National Congressional Library Rule Identification: Law 19,886 Date Published: 07-30-2003 Date Enacted: 07-11-2003 Institution: MINISTRY OF FINANCE Title: LAW ON TERMS AND CONDITIONS FOR ADMINISTRATIVE SUPPLY AND SERVICE CONTRACTS Version Type :Latest Version From: 03-01-2010 Enters as Law :03-01-2010 Norm ID :213004 Latest Modification : 01-MAR-2010 Executive Order 11 URL :http://www.leychile.cl/N?1=213004&f=2010-03-01&p= LAW No. 19,886 LAW ON TERMS AND CONDITIONS FOR ADMINISTRATIVE SUPPLY AND SERVICE CONTRACTS

Bearing in mind that the Honorable National Congress has approved the following: B I L L: “CHAPTER I General Provisions Article 1.- All contracts subscribed by the State, for good and valuable consideration, for the supply of goods and services required for the performance of its duties, shall comply with the rules and principles of this Law and its regulations. Additionally, these contracts shall also comply with all rules of Public Law and, in default thereof, with all rules of Private Law.

For the purposes of this Law, the State shall be defined as the agencies and services described in Article 1 of Law No. 18,575, except for public corporations created by law and all other cases provided for by law.

Article 2. – For the purposes of this Law, a supply contract shall be defined as a contract for the purchase or rental or with the option to buy of goods or movable assets.

The concept of supply contract shall include the following contracts, among others:

a) The acquisition and rental of data processing equipment and systems, as well as their devices, software and intellectual property rights of use.

However, the acquisition of custommade software shall be considered service contracts;

b) The maintenance of data processing equipment and systems, as well as their devices and software, when contracted jointly with acquisitions or rental; and

c) Manufacturing agreements by which the goods to be delivered by the supplier must be built according to characteristics previously established by the State, even when the State is obliged to provide all or part of the materials.

Article 3.- The following items are excluded from the application of

this Law: a) Contracting of State employees that are regulated by special

statutes, and independent service contracts subscribed between individuals and public agencies, regardless of the legal source on which they are founded;

b) Agreements subscribed between the public agencies listed in Article 2, Section 1 of Decree No. 1,263 (1975), Organic Law of State Financial Administration, and its modifications;

c) Contracts subscribed according to the specific procedures of international organizations, involving loans or contributions made by this type of institution;

d) Contracts for the purchase, sale and transfer of negotiable securities or other financial instruments;

e) Contracts for the award and execution of public works; All public works contracts subscribed with the Ministry of Housing

and Urban Works for the performance of its duties are also excluded from this Law, as well as all contracts for the execution, operation and maintenance of urban works subscribed with third parties according to Law No. 19,865, which ratified the Shared Urban Funding System.

Notwithstanding the exceptions listed in this section, these contracts shall comply with the provisions contained in Chapter V of this Law, as well as all its other provisions; and

f) Contracts for defense supplies, subscribed according to Law No. 7,144 and Law No. 13,196 and their subsequent modifications; as well as those subscribed for the acquisition of the following items by the Armed Forces or the Law Enforcement and Public Security Forces (hereinafter referred to as the Police Force): military or police vehicles (excluding pickup trucks, automobiles and buses); advanced and emerging information technology equipment and systems (used exclusively for command, control, communications, computer and intelligence systems); elements or parts for the manufacture, integration,maintenance, repair, improvement or assembly of weaponry, as well as their spare parts, fuels and lubricants.

Also excluded are all contracts for goods and services necessary to prevent exceptional risks to national or public security, as qualified by Supreme Decree issued by the Ministry of National Defense upon request

by the corresponding Commander-in-Chief or, as the case may be, by the General Director of the Police Force (Carabineros) or the Director of the Investigative Police (Investigaciones).

All contracts described in this Article shall be governed by their own special rules, notwithstanding that stated the final section of Article 20 of this Law. CHAPTER II Requirements for Contracting with the State

Article 4.- All Chilean or foreign individuals and legal entities who accredit their financial status and technical suitability according to these rules and regulations shall be eligible for subscribing contracts with the State, as long as they comply with all other requisites contained herein and with those established by common law. Suppliers that have been found guilty of antiunion practices or infractions to fundamental workers’ rights within the two years prior to placing bids or submitting proposals for a contract or agreement in public tendering, private tendering or direct contracting processes, shall be ineligible.

