By: Maria Alejandra Tulipano y Gustavo Vega
El Salvador has promoted a public procurement system in a strategic manner to contribute to the achievement of complementary public policy, social, environmental, and innovation objectives.
The implementation of a new regulatory framework, and especially in this article in which reference is made to the Public Procurement Law in substitution of the LACAP, generates great challenges, both for the Public Administration and for the administered, especially if the legal framework linked and necessary for its application is still in its formation process (Law of the National Directorate of Public Procurement, Law of creation of the Court of Appeals of Public Procurement).
In this first edition we will address some questions related to the Public Procurement Law (LCP) that comes into force this March 10, 2023. On this occasion we have the intervention of our partner, María Alejandra Tulipano and our associate, Gustavo Vega, both lawyers are related daily with the practice in the regulated sector and foreign investment, as well as with contracts with the State.
What has motivated the recent Public Procurement Law (LCP)?
According to our partner, María Alejandra Tulipano, in recent years, according to an IDB study, it has been shown that Latin America has made profound changes with the purpose of advancing in the efficiency and modernization of public procurement, in such a way that it contributes to the development, reduction of discretionarily and the effort to guarantee good market practices.
In addition, the tendencies to comply with these principles have led to the adherence of more procurement mechanisms than those historically recognized to achieve the objectives of transparency, competition and agility.
Based on studies conducted by multilateral organizations, the most commonly used mechanisms in the region are still the traditional ones, such as public bidding (as a general rule) and direct contracting, where electronic contracting for the procurement of goods and services with uniform conditions is an agile mechanism that countries have used to help ensure greater transparency, efficiency and effectiveness.
El Salvador currently joins this trend, since public procurement has been governed since 2000 by the Public Administration Procurement and Contracting Law (LACAP), approved by Legislative Decree (DL) No. 868, published in the Official Gazette No. 88 Volume No. 347 dated May 15, 2000. Said law has undergone eleven (11) amendments since its entry into force, the last one in 2019. Its regulation was issued in the year 2005, which was repealed with the implementation of a new regulation during the year 2013 issued by Executive Decree No. 53 published in the Official Gazette No. 71, Volume 399 dated April 19, 2013, which underwent two (2) reforms, being these in the years 2016 and 2020.
From the foregoing, it can be observed that the applicable regulations already have twenty years (20) of validity and implementation, so the enactment of a new law on the matter adds to the modernization efforts that the Public Administration has made in recent years, in which laws have been issued that seek the elimination of bureaucratic barriers and encourage the use of information and communication technologies as tools to simplify actions and optimize resources. An example of this is the Administrative Procedures Law, in force since 2018, as well as the Regulatory Improvement Law, in force since 2019 whose objective is for the Public Administration to eliminate demands and requirements that, without basis, or departing from technological platforms, affect the business climate and competitiveness in the country; o the Law for the Elimination of Bureaucratic Barriers, also in force since 2019, whose purpose is to eliminate bureaucratic barriers, lacking legal basis and/or reasonableness, which restrict or hinder the access or permanence of economic agents in the market, seeking an efficient provision of services by the entities of the Public Administration.
This new regulatory framework introduces aspects such as:
✔ The concept of innovative procurement for the contracting of works, goods and services, which, according to the IDB study mentioned above, is a method already proven and recognized as good practice at the international level.
✔ The incorporation of Information and Communication Technologies (ICT) in contracting processes (electronic contracting, the replacement of physical documents with electronic verifications), to make process management more efficient and effective and ultimately the administration and reasonable use of public resources.
✔ The obligatory nature for anti-bribery certification and compliance officer for public institutions, which will allow institutions to have mechanisms to prevent, detect and respond to possible bribery behaviors, as established in the procurement regulations of international organizations.
✔ The law highlights the creation of special procurement procedures, such as online contracting, which will generate price advantage in the market. It also highlights the electronic catalog derived from the framework agreement and the reverse auction, which become innovative mechanisms and modernize the State.
For direct contracting with urgency qualification, the requesting institution itself will declare the urgency. This aspect is left to the discretion of the institutions and in a subjective manner, being understood as a violation of the principle of competition.
