Castellán

On September 19, 2002, when Uruguay was just beginning to emerge from the greatest financial crisis in its recent history, Law No. 17,555 was published in the Official Gazette, better known as the "Economic Reactivation Law". As its name indicates, through this law a series of measures were established to neutralize the effects that the recession was having on various sectors of our economy.

Among these measures, the one contained in Article 19 of the Law stands out, which established a new regime of initiatives coming from the private sector for the execution of public works and the provision of services, through the concession modality or others provided for in our regulations, also extending the mechanism to the entire Uruguayan State. The legal norm was later regulated by the Executive Branch through Decree No. 442/002, published in the Official Gazette on November 19, 2002. In turn, said Decree was modified in its wording by Decree No. 102/018, recently issued on April 19, 2018.

What is a private initiative?

The private initiative is the mechanism by which the aforementioned rules enable any private person, physical or legal, national or foreign, to present a project through which they intend to satisfy the detected need, whether it is a public need or a need of a public administration.

 

What can be the object of a private initiative?

According to Article 19 of Law 17,555, the private initiative can have as its object activities that can be carried out directly by the State or concessioned, while Article 3 of Decree 442/002 more specifically establishes that under this regime, the purchase, execution, repair or conservation of public works, concession or provision of services and/or goods may be proposed. As can be seen, the object of private initiatives can be very broad and diverse.

What is a concession?

The concession is a contract through which a state agency (called the "grantor") entrusts a third party (called the "concessionaire") with the construction and/or maintenance of a public domain asset (public works concession) or the management of a public service (public service concession) at its sole cost, allowing, as a counterpart, the collection of a fee from those who use the asset or the public service, for a specified period of time.

In Uruguay, the public works concession is the modality under which a good part of the road infrastructure network operates, where the construction and maintenance of the main national routes are the responsibility of concessionaire companies that amortize their investment through toll collection. On the other hand, the most outstanding example of a public service concession in our country is constituted by the collective passenger transport by land, in which the different regular service lines are transferred by both the different Departmental Governments (at the departmental level) and the Ministry of Transport and Public Works (at the interdepartmental level) to different concessionaire companies, which apply the service tariff to the passengers who use it.

Its particularity consisting in the fact that the financing for the execution of the public work or the provision of the public service comes from the private entity in charge of it (a characteristic that is also present in Public-Private Participation contracts) explains why the regulation on private sector initiatives has proliferated in a national and regional economic context unfavorable, in which naturally the State seeks to retreat and reduce its budget as much as possible.

What cannot be the object of a private initiative?

On the contrary, those works or services that are already under study by the state agency to which the proposal is addressed at the time of submission cannot be the object of a private initiative.

Likewise, it goes without saying that those services that can only be provided by the State exclusively cannot be the object of private initiatives, either because they constitute essential services (for example, public security or national defense) or because even being public services -and therefore, could be concessioned to a private entity-, a constitutional or legal norm imposes their direct and exclusive provision by the State (for example, the service of supplying drinking water).

What are the benefits received by the promoter of the private initiative?

If the initiative is accepted by the state administration to which it is addressed, the promoter will receive different benefits, depending on whether they submit an offer or not in the subsequent competitive contracting procedure.

If the promoter participates in the subsequent competitive contracting procedure, they will enjoy the following benefits:
- They will not have to pay the price of the bidding documents for the competitive procedure.
- They will be entitled to benefit from the evaluation of their offer by a minimum of 5% of the offered value, which can reach a maximum of 20% if at the date of the submission of the initiative there was a resolution of the head of the agency declaring interest in the concession of the service or asset, published in the Official Gazette for more than 60 days.

If, on the other hand, the promoter does not participate in the subsequent competitive contracting procedure, their only benefit will be the right to compensation equivalent to the costs incurred in the stage prior to the procedure and that can be proven. This compensation must be paid by the successful bidder of the competitive procedure.

 

What is the procedure like?

A) Presentation of the initiative
As established by Decree 442/002, regardless of the state agency to which the initiative is addressed, it must be submitted to the Presidency of the Republic, unless it refers to goods or services for tourism, in which case the proposal may be submitted to the Ministry of Tourism or to the corresponding Departmental Government.