If the supplier that is awarded a contract or subscribes an agreement has unresolved debts related to salaries or social security benefits of its current workers, or workers hired during the two years prior to being awarded the contract, the first payments of this contract must be used to settle these debts, and the supplier must prove that all such obligations have been fulfilled halfway through the period of execution of the contract, with a maximum limit of six months. Each public agency must require that the contracted supplier proceed with these payments, presenting payrolls and spreadsheets that prove complete fulfillment of these obligations. If these obligations are not fulfilled by the contracted supplier, the agency has the right to terminate the corresponding contract, publishing a new call for tenders in which the supplier previously awarded the contract may not participate.

If the supplier contracted to provide a service has subcontracted any part of the contract’s tasks, the subcontracted party must also comply with the requisites of this Article.

In the corresponding bidding specifications, each procuring agency may require the successful bidder, as soon as the contract is awarded and as the case may be, to grant a power of attorney or to establish a Chilean or foreign partnership or corporation, in order to subscribe the contract the object of which must include the execution of this contract according to the provisions of this Law.

The aforementioned section shall only apply to contracts for the purchase of goods or services which the successful bidder agrees to deliver successively.

No public agency, or corporation partially or totally owned by the State, may subscribe administrative contracts for goods or services with highranking employees of the same agency or corporation, or with persons who are related to them as described in letter b), Article 54 of Law N°

18,575, the Organic Constitutional Law on General Terms and Conditions of the State LAW 20238 Art. Nº 1 a) E.O. 19.01.2008 LAW 20238 Art. Nº 1 b) E.O. 19.01.2008 LAW 20088 Art. 13 E.O. 05.01.2006 NOTE Administration; or with public corporations in which these persons participate; or with limited liability corporations in which these persons are partners; or with joint stock corporations in which these persons have stock representing 10% or more of the total capital; or with the managers, representatives or directors of any of the types of corporations mentioned herein.

The same prohibitions listed in the aforementioned section shall apply to both Chambers of the National Congress, to the Administrative Body of the Judicial System, and to all Municipalities and their corporations, as pertains to members of Congress, members of the First Level of the Judicial System, and Mayors and City Council members, respectively.

All contracts subscribed in infringement of the rules established in the aforementioned section shall become null and void, and the employees participating in them shall have incurred in infringement of the principle of administrative probity contained in numeral 6 of Section 2, Article 62 of Organic Constitutional Law N° 18,575 on General Terms and Conditions of the State Administration, notwithstanding any civil and criminal responsibilities that may also apply.

However, under exceptional circumstances, the agencies and corporations described in section four may subscribe these contracts, as long as they guarantee conditions of equal opportunity similar to those normally prevalent in the market. This contract must be approved by a well founded resolution delivered to the superior officer of the procuring agency, the General Comptrollership of the Republic, and the Chamber of Deputies. In the case of the National Congress, the resolution shall be sent to the Senate Ethics Committee or the Chamber of Deputies Conduct Committee, respectively, and in the case of the Judicial System, to its Ethics Committee. NOTE:

Transitory Article 2 of LAW 20,088, published on May 1st, 2006, modifies this rule, establishing that the modifications made to the Law shall

enter into effect 90 days after the publication of the regulations establishing the requisites of property statements, according to Transitory Article 1 of this Law. These regulations are established in DTO 45, General Secretariat of the Presidency, published on March 22nd, 2006. CHAPTER III Procurement Actions PARAGRAPH 1 Procurement Procedures

Article 5.- The State shall award its contracts through public tendering, private tendering or direct contracting processes. Public tendering shall be mandatory for contracts exceeding 1,000 monthly tax units (UTM), except as provided for in Article 8 of this Law.

Article 6.- The bidding specifications must establish the conditions that allow for the most advantageous combination between the benefits of goods or services to be purchased and all their present and future related costs. In the case of services that are required regularly, and which must be contracted through periodic tendering processes, higher scores shall be given to suppliers that offer better salaries and employment conditions. These bidding specifications may not establish arbitrary differences between bidding suppliers, nor base their decisions solely on the price of bids.

Likewise, in the case of service contracts for primary and preschool Educational establishments, all work contracts for food workers must consider the payment of salaries during the months of January and February.