An aspect that could be considered ambiguous in the wording of the LCP are the special rules for micro, small and medium enterprises, since it is not established in an imperative manner, as in the LACAP, that at least 25% of the budget for procurement of goods and services must be acquired or contracted to this sector, which could discourage the participation of these in the procurement processes. Similarly, a setback is identified in the gender gap, since the wording of the new law does not guarantee that at least 10% of the procurement budget will be allocated to contract MSMEs whose ownership, majority shareholding or legal representation is held by women. It is important to clarify that all of this could be included in the regulations currently being implemented by the public administration.
What are the guiding principles of the new Public Procurement Law?
According to our associate, Gustavo Vega, unlike the LACAP, the LCP in its article 5 incorporates in its principles, aspects related to related issues linked to the current historical moment, since it includes the principle of technological validity, as well as the principle of social and environmental sustainability that seeks environmental and social protection and human development. Another aspect to highlight is the inclusion of the principle of economic equilibrium that seeks, for both parties, to avoid a financial impact, so that adjustments may be made to the economic terms of the contract whenever there is a cause not attributable to the contractor or there are fortuitous causes or force majeure. This may motivate the private sector to participate in contracting and procurement processes, since, in the spirit of the law, companies will be protected in the profitability of their investment in the face of events that can be justified and are not attributable to it.
An analysis of the principles under which the LCP is governed shows an increase in the exclusions for the application of such law, which could be considered by the public opinion as contrary to the principle of transparency. Such is the case of the strategic projects of public utility that can be defined by the Council of Ministers, since it is identified that these will enjoy greater flexibility, for which it will be convenient that the Public Administration, in its regulation process, establishes processes in line with international regulatory standards of transparency and competition, especially in international tenders that could be applied to larger projects.
What organic changes at the level of the governing body does the new Law establish?
María Alejandra Tulipano comments that the LCP establishes the creation of the National Public Procurement System (SINAC), Art. 6, which includes all the necessary elements for the administration, implementation, coordination, operation and follow-up of government procurement. This replaces the Integrated Procurement and Contracting System of the Public Administration (SIAC), contained in Art. 10 of the LACAP.
The members of the SIAC will be:
– National Directorate of Public Procurement (DINAC):
It is established as an autonomous institution that replaces the current Public Administration Procurement and Contracting Regulatory Unit (UNAC). Art. 7; this will be the governing entity in public procurement at the national level and its powers are contained in its law of creation in addition to those provided for in the LCP.
– Public Procurement Units (UCP):
Institutional unit responsible for carrying out the management of procurement processes, goods, works and services. It replaces the current institutional procurement and contracting units (UACIs). Art. 8.
– Requesting units, financial units or whoever takes their place and other actors involved in the public procurement cycle such as suppliers, bidders and contractors, legal framework, and the corresponding technical provisions.
– Electronic Public Procurement System (to be developed in the following section).
What is the electronic public procurement system?
Gustavo Vega comments that the computer system will be called COMPRASAL and will be centralized. It will be accessed through the Internet and will allow the exchange of information between the participants of the process and the contracting institution in real time or according to the nature of the process, as well as the publication of information that must be registered or published within a reasonable security environment, as established in Article 10.
This system will be administered by DINAC and will be mandatory for all institutions. All procurement and contracting information will be recorded in accordance with the principles of the LCP and will be developed and implemented gradually, through evolutionary phases. DINAC will dictate the rules for its operation and other associated aspects.
One element of COMPRASAL will be the National Registry of Procurement and Contracting of the Public Administration which, in turn, will contain the single registry of state suppliers and the registry of sanctions, process information and other information related to public contracting, facilitating the recognition of the bidders’ market, as well as participation opportunities for them, in accordance with what is established in Article 11.
Can you tell us more about the types of registries?
There are two types of registries:
- Single Registry of State Suppliers – RUPES 2.
The RUPES is a national and centralized registry in which all natural and legal persons wishing to participate in all procurement processes must register, except for purchases for emergencies, urgency or low amounts, as detailed in the LCP, according to Art. 12.
- Sanction Registry.
It shall contain the list of disqualified and incapacitated bidders and contractors to bid and contract with the entire public administration. Art. 13.
What are the methods of public contracting established in the new regulations?