According to the provisions of articles 4, 6, 7, and 8 of Decree 442/002, the initiative must contain:
- Project description at the profile level, with the following elements: type and name of the project; geographical location and area of influence (if applicable); land, ownership, and possible need for expropriation (if applicable); description of the works and/or services; estimated investment; income, estimated operating and maintenance costs; financial analysis; need for contributions of goods or services by the State or third parties. This, without prejudice to all the documentation that, in the promoter's opinion, contributes to clarifying the content of the initiative.
- Cover letter from the promoter, containing the following information: name, actual address, registered address, sworn statement about the veracity of the data provided, acceptance of the legislation and Courts of the Republic, declaration of knowledge and acceptance of the provisions of Decree 442/002, representative's details, and documentary evidence of the representation.

Likewise, the proponent may provide and prove all their relevant background.

 

B) Opening of the initiative
The opening of the initiative will take place on the date and time to which the promoter must have been previously summoned. At this event, the proposal, as well as the participants, compliance with the formal requirements, and any clarifications or reservations that the interested parties wish to make, will be recorded.

C) Referral of the initiative to the corresponding agency
Once the initiative has been opened, except in cases related to tourist goods or services, it will be sent from the Presidency of the Republic to the agency that corresponds according to its purpose. In the case of initiatives related to tourist goods or services, the recipient of the initiative (Departmental Government or Ministry of Tourism, as seen) must process it jointly with the agency in charge of the asset or service.

D) Examination of the initiative
Once the initiative is received, the receiving agency will have a period of 90 calendar days, counted from its receipt, to examine it, and until it is accepted, all information related to the proposal will be confidential.

E) Acceptance of the initiative
If the state administration accepts (totally or partially) the initiative, it will also lift the confidentiality of it and will require the promoter to carry out feasibility studies.

F) Feasibility studies
The feasibility studies must be carried out by the promoter at their sole expense but controlled by the state administration. If the promoter does not carry out the feasibility studies, the administration may carry them out itself or hire a third party to do so, but the promoter will lose all rights to the benefits established in this regime.

G) Call for competitive contracting procedure
If the state administration approves the feasibility studies carried out by the promoter, it will have a period of 120 calendar days to call for a competitive procedure in order to select its co-contractor for the execution of the project. In this case, the private initiative presented by the promoter is automatically transferred to the administration. On the other hand, if the administration does not call for the competitive procedure within the indicated period, the promoter will retain all rights over the initiative for a term of 2 years.

H) Development of the competitive procedure
The competitive procedure will be governed by the general rules of public procurement, and, in addition to submitting their offer in it, the promoter will enjoy the benefits established in this special regime, as mentioned, especially the preference margin in the evaluation of their offer. However, the offers will be evaluated based on the specific characteristics of the project object and according to the weighting factors established in the corresponding terms of reference.

I) Award or rejection of offers
According to the general procedural rules in public procurement matters, once the offers have been evaluated in their entirety, the award will be granted to the offer that, in the administration's opinion, is the most convenient or, conversely, all of them will be rejected as inadmissible or inconvenient.

The award may fall on the promoter's offer or that of another participant in the procedure. In the first case, after the corresponding formalities have been completed, the promoter will become a contractor of the administration and will execute what was originally their initiative, in accordance with the contract, the terms of reference that governed the procedure, and the regulations applicable to the contract object. On the contrary, if the promoter is not awarded the competitive procedure, they will have the right to request an offer improvement stage.

Finally, the administration may decide not to receive more proposals, cancel the call or the competitive procedure, reject all proposals, or declare the call void, at any stage of the procedure, without this generating any right to claim by the bidders. However, the promoter will retain the rights over the initiative for a period of 2 years.

 

Final considerations

As a final reflection, we can conclude that it is a mechanism that clearly denotes the adverse economic scenario in which it was conceived, as it drastically reduces the costs and activity of the state apparatus in the elaboration of projects for the execution of public works and the provision of public services.

In contrast, the private individual is faced with a State open to capturing projects and analyzing investment opportunities, which ultimately benefits not only their particular interest but also the public interest, which is satisfied with the development of infrastructure and services.

Dr. Juan Pablo Díaz

 

Montevideo, June 1, 2018