Under all circumstances, the State must promote effectiveness, efficiency and savings in its procurement and contracting.

Article 7.- For the purposes of this Law, the following definitions shall apply:

a) Public Tendering: administrative procedure involving a contest in which the State publishes a “call for tenders,” inviting all interested suppliers to submit proposals according to the corresponding bidding specifications, after which the most convenient bidder is awarded the contract.

In public tendering processes, anybody may place a bid, and the call for tenders must be published using the public access systems provided by the Public Procurement and Contracting Bureau, according to the provisions established in the regulations. Also, in order to further advertise its call for tenders, the procuring agency may publish one or more notices according to the provisions established in the regulations.

b) Private Tendering: administrative procedure consisting of a contest, which must be previously approved through a well founded resolution, in which the State invites certain suppliers to submit proposals according to the corresponding bidding specifications, after which the most convenient bidder is awarded the contract.

c) Direct Contracting: procurement procedure which, given the nature of the negotiation involved, must be carried out without following the requisites of a public or private tendering process. In each specific case, these circumstances must be duly accredited as provided in the regulations.

The State may not divide its purchases into several contracts in order to vary the procurement procedure.

Article 8.- Private tendering or direct contracting processes shall

proceed in the following wellfounded cases: LAW 20238 Art. único Nº 2 a) D.O. 19.01.2008 LAW 20238 Art. único Nº 2 b) D.O. 19.01.2008

a) If no suppliers place bids in a public tendering process. In this event, a private tendering process must first be executed, and if once again no suppliers place bids, only then may the procuring agency resort to direct contracting.

The bidding specifications for the public tendering process must be the same as those used for direct contracting or private tendering processes. If the bidding specifications are modified, the procuring agency must once again proceed according to the general rules;

b) If a contract has been terminated before the deadline as a result of supplier negligence or other grounds, and the remainder of which does not exceed 1,000 UTM;

c) In cases of emergency, urgency or unforeseen circumstances, established through a wellfounded resolution by the superior officer of the procuring agency, notwithstanding the special provisions in cases of earthquakes and natural catastrophes as provided for by all applicable laws.

Notwithstanding the validity or invalidity of the contract, the superior officer of the agency that has improperly qualified a situation as an “emergency, urgency or unforeseen circumstance,” shall be punished with a fiscal fine of 10 to 50 UTM, depending on the total value of the contract. This fine shall be applied independently from any other administrative sanctions that may apply under the current legislation, and shall be enforced according to Article 35 of Decree No. 1,263 (1975);

d) If only one supplier offers the goods or services; e) In the case of service contracts to be subscribed with foreign

suppliers and executed abroad;

f) In the case of confidential services, the publication of which might adversely affect national security or interests (this situation must be determined by Supreme Decree);

g) In cases where, given the nature of the negotiation, the contract may have characteristics that make it absolutely necessary to resort to direct contracting, according to the criteria listed in the regulations of this Law; and

h) When the amount of the purchase is under the limit established in the regulations.

In all the cases set forth above, the particular circumstances must be accredited, including the specific proposals or bids in the cases described in the regulations.

In the cases described in the previous sections, except for letter f), the wellfounded resolutions authorizing direct contracting must be sent to the Public Procurement Information System within 24 hours. The resolutions or agreements issued by public agencies according to this Law, and authorizing private tendering processes, must be published in the same way and within the same deadline.

Whenever direct contracting is used, a minimum of three quotations shall be required, except in the cases described in letters c), d), f) and g) of this Article.

Article 9.- The procuring agency must declare inadmissible all bids that do not comply with the requirements established in the bidding specifications. It shall also declare a public tendering process “abandoned” whenever no bids are submitted or when the bids submitted do not serve its interests.

In both cases, the statement must be made through a wellfounded resolution. Article 10.- The contract shall be awarded through a wellfounded resolution by the competent authority, which shall be communicated to the successful bidder.

The successful bidder shall be the one that submits the overall most advantageous proposal, according to the conditions described in the respective bidding specifications and the evaluation criteria set forth in the regulations.

Both suppliers and procuring entities shall carry out their tendering procedures in strict compliance with the administrative and technical specifications that govern these proceedings. Bidding specifications must always be previously approved by the competent authority.

