supplier’s fault;
b agents, public officials and their close relatives;
c suppliers that do not meet their tax obligations;
d those convicted of intentional crimes (disqualified for a period equal to twice the sentence); and
e those that are undergoing an insolvency proceeding.
ii Conflicts of interest
According to Decree 893/13, the submitted tender shall be dismissed in case of accurate and consistent indicators that a conflict of interest may have arisen.
iii Foreign suppliers
Foreign suppliers are allowed to submit tenders when the contracting authority calls for an international bid. In some cases the bidding specification may require that international bidders present tenders in association with domestic suppliers. Also, foreign suppliers may be invited to participate in direct awarding if the contracting authority for any reason is to purchase assets abroad.
Foreign suppliers that have already incorporated a branch or a subsidiary in Argentina are also allowed to participate in national bids as explained in Section V.ii, supra.
i Evaluating tenders
The binding criterion for government bodies is to award the contract to the ‘most suitable offer’. To determine this, the GR sets some objective guidelines such as the relationship between the price and the quality offered and the bidders’ economic, financial and technical capabilities. Therefore, the award will not be exclusively based on the most economically advantageous tender, namely, the lowest price. The price is only one of the elements to be considered, since public procurement is aimed at obtaining goods and services with the best technology at the right time and at the lowest possible cost.
The GR specifically states that lawful procurement procedures must comply with equal treatment, transparency and competition principles. The GR is further supplemented by the Act on Ethics in Public Employment No. 25,188, which imposes on all levels and ranks of public officials the duty of observing in all public procurement proceedings the principles of transparency, competition, equal treatment and publicity. In addition, Argentina has signed the United Nations Convention against Corruption ratified through Act No. 26,097 and the Inter-American Convention against Corruption, ratified through Act No. 24,759. Both treaties based on the principles of openness, transparency and non-discrimination are directly applicable to public procurement procedures in Argentina. The United Nations Convention against Corruption also requires the adoption of the necessary steps to establish appropriate systems of procurement, based on transparency, competition and objective criteria in decisionmaking. The application of those principles is also supported by Section 1198 of the Argentine Civil Code, which as an equitable principle, establishes that agreements must be entered into, construed and performed in good faith and pursuant to what the parties intended or could have reasonably intended, if acting with care and foresight. The good faith principle emphasises the importance of ethical behaviour of the parties. Argentine case law and legal authors provide a broad interpretation of the good faith principle, which provides courts with appropriate means to reach fair decisions according to the circumstances of each case.
The GR, as well as case law and relevant legal authors’ opinions, requires the contracting authority to be independent and impartial in selecting the bidders and in the awarding of the contract. This obligation is also reinforced by the application of Section 18 of the Act on Ethics in Public Employment No. 25,188, which establishes that public officers may not accept gifts, donations or rewards, whether of goods or services, or any kind of benefits, by reason of or in the discharge of their duties. Furthermore, the United Nations Convention against Corruption ratified by Argentina through Act No. 26,097 and the Inter-American Convention against Corruption, ratified through Act No. 24,759, are part of the federal legislation that addresses this issue by imposing obligations and recommendations to prevent, detect and deter in a more effective manner the international transfer of illicitly acquired assets.
ii National interest and public policy considerations
Argentina has in place a legal regime destined to grant preference to domestic suppliers. To that end, every tender must be accompanied by an affidavit that certifies the fulfilment of the conditions required to be considered a domestic supplier.
VIII INFORMATION FLOW
i Documents for bidding
Before calling for a competitive procedure the contracting authority shall prepare the applicable tender specifications and approve them by issuing the corresponding administrative act. In addition, those tender specifications are further complemented with the ‘general terms and conditions’, which are a set of rules intended to standardise certain basic requirements with which the government co-contract shall comply (legal capacity, financial ability, etc.). The general terms and conditions are effective once duly approved by the ONC through the corresponding rule-making proceeding.
