Law of 25 January 2023 No. 653 “On Public Procurement” (Ley De Compras Públicas, hereinafter referred to as the Law on public procurement or the Law) substitutes previous Law of 5 April 2000 No. 868 “On Public Procurement and Public Contracting” (Ley de Adquisiciones y Contrataciones de la Administración Pública) and introduces the following novelties:

1. Area of regulation.

Certain cases of public procurement of goods, works and services have been excluded from the area of application of the new Law, including:

• contracts between public bodies and organisations with the latter being controlled directly or indirectly by the former;
• contracts concerning the acquisition or rental of real estate;
• contracts regarding parametric insurance with international organisations;
• contracts providing for the payment of membership fees and/or the acquisition of subscriptions if their payment and/or acquisition is duly justified by the public body in the framework of fulfillment of its functions;
• procurement for strategic projects of public interest implemented by public bodies;
• procurement by the Directorate of Municipal Works (Dirección de Obras Municipales).

2. Single source procurement.

Also, the list of situations where the conclusion of single source public procurement contracts is possible has been expanded by incorporating in it:

• extension of the effective contract with the same contractor if the initial contract did not include the full amount of goods, works and services that the body needed due to financial reasons;
• acquisition of arms, materials and specialized equipment to fight crime;
• procurement of goods, works and services to standardise software, equipment, its supplementary or spare parts to ensure its compatibility with the existing systems that were purchased from the same contractor;
• inevitable lack of medical goods and services;
• repeated procurement of goods, works and services immediately after the first procurement procedure is recognised as invalid (the previous version required that the procurement procedure is recognised as invalid twice).

3. Institutional organisation of the public procurement system.

In order to enhance effectiveness of public procurement, the Law provides for the establishment of a comprehensive National Public Procurement System (Sistema Nacional de Compras Públicas – SINAC) that would include:

• the National Directorate of Public Procurement (Dirección Nacional de Compras Públicas – DINAC);
• public procurement units (Unidades de Compras Públicas) in every public body or entity;
• units within public bodies and entities and/or organisations subordinate to public bodies and entities responsible for defining the needs of the body or entity for goods, works and services (Unidades Solicitantes);
• financial or equivalent divisions of public bodies and entities responsible together with public procurement divisions for annual planning of procurement and allocation of funds to the organisation of procurement procedures, payment under contracts and the like;
• other subjects of public procurement, including bidders, contractors and subcontractors.

Under the Law on public procurement and Law of 25 January 2023 no. 653 “On the Establishment of the National Directorate of Public Procurement “(Ley De Creación De La Dirección Nacional De Compras Públicas) the DINAC will be responsible for:

• exercising control and monitoring of compliance of public bodies and organisations with the provisions of the Law on public procurement, receiving reports of violations and taking corrective action, in particular, by suspending the selection of contractors until the concerns are eliminated or motivated;
• holding natural and legal persons liable for violating provisions of the Law and submitting information on the detected indicators of crimes in procurement to the attention of the Prosecutor General’s Office;
• managing the electronic system of public procurement (Sistema Electrónico de Compras Públicas – COMPRASAL); in this context, the DINAC will be responsible not only for the functioning of the system but also for the procedure of its functioning: in exceptional cases the Directorate is entitled to adopt special procedures for submitting information to the COMPRASAL with no need to disclose data on specific public procurement procedures;
• drafting and publishing guidance on public procurement, functioning of the SINAC, other issues, standard document forms for public contracts and other materials;
• providing advice and technical assistance in public procurement;
• submitting recommendations on how to reform public procurement regulation policy to the Council of Ministers on an annual basis etc.

Additionally, the Law provides for the establishment of the Public Procurement Tribunal (Tribunal de Contratación Pública) responsible for processing reports of violations, including corruption, detected in the course of procurement procedures.

4. Electronic platform.

Furthermore, an electronic public procurement system (COMPRASAL) is established. It will operate in conjunction with the Integrated Financial Management System (Sistema de Administración Financiera Integrado – SAFI), and the systems at the municipal level that are not subject to the SAFI.

All public bodies and entities and other subjects participating in public procurement will be obliged to use the COMPRASAL. These will be, in particular:

• the National Register of Procurement and Contracts of the Public Administration (Registro Nacional De Adquisiciones Y Contrataciones De La Administración Pública);

• the Single Register of Public Contractors (Registro Único de Proveedores del Estado – RUPES) where all natural and legal persons participating or intending to participate in public procurement (except for emergency and small procurement) must register. The register will contain, as a minimum, information on the qualifications of contractors, previous contracts concluded with them, violations committed etc.;
• the Register of Sanctions (Registro de Sanciones) that includes information on liability of contractors for using anti-competitive practices and corruption.

5. Compliance.

All bodies and divisions established in line with the Law must get certified in anti-corruption in accordance with the existing international quality standards within three years from its adoption (although the Law does not specify which standard is to guide these activities, it can be assumed that it is ISO 37001 Anti-bribery management systems).

Other organisations participating in public procurement must appoint an officer responsible for monitoring compliance with the legal requirements in public procurement.

The Law has been sharply criticised, primarily due to the exclusion of certain types of procurement from the area of its regulation: it is stressed that this approach increases considerably the risks of corruption, as the relevant procurement procedures have extremely low requirements with regard to transparency of contacting and there is actually no competition in the selection of contractors.

Experts are particularly concerned about the exclusion of such a broad and subjective category as contracting within strategic projects from the scope of application of the Law. It seems that this loophole can be exploited by dishonest customers to conclude a broad range of contracts, including expensive ones, without holding competitive procedures to select the contractor and circumventing further oversight of spending of public funds.

Moreover, the possibility to conclude single source procurement contracts immediately after the initial procurement is recognised as invalid, as provided for by the Law, seems to be ambiguous: some experts highlight that this can increase abuse associated with the conclusion of contracts with “loyal” contractors, including those who are ready to pay a “corruption rent” to officials of the customer to win tenders.