The regulations shall determine the requirements to be included in the bidding specifications. PARAGRAPH 2 Guarantees Required for Contracting

Article 11.- According to the regulations, the procuring agency shall specify any guarantees that are considered necessary in order to ensure the seriousness of the bids submitted, as well as proper and timely execution of the final contract, according to the conditions and means established in the corresponding bidding specifications. In the case of service contracts, these guarantees must also ensure payment of the salaries and social security obligations of the workers hired, notwithstanding the provisions established in Article 20 of Law N° 17,322, and shall be valid up to 60 business days after completion of the services or termination of the contract. The superior officers of the procuring agency shall be directly responsible for the custody, maintenance and validity of the requested guarantees.

The guarantees deemed necessary to ensure seriousness of the bids, fulfillment of worker salaries and social security obligations, and proper and timely execution of the final contract, shall consider an amount that adequately serves its purpose without discouraging the participation of other suppliers in the tendering process.

In order to ensure these situations, fines and other sanctions against suppliers may be made effective.

Cash advances may only be given to a supplier if their value is appropriately and fully guaranteed. LAW 20238 Art. único Nº 3 a) D.O. 19.01.2008 LAW 20238 Art. único Nº 3 b) D.O. 19.01.2008 PARAGRAPH 3 Powers of the State

Article 12.- Each institution must periodically create and evaluate an annual procurement and contracting plan, with minimum contents defined by the regulations.

Each institution must establish a methodology for the annual evaluation of the results of the contracts subscribed, as well as accounting for the goods purchased and services contracted. This information must be published on the Public Procurement Information System and the National Supplier Registry, as provided for by the Public Procurement and Contracting Bureau.

Article 13.- The administrative contracts governed by this Law may be modified or terminated in advance in the following cases:

a) Mutual consent between the contracting parties. b) Gross nonfulfillment of the obligations of the supplier.

c) Notorious insolvency of the contracting party, unless its guarantee is improved or the existing one is sufficient to ensure fulfillment of the contract.

d) If so required by the public interest or national security. e) In all other cases established in the corresponding bidding specifications or in the contract. These conditions may establish mechanisms of compensation and indemnity for the contracting parties. The resolutions or decrees that establish such measures must be wellfounded.

PARAGRAPH 4 Releases and Subcontracting

Article 14.- The rights and obligations arising from a tendering process shall be nontransferable.

This shall be understood without prejudice of any special law that expressly provides for the release of these rights and obligations.

All documents justifying the loans deriving from the tendering process shall be transferable according to the rules of common law.

Article 15.- Although the procuring agency may arrange the partial execution of a contract with third parties, the liability and obligations for its enforcement shall rest exclusively on the successful bidder.

However, subcontracting shall not be permitted in cases specifically described in the regulations, or as a result of an express prohibition in the corresponding bidding specifications.

PARAGRAPH 5 Supplier Registry

Article 16.- The State shall establish an Official Online Supplier Registry under the Public Procurement and Contracting Bureau.

All Chilean and foreign individuals or legal entities that are eligible for subscribing contracts with public agencies may register with this Supplier Registry. The Public Procurement and Contracting Bureau may establish semestral or annual registration fees to be paid by suppliers, in order to finance the direct operating costs of the Supplier Registry, ensuring that this shall not hinder or prevent free and equal access of suppliers.

This Supplier Registry shall be public and shall comply with the rules and regulations of this Law.

Procuring agencies may require suppliers to register with the Procurement Bureau’s Supplier Registry in order to subscribe their final contracts.

The Public Procurement and Contracting Bureau may entrust the economic, financial and legal evaluation of suppliers to external professionals and technicians (whether individuals or legal entities), through a prior public tendering processes.

Notwithstanding, the decision to approve or reject supplier applications shall be made by the Public Procurement and Contracting Bureau and may be challenged according to the provisions of Chapter V.

In order to subscribe certain types of contracts, suppliers may also be required to participate in other official supplier registries for certain public agencies or contracting categories. These registries shall be governed by Supreme Decree issued by the corresponding Ministry. These registries may be online or otherwise. If they are online, they must be compatible with the format and characteristics of the registry described in Section 1. These registries must always be public.

Notwithstanding, the Armed Forces and Police Force may keep classified or secret registries for goods and services that are not governed by this Law, according to their own internal laws.