On most occasions, tender specifications are predetermined by the contracting authority without prior consultation. However, when the complexity of the amount of the procurement so justifies, the contracting authority may allow a preliminary stage, before the call, for comments upon the tender specifications draft. Based on that, the contracting authority shall approve the tender specifications taking into account the comments made for the potential bidders to the extent deemed appropriate. Nevertheless, the contracting authority is obliged to include within the administrative act that approves the tender specifications a reasoned assessment of the comments received during the consultation period.
The above notwithstanding, it should be noted that during all bid procedures there is a specific time period during which bidders may request clarifications or file objections regarding the tender specifications. The contracting authorities must answer these questions, in an impersonal manner, and submit copies of their answers to all bidders. Such answers are construed as amendments to the tender specifications and become mandatory for both contracting authorities and bidders. Once the consultation period expires the bidders may not file new questions and the tender specifications, as amended, become final and mandatory for both bidders and the contracting authority.
ii Procurement procedure
The GR and Decree 893/12 provide for certain stages to guarantee the bidders equal access to information during the procurement procedure. In particular, bidders are allowed to review other bids for two days after the opening. Bidders are also allowed to obtain copies of other tenders at their own expense.
Moreover, Decree 893/13 determines that a large amount of the procurement information shall be publicly accessible through the ONC’s website. Among other issues, the ONC’s website shall contain the following information:
a prior consultation period to make comments on the tender specifications;
b call for tenders including the tender specifications and any other relevant information of the call;
c following amendments to the tender specification its publication (if any);
d minutes of the opening reporting details of the submitted tenders;
e comparative charts of the submitted tenders;
f evaluation report of bids; and
g challenges filed by bidders, etc.Only the stage for bid evaluation is confidential. Therefore, during the evaluation period it is not possible to have access to other tenders or to the procurement records. Afterwards, the majority of the procurement record will be available through the ONC’s website as explained above.
iii Unsuccessful bidders
Under the GR, the contracting authority must notify all bidders within three business days of the evaluation report and the final award. Any applicant may file objections to the evaluation report and ask the contracting authority the reasons for its rejection, and any bidder whose bid was unsuccessful has the right to appeal against such decision.
IX CHALLENGING AWARDS
Bidders may challenge the evaluation. To that end, it is possible to appeal against the review decision by filing a written request for appeal within five days. The contracting authority may require the filing of a bond as a security to guarantee the seriousness of the challenge.
After resolving the challenge, the contracting authority is in a position to award the contract. The contracting authority shall send notices to all bidders informing them on the award.
ii Grounds for challenge
There are no restrictions in place for challenging the award of a bid. Therefore, the unsuccessful bidder or any other aggrieved party can discuss both aspects related to the legitimacy of the procurement or related to the incorrect evaluation or assessment of the tender. Challenges are likely to succeed if there has been an infringement of the applicable regulations.
In general, administrative procedural rules require exhaustion of all administrative reviews before requesting a judicial review. Affected bidders have standing to sue as well as to request the court to stop the procurement proceeding until the final review is made.
It is also possible to file for a full judicial review of the decisions made by the contracting authority within 90 business days. There are special cases such as requests for injunctions or other administrative appeals (10 business days) and judicial summary proceedings for review (15 business days).
The affected bidder must expressly apply for an administrative or judicial injunction either to suspend or to block the continuation of the procurement procedure. This kind of injunction is rarely granted by courts and only proceeds when there is a severe breach of duty by the contracting authority that shows that the procedure can be declare null and void. Otherwise, the affected bidder may be entitled to seek compensation for damages but not to block the procurement procedure or avoid the conclusion of the contract.
One emerging trend in public procurement in Argentina has been the government’s increased efforts to further advance sustainable public procurement and green public procurement. In this regard, Decree 893 set the general principle stating that the ONC will develop mechanisms to promote sustainable procurement to ensure the least impact to the environment, as well as the adequate compliance with health and safety legislation. However, public procurement procedures still need to be amended and updated in order to develop specific sustainability criteria applicable to contracts and government suppliers. Otherwise, the general principle set by Decree 893 will remain as a provision with little effect in practice.
For further information on this topic please contact María Morena Del Río