María Alejandra comments that the LACAP established three forms of contracting, these being bidding or public bidding, free management and direct contracting. In the LCP that comes into force this March 10, 2023, the methods have been expanded, dividing them by type of object to distinguish the selection processes of the contractor to be awarded according to the following:
- when they are works, goods and non-consulting services will be four:
- Competitive bidding
Procedure whose purpose is to find the most advantageous offer in attention to the state interests and the common good pursued by the function of the Public Administration, art. 39. - Price comparison.
Method of agile and competitive contracting based on comparisons of quotations obtained through an open call for bids and inviting a minimum of three bidders to ensure price competition, Art. 40. - Direct contracting.
It is a particular and exceptional contracting method that may be carried out without generating competition depending on the cause. It requires the solicitation of a bid, award and execution of a contract or purchase order, Art. 41. - Low amount
It is a particular and exceptional contracting method that may be carried out without generating competition according to the cause, requiring a bid request, award and subscription of a contract or purchase order, which may be paid from working capital or petty cash, Art. 44.
When they are consulting services:
The new consulting methods incorporate selection criteria based on the needs of each institution, which will be used in those services of a special and intellectual nature, among these are the design, analysis, data collection, research and studies for the performance of any technical work, study and assistance in the drafting of projects and preliminary projects. It consists of seven contracting methods, Art. 60, being the following:
– Selection based on quality and cost.
– Selection based on quality.
– Selection based on fixed price.
– Selection based on lowest cost.
– Selection based on consultant qualifications.
– Sole source selection.
– Selection based on individual consultants.
Special Procedures
In addition to the methods described above, special procedures are created linked to the principle of technological innovation that seeks to improve efficiency and effectiveness in the procurement processes of the Public Administration. These are similar to the modernization processes in Latin America:
– Online Purchases
There is no limit of amount, payment by credit or debit card, there is no standard document or application document and there is no administrative appeal. Receipt of the goods signed only by the institutional representative, Art. 71.
– Electronic catalog derived from framework agreement
Process carried out by means of a call for applications by DINAC in which suppliers that comply with the terms and conditions established in an application document are registered, selected, and sign an agreement. When the agreement becomes effective, the institutions may choose directly from the catalog the product that is available and issue a purchase order. (Art. 72).
– Electronic reverse auction
Procurement of goods through an electronic award platform. Private platforms such as BOLPROS may also be used (Art. 73).
What transcendental changes are there regarding the Evaluation Periods in the new Law?
Gustavo Vega tells us that unlike the LACAP, the LCP establishes fixed times for the evaluation of bids for the following contracting methods:
To determine the most advantageous offer in competitive bidding, as well as consulting services, the Public Administration will have a period of fifteen days within the procurement cycle as shown below:
For price comparison methods, direct contracting and electronic reverse auctions, there will be a period of eight days for evaluation, as shown below:
The deadlines may be extended up to a maximum of fifteen days for justified causes, as established in Article 22 of the LCP.
The incorporation of specific deadlines benefits the budget execution since it forces the Public Administration to carry out expeditious processes.
In our next edition we will address the aspects inherent to means of challenge, the new system of fines, and other relevant aspects of the regulation. Our interdisciplinary team is available to provide detailed information on the new Public Procurement Law.
Conclusions
For the purposes of this publication, we would like to point out that since the mechanism for the elaboration and consultation of the regulations for the application and development of this Law is in the process of formation and publication, the scope and procedures that will regulate the execution of the procurement cycle are still pending to be determined.
On the other hand, the administration will make the pertinent efforts to guarantee the effective implementation of the new tools that this law offers, since by incorporating concepts oriented to the modernization of the Public Administration, such as sustainable purchases, innovative purchases or online purchases, among other concepts, which are aided and complemented by information and communication technologies, the commitment is even greater, in order to guarantee the institutionalization of access to ICTs as public policy, based on the fact that according to World Bank data for the year 2020 only 55% of the population will use the Internet.
If the general population’s access to ICTs is not guaranteed, it would generate exclusion and limit participation in contracting processes. Therefore, the Public Administration may even ensure that, although modernization is sought through technological means, an alternative means is always found so that those who do not have access to it may participate in free competition.
Finally, it is considered essential for the Public Administration to establish integrity programs or certifications within the institutions to identify and prevent acts of corruption, promoting a culture of transparency and access to information.