Article 17.- The Regulations shall establish the system and

classification criteria for suppliers, registration requisites for each category, and grounds for ineligibility, incompatibility, suspension or elimination from the registry due to nonfulfillment of obligations or other grounds. The regulations must guarantee suppliers free access to the registry and an objective and wellfounded evaluation.

CHAPTER IV Procurement and Contracting Through Electronic Means and Information System for Procurement and Contracting by Public Agencies

Article 18.-The public agencies governed by this Law must quote, tender, contract, award, request delivery and, in general, proceed with all their procurement and contracting processes for goods, services and works included in this Law, using only the online or digital systems established for those purposes by the Public Procurement and Contracting Bureau. Such use may be direct or indirect, through open or closed networks, operating on e-commerce platforms or digital trading markets, either individually or subject to the benefits of the framework agreements subscribed by the Procurement Bureau. These activities must comply with the corresponding organic laws, the law of electronic signatures and the rules established by this Law and its regulations.

Generally, the public agencies governed by this Law may not award contracts if they have not published calls for tenders through the online or digital systems established by the Public Procurement and Contracting Bureau. However, the regulations may determine specific cases in which it is possible to conduct procurement and contracting processes without using these systems.

Article 19.- This Law hereby establishes the Public Procurement

and Contracting Information System, under the responsibility of the Public Procurement and Contracting Bureau, which shall govern the procurement processes of the agencies listed in Article 1 of this Law, and which shall be made available to the general public according to provisions established in the regulations.

This Information System shall be open to the public and free of cost.

Article 20.- Public agencies must use the information systems established by the Public Procurement and Contracting Bureau to publish the basic information regarding their procurement processes and all other information required by the regulations. Such information must be comprehensive and appropriate, including the calls for tenders, reception of bids, clarifications, replies and changes to the bidding specifications, as well as the results of the tendering processes for the acquisition of goods and contracting of services, manufacture and works, all according to the regulations.

The public agencies governed by this Law shall not be obliged to use the abovementioned Information System to publish any information regarding purchases and contracting qualified as secret, classified or confidential according to law. The Armed Forces and Police Force shall comply with this obligation according to their current legislation on document handling, use and processing.

Article 21.- The public agencies that are not governed by this Law,

except for public corporations created by law, must comply with the rules of Articles 18, 19 and 20 of this Law, providing the basic information regarding their contracting of goods, services and works, as well as all other purchases described in the regulations. CHAPTER V Public Procurement Court

Article 22.- This Law hereby creates a court, called the “Public Procurement Court,” with its headquarters in Santiago.

This Court shall be composed of three lawyers, with their corresponding substitutes, designated by the President of the Republic from among a prior set of candidates submitted by the Supreme Court.

This set of candidates shall be defined successively, taking names from a list created specifically for this purpose by the Court of Appeals of Santiago, through public contest. This list may include only Chilean lawyers with an outstanding professional or academic background; proven experience in the field; and no less than ten years of professional practice; or who have belonged to the Highest Level of the Judicial System, as long

as they have been on the Outstanding List for the last five years. Under no circumstances may this list include professionals who have been demoted from their judicial positions, whether in the annual evaluation process or as a result of any other situation.

The members of the Court shall select one of its members to act as chairman for a period of two years, with the possibility of reelection.

The members appointed as substitutes shall hold the position that has been assigned to them in cases in which, for any reason, this role is not being performed by the senior member. This substitute role may not extend beyond six consecutive months, at the end of which the position must necessarily be filled by a senior member, through the procedure described above, for the remainder of the period.

The members of the Court shall be paid a sum equivalent to onethirtieth of the Grade IV salary (corresponding to a judge of the Court of Appeals) for each session they attend, with a maximum of twelve monthly sessions.

The members of the Court may hold this position for a period of five years, and may be redesignated in the same manner as before.

This Court shall rule according to the law and shall be subject to the managing, correctional and economic supervision of the Supreme Court, according to Article 79 of the Political Constitution of the Republic.

A decree issued by the Supreme Court shall regulate all matters related to its internal administrative operation, watching over the efficient resolution of the matters dealt with by the Court.

Article 23.- The Court shall implement a public contest to designate

an independent lawyer of utmost confidence and subordination, who shall act as a notary for the Court and perform any other duties that this Court deems necessary.

The Public Procurement and Contracting Bureau must provide the infrastructure, technical support, human resources and materials necessary for the proper operation of the Court.

