Procurement process

Relevant procedure

What procedures normally apply to a PPP procurement? What evaluation criteria are used to award a PPP transaction?

The procedures that apply to a PPP procurement are divided into two different types of initiative: public initiatives and unsolicited proposals. Any project that requires more than 30 per cent of national or subnational budgetary disbursements must be selected using the public initiative procedure. The threshold for road concessions is 20 per cent.

In the first case, the procurement process must be granted by a public tender. In this process, the entity may use a pre-qualification process, establishing a limited group of bidders to participate in the selection process. The public entity inviting tenders for such projects provides the following information:

  • preparation of studies: technical, economic, environmental, land rights, financial and legal;
  • description of the project: design, construction, maintenance, duration, financial model and phases;
  • cost or profit assessment, specifying social, economic and environmental impact;
  • threat and vulnerability analysis; and
  • typology, estimation and allocation of risks, potential contingencies and matrix of associated risks.

Unsolicited proposals are divided into two different procedures that lead up to the tender, depending on whether the unsolicited project requires public resources or not. If the project requires less than 30 per cent of centralised national government disbursement (20 per cent for road concessions), the process must be granted using a public tender. In this case, the PPP Law grants the original proponent of a project a qualification bonus that ranges from 3 to 10 per cent over its initial qualification, depending on the size and complexity of the project.

On the other hand, if the unsolicited proposals do not require public funds, the procurement procedure is the abbreviated selection of minor account as stated in Law No. 1150/07, which can be defined as a shorter-term public tender. In this case, the original proponent of the project is given the right to improve the subsequent better offer submitted by a third party during the tendering process.

In relation to the evaluation process, successful bidding contractors are selected considering the following evaluation criteria:

  • formal requirements: legal, financial capacity, investment and structuring experience; and
  • assessment factors: service levels, quality standards, current value of expected revenues, lower level of state funding and consideration offered by the bidder.
Consideration of deviating proposals

May the government consider proposals to deviate from the scope or technical characteristics of the work included in the procurement documentation during the procurement process, without altering such terms with respect to other proponents? How are such deviations assessed?

The private party may present proposals that deviate from the scope or technical characteristics of the procurement documentation, but according to article 12.2 of the PPP Law the government may only evaluate proposals based on the criteria established in the procurement documentation or scope statement. In other words, proposals that deviate from the scope of the procurement documentation may be presented, but the deviation will not constitute a factor for evaluation by the government.

Unsolicited proposals

May government parties consider unsolicited proposals for PPP transactions? How are these evaluated?

Private investors may structure projects at their own risk and bearing all structuring costs, and then submit these to the public authorities in strict confidence. The preparation process follows with a two-stage viability test.

Pre-feasibility

The sponsor must provide a complete description of the project (minimum construction design, operation and maintenance, organisation and exploitation), indicate the scope of the project, prepare demand studies and identify sources of financing. Once the project is submitted, the state entity has three months to assess the project’s viability. If its decision is favourable, the private entity may continue to the second phase (feasibility), although this does not mean that the state has awarded the project to the sponsor.

Feasibility

During this phase, the sponsor must:

  • provide a detailed financial model;
  • describe the phases and duration of the project;
  • submit a risk analysis and environmental, economic, social impact, land rights, financial and legal viability studies;
  • indicate the value of the structure;
  • provide documents regarding its legal and financial capacity and experience; and
  • provide a copy of the contract template.

If the sponsor is not awarded the project, the costs for compiling the studies will be covered. Once the project is submitted, the public entity has six months to decide whether the project is viable or not. This period may be extended for three more months. If the project is viable, the public entity will inform the sponsor of all the conditions for accepting the proposal, including the costs of the structuring studies. The sponsor has two months to accept the conditions or to suggest alternative options. If the parties fail to reach an agreement within these two months, the project will be rejected.

Government stipend

Does the government party provide a stipend for unsuccessful short-listed proponents or otherwise bear a portion of their costs?

In case the originator of a private PPP is not chosen for its execution, the awardee and not the government party must pay the originator the cost of all the studies made for structuring the project, determined by the government party. This is the only type of stipend that the unsuccessful proponent shall receive.

Financing commitments

Does the government party require that proposals include financing commitments for the PPP transaction? If it does not, are there any mechanisms during the procurement process to ensure that the applicable PPP transaction, once awarded, is financeable?

In Colombian law, the government body requires that every proposal includes documents that detail the financial capacity of the private party, or its capacity to obtain funding for the project and investment experience (project finance). The government body shall bear this in mind while evaluating the proposal. But these documents are not necessarily required to be commitments.

One way in which to ensure that the PPP transaction, once awarded, is financeable, is to add a clause to the contract specifying that failure to obtain the financial closure required will be deemed a breach of the contract, causing termination of the PPP agreement.

Legal opinion

May the government ask its counsel to provide a legal opinion on the enforceability of the PPP agreement? May it provide representations as to the enforceability of the PPP agreement?

There is no specific obligation for the government party to ask for a legal opinion on the enforceability of the PPP agreement. Nonetheless, Law No. 80/93 establishes that the attorney general’s office may intervene in the selection process or execution of the agreement to ensure enforcement of the law. The reason behind this is that most government entities have a legal department that participates in the PPP agreement process.

Restrictions on foreign entities

Are there restrictions on participation in PPP projects by foreign entities? May foreign entities exercise control over the project company?

According to Law No. 80/93, which applies to what is not regulated by the PPP Law, foreign entities are welcome to participate in PPP projects with no restriction. In fact, according to article 20, foreign proponents shall receive the same treatment as domestic ones. Therefore, foreign entities may exercise control over the project company.