Public infrastructure tenders: toward a competitive model

Covid-19 has prompted an economic crisis in countries and for this reason governments have had to intervene with different measures, such as incentivizing investment in public infrastructure, for example. Chile is no exception. In fact, the "Step by Sep, Chile Recovers" plan was announced, which aims to execute a total of US$34 billion in 2020-2022 - of which US$9.36 billion are to be undertaken by Public Works - with the impact that this will have on the number of projects to be tendered.

In the tenders held by the state administration, the relevant economic agent and market will be the one affected by the goods or services tendered, therefore making it imperative that these processes consider the principles of free competition from their design to avoid introducing distortions that prevent, restrict, or perturb it.

Thus, there is a need to focus attention on the tender assessment criteria, which have been accused of hampering free competition by creating artificial entry barriers, the most criticized of which have been [the bidders] experience and economic capacity. In this way, it would appear to be necessary for the tendering agencies to integrate competition criteria to ensure the fulfillment of the public policy objectives underlying the process and the proper investment and execution of public funds so that traditional criteria do not end up excluding the benefits of a truly competitive process ex officio.

These matters are of special importance if we consider Chinese construction companies’ growing interest in participating in the tenders for infrastructure projects in sectors such as highways (Highway 5 South, from Talca to Chillán) and hospitals (Maule Hospital), among others, which could be joined by new local actors who want to diversify their activities.

We have a great opportunity in this area. The Free Competition Defense Court (TDLC) recently began a consultation process on the design of terms and conditions for tendering the construction of health infrastructure, in which it proposes not just analyzing the assessment criteria of the specific terms, but also issuing general instructions to set objective, general, uniform and nondiscriminatory conditions as a way to foster participation by the largest possible number of bidders in the health facility tender process, guaranteeing the entry of new players in the market.

If successful, rules would be drafted to oblige public agencies to incorporate competition criteria into future tender processes, whose compliance is overseen by the FNE and whose noncompliance can be sanctioned.

The door is opened to discuss the criteria requirements that must be considered to participate and assign infrastructure tenders and which may constitute legitimate entry barriers to ensure the construction quality of the works tendered, in addition to the fulfillment of the contract, establishing a trade-off in the way that scores are assigned to factors and their relative weight.

The Court has already invited the Health Ministry, the Public Works Ministry, and the Chilean Chamber of Construction to participate by submitting evidence to the National Economic Prosecutor. However, it seems essential that the largest possible number of visions and interests be considered to account for different national and international realities and experiences.

Given the importance of having public infrastructure, the amounts involved and often the duration of the concession operating period, there is a need to pay close attention to how this process unfolds in the competition court and the decisions that will be made, given that mechanisms like the one chosen by the Court could become criteria to be implemented in other tender processes aimed at improving our country's infrastructure.

*Column originally published in latercera.com