Article 24.- The Court shall have jurisdiction try challenges against illegal or arbitrary acts or omissions occurring during the administrative procurement procedures of public agencies governed by this Law.

The challenging procedure shall proceed against any illegal or arbitrary act or omission that takes place during a tendering process, between the approval of the bidding specifications and the award of the contract, including both actions.

The challenging procedure may be presented by any individual or legal entity that has an ongoing interest in the corresponding procurement procedure.

This claim must be filed within a maximum period of ten business days from the moment the affected party takes notice of the act or omission that is to be challenged, or from its publication. It shall be presented directly to the Public Procurement Court, but when the

interested party’s address is outside the city where the Court is located, it may be presented through the corresponding Regional Intendancy or Provincial Government. In such an event, the Intendant or Governor, as the case may be, must refer it to the Court on the same day, or at the latest on the next business day after it is received.

The claim must present the facts that constitute the alleged illegal or arbitrary act or omission, the identification of the rules or regulations on which the challenge is founded, and the specific petitions being submitted to the Court.

The Court may declare inadmissible any challenges that fail to comply with the requisites listed in the previous sections, and the challenger shall have five straight days from the notification of inadmissibility to correct the challenge.

Article 25.- Once a challenge is admitted for trial, the Court shall notify the corresponding public agency, forwarding the complete text of the claim filed so that, within a maximum period of ten business days from this notification, the public agency may report back to the Court regarding the challenge and any other matters the Court may require.

Through a wellfounded resolution, the Court may decree suspension of the administrative procurement process involved in the challenging procedure.

Once the report is received, or after the maximum period of ten business days indicated in Section 1 has elapsed without the public agency having reported back, the Court shall try the matter and, if it finds that there has been or may have been a dispute regarding substantial and pertinent facts, it shall admit the case for the presentation of evidence and establish, in the same resolution, the substantial controversial facts that apply.

As soon as this resolution has been notified to all parties, a common discovery period of ten business days shall begin, during which the challenger must submit all the evidence required by the Court. If the challenger wishes to provide testimony, a list of witnesses shall be submitted within the first two business days of the discovery period. The Court shall appoint one of its members to examine the evidence.

After the discovery period, the Court shall summon the parties to hear judgment. After this notification, no further evidence of any nature shall be admitted.

After receiving the claim, the Court may, on its own accord, decree any of the measures listed in Article 159 of the Civil Procedure Code or other procedures designed to verify the disputed facts. These measures must be carried out within ten business days from the date of the decree. At any rate, they must be decreed and completed before the end of the discovery period in order to deliver a sentence.

The incidents that might emerge in the trial shall not suspend its course, and shall be substantiated in a separate branch.

The final sentence must be passed within ten business days from the date of the decree summoning the parties to hear judgment.

Article 26.- In the final sentence, the Court shall deliver its verdict regarding the legality or arbitrariness of the challenged act or omission, and shall accordingly order the measures necessary to restore the rule of law.

The final sentence shall be notified by a judicial resolution. The party affected by this resolution may, within five business days of notification, present the Court with an appeal, which shall be tried by the Court of Appeals of Santiago. The appeal shall be tried for restorative purposes only.

The appeal shall be tried without hearing arguments from either party, unless the Court requests them. In such an event, the case shall be added to the schedule extraordinarily. The trial of the case shall not be suspended for the reasons established in No. 5 of Article 165 of the Civil Procedure Code. At any rate, the Court of Appeals may use a wellfounded decree ordering not to innovate for a period of up to thirty days, renewable.

The ruling on the appeal must de delivered within ten business days of the reception of the case, and no further recourses shall proceed.

Article 27.- The challenging procedure shall be tried according to the rules contained in this Chapter. Additionally, the provisions common to all procedures established in Book I of the Civil Procedure Code shall apply, as well as those common to all ordinary civil trials of the same brief and summary nature as this procedure. CHAPTER VI Public Procurement and Contracting Bureau

Article 28.- This Law hereby creates a decentralized public agency, the Public Procurement and Contracting Bureau, under the supervision of the President of the Republic through the Ministry of Finance, with its main headquarters in the city of Santiago.

Article 29.- The executive management, organization and administration of the Public Procurement and Contracting Bureau shall correspond to a Director of absolute confidence of the President of the Republic, who shall be the highest authority of this agency.

