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Significant Reforms in Public Procurement: A Move Toward Transparency and Efficiency

Atty. Daniela Bedoya M.

Head of Public Procurement Department

 

From Meythaler & Zambrano, we are pleased to share the latest legislative developments that directly impact the landscape of public contracting in Ecuador. On February 8, 2024, the Legislative Assembly approved the Corruption Combat Financing Code: Economic Resource Saving and Monetization Act. This law introduces significant modifications to the National Public Contracting System, which are briefly described below:


Strengthening of the Public Contracting System

This reform introduces additional objectives to strengthen the National Public Contracting System, focusing on the prevention of money laundering, the fight against corruption, and the laundering of capital. For example, it specifies that the National Public Contracting Service (SERCOP) must provide detailed information on a monthly basis about contract awards, as well as about personnel who have worked in SERCOP, to the Financial and Economic Analysis Unit, for the purpose of integrating this information into its assessments.


Ten Highlights:

  1. Citizen Surveillance: The creation of the Anti-Money Laundering and Anti-Corruption Unit, along with the formation of citizen observatories, ensures continuous and effective monitoring.

  2. Innovations in the Special Regime: The reform establishes a new specific procedure for acquisitions related to defense, security, and social rehabilitation, which can be used by institutions such as the Armed Forces and the National Police.

  3. Limits on Inter-Administrative Contracting: The law is modified to prevent the abuse of contracting among different sectors of the government, known as inter-administrative contracting, ensuring it is not used to evade legal procedures. It specifically prohibits public companies participating as suppliers in inter-administrative contracting from forming associations or investing in private companies, whether national or foreign.

  4. New definitions and publicly available information: The reform updates the definitions of collusion and connection in contracting. It establishes that the offers presented (after evaluation) and the documents generated in the contracting process must be publicly accessible, except those related to critical areas such as defense and national security, which remain confidential for security reasons.

  5. Validation of Errors and Pertinence Report: When there are doubts about whether or not to correct an offer due to present errors, the decision should be to proceed with its correction. This principle, known as "in dubio pro administrato", seeks to favor the administered (in this case, the bidder) in the face of uncertainty, applying uniformly to all bidders who have made the same mistakes. Additionally, the reform eliminates the need to send the pertinence and favorability report to SERCOP, which was previously a mandatory step. It is also not required to notify the General State Prosecutor's Office if an entity does not correct the observations made by the General State Comptroller's Office to continue with the process of obtaining this report.

  6. Restrictions on the Award of Contracts until Provisional Receipt of the Work: The contractor who has been awarded a contract to carry out a work through a tender cannot receive another contract from the same governmental entity before obtaining the provisional receipt of the previous work. This applies whether the contract was won individually by the supplier or in collaboration with others, in the form of a consortium. Additionally, it specifies that the process to obtain contracts of lesser amount must be quick, clear, and encourage the participation of different suppliers, thus ensuring transparency and competitiveness in public contracting.

  7. Introduction of the Engineering, Procurement, and Construction Mode: The reform introduces the integral contracting by fixed price in infrastructure projects through the engineering, procurement, and construction (EPC) mode. This mode allows grouping in a single contractor the responsibilities of studies, design, supply, and construction of a work, offering a fixed price and term for its execution. To opt for this mode, it is necessary to demonstrate a series of requirements, such as the advantages compared to traditional contracting. Exceptionally, this mode can also be used in water and environmental sanitation infrastructure projects.

  8. Formalities in the Subscription of Contracts: It specifies that certain contracts will require formalization through a public deed, according to the nature of the contract or express provision of the law.

  9. Adjustments through Modificatory Contracts: The subscription of addenda to adjust the initial contract in the face of unforeseen events or technical difficulties is allowed, without altering the object, scope, price, or term of the original contract.

  10. Regulation of Collusion and Arbitration: The law establishes the possibility of suspending contracting phases in the face of indications of collusion and regulates the use of arbitration and dispute resolution boards for solving controversies.


This summary briefly presents the changes introduced by the new legislation, relevant in the legal framework of public contracting. For more information on how these reforms may impact your projects and operations, do not hesitate to contact us.



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Legal disclaimer

The content of this blog is provided for informational and educational purposes only and should not be considered legal advice. Regulations in Ecuador are subject to changes and updates that may affect the applicability and accuracy of the content published here. We do not guarantee that the information presented is accurate, complete or current at the time of reading. Therefore, past postings should not be construed as necessarily reflecting current regulations. We strongly recommend that you consult with our qualified attorneys for specific and personalized advice.

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