In the mid 2011, Parliament unanimously passed Law Nº 18.786, which establishes the regulatory framework applicable to the regime that governs the Public-Private Partnership Contracts, which was completed in 2012, through Decree N° 17/2012.
Among the first undertakings to be developed using this mechanism, is one directly related with the Logistics Hub: the work related to the construction, restoration and maintenance of roads, thus aiming to improve the country’s connectivity by land.
PUBLIC-PRIVATE MANAGEMENT CONTRACTS
Public-Private Partnership contracts are those in which a public administration entrusts a third private person the conduction of a comprehensive and integrated activity for a specific period, including, in addition to financing, a number of tasks such as design, construction, maintenance and infrastructure operations.
The sectors of activity likely to develop this type of contract are:
– Roadworks (including rural roads), railways, including ports and airports;
– Construction of energy infrastructure;
– Construction of waste disposal and treatment;
– Construction of social infrastructure, including prisons, health centers, education centers, social housing, sports complex and improvement works, urban fixtures and development.
Contracting procedure:
1. Public or Private Initiative.
2. Previous evaluation (technical, economic, legal and financial analysis).
3. Approval of previous assessment studies (Budgeting and Planning Bureau and Ministry of Finance).
4. Call for public tender; implementation of competitive methods that include bidding and auctions, as well as competitive dialog procedures in the case of more complex projects.
5. Submission of bids in accordance with the pre-established requirements.
6. Examination of the bids submitted, based on the evaluation criteria previously established in the specifications.
7. Granting of bids.
GUARANTEES
Bid Maintenance Guarantee:
Bidders shall present a guarantee for the maintenance of their bid prior to the opening of the tenders, through a deposit either in cash or in government stocks, bank endorsement or bonds, in local or foreign currency that will be expressly stated by the Administration in the specifications. In any case, the guarantees fulfilled need to have at least a 180 day validity.
The guarantee is kept until the guarantee of contract is set up or all the bids are rejected.
Guarantee of Fulfillment of Contract:
The grantee may set up the same guarantee presented for the maintenance of the bid as the guarantee for the fulfillment of contract, or else, proceed to the set up of a new guarantee for the latter purpose. If the modification of the contract entails changes in price, the guarantee needs to be adjusted, to keep the appropriate proportion. The contracting Government Authority will have preference over any othe creditor.
The sanctions regime includes, but is not limited to, damages compensation and the implementation of precautionary measures, as well as the right to withhold payment.
CONTRACT MODIFICATIONS
The General Government/Government Authority may modify the contract, following a report by the Ministry of Finances’ Budgeting and Planning Bureau, with intervention by the Audit Office (Tribunal de Cuentas).
In particular, the General Government may modify the characteristics or the amount of the work or the services hired, to improve or increase the levels of services or technical standards established, or for other duly grounded reasons in the public’s interest. The contractor will have the right to receive appropriate economic compensation for any additional costs derived.
Either party may require the other party to re-negotiate the contract whenever:
– The relevant Government Authority modifies the contract and gives rise to one of the situations below:
– The amendment occurs after the signing of the contract, and it was an unforeseeable modification;
– The modification significantly alters the economic and financial equation of the project;
– The modification is specifically relevant to the scope of the contract.
– Force majeure.
– Occurrence of one of the scenarios foreseen in the contract as grounds for reviewing it, and where the parties fail to reach an accord.
GROUNDS FOR THE TERMINATION OF CONTRACT
– The contract has been fulfilled in conformance with the pre-established terms;
– The contract has reached its due date;
– Unilateral decision for an early termination due to contractors’ failure to meet their duties;
– Bailout decided by the contracting Government Authority, in the interest of the public;
– Inability to comply due to measures adopted by Government;
– Inability to comply due to contractors’ insolvency procedures;
– In the event of any grounds that would prevent/disqualify the contractors from fulfilling their obligations;
– Contractors’ inability to comply due to force majeur or acts of nature;
– Common agreement between the Government Authority and the contractor(s);
– In the rest of the cases especially foreseen in the contract.
CONTROVERSIAL ISSUES
Arbitrage is contemplated in the event of controversies between parties. Parties will agree on the arbitrators in each case; decisions made by these arbitrators will not be subject to appeal.
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