Article 30.- This agency shall have the following duties: a) To advise public agencies in the planning and management of

their procurement and contracting processes. For this purpose, the Procurement Bureau may subscribe agreements for consultancies to design their training, assessment and contract evaluation programs.

b) To tender the operation of the Information System and other means of online procurement and contracting for public agencies, to supervise its proper operation, and to act as counterpart for the system operators.

However, in specific cases described in the regulations, the Public Procurement and Contracting Bureau shall be authorized to operate the system directly.

c) To subscribe agreements with the appropriate public and private entities for the purposes of gathering information to complement the background information of the supplier registry described in Article 16.

d) On its own accord, or at the request of one or more public agencies, to tender goods and services through framework agreements that shall be governed by the provisions of this Law and its regulations. In terms of the goods and services included in these framework agreements, the public agencies bound by this Law shall be obliged to purchase their products using the agreements, contacting the successful bidder directly through the Procurement Bureau, except whenever they may obtain more advantageous conditions directly on their own account. In such a case, the agency must record all corresponding background information for its later verification and control by the corresponding supervising entity.

Public agencies that independently obtain more advantageous conditions for goods or services for which the Public Procurement and Contracting Bureau currently maintains framework agreements, must report these conditions to the Public Procurement Bureau. With this information, the Bureau must take the necessary steps to include these conditions in the framework agreement and extend them to the rest of the public agencies.

Municipalities shall not be obliged to subscribe framework agreements, without prejudice of which they may individually or collectively adhere to them voluntarily.

The Armed Forces and the Police Force shall not be obliged to subscribe framework agreements, for certain goods and services respectively determined by the Army Director of Logistics, the Director General of the Navy Services, the Commander of the Air Force Logistic Command, the Director of Logistics of Carabineros and the Head of the Logistics Department of the Investigative Police, according to the criteria defined in the regulations.

e) To represent or act as an attorney for one or more public agencies governed by this Law, in the tendering processes for goods or services according to the provisions established in the regulations.

f) To manage, update and tender operation of the Supplier Registry described in Article 16, granting technical and financial certification according to the regulations.

g) To promote the most possible competition in the State’s public procurement procedures, developing initiatives to include the highest number of bidding suppliers. It must also inform current and prospective

bidding suppliers of the rules, procedures and technologies currently being used by the State.

h) To establish the policies and conditions of use of the online or digital information and procurement systems that are available.

According to letter b) of this Article, the Public Procurement and Contracting Bureau may charge a fee for the operation of the information systems and other means of online procurement and contracting to be tendered.

These fees must be established through a wellfounded resolution issued by the Public Procurement and Contracting Bureau.

The functions and duties set forth above must in no way limit or restrict the powers established by special statutes for the Commanders-in-Chief of the Armed Forces, the General Director of Carabineros and the General Director of the Investigative Police.

Article 31.- The assets of this agency shall include: a) The funds allocated each year in the Budget Law; b) The goods acquired and the proceeds of these acquisitions; c) The contributions from other public or private entities, whether

domestic or international; and d) All other income generated by its own operations and those that

lawfully pertain to it.

Article 32.- The Public Procurement Bureau staff shall be governed by the provisions of Law No. 18,834, the Administrative Regulations for Public Employees. The Public Procurement Bureau’s superior officers (department heads) shall be of absolute confidence of the Director.

The system of salaries for the Bureau’s regular staff and independently contracted workers shall correspond to that of the supervising institutions, according to the terms of Title I of Decree No. 3,551 (1981), and the rules that have modified it, including the allocation described in Article 17 of Law No. 18,091, which replaced Article 11 of Law No. 19,301, according to that provision, in which the Director must report annually to the Ministry of Finance on this matter. The bonus established in Article 5 of Law No. 19,528 shall also be applied.

Article 33.- The following staff structure for the Public Procurement and Contracting Bureau is hereby created: Staff Categories Degree (scale of supervisors) Number of Positions Superior Officers National Director 1 1 Department Heads 3 4 Professional Staff

Professionals 4 3 Professionals 6 3 Professional 9 1 Technical Staff Computer Technicians 14 1 Administrative Staff Administrative 16 1 Administrative 18 2 Administrative 19 1 Auxiliary Staff Auxiliary 20 1 TOTAL STAFF 18

In addition to the general requirements contained in Law No. 18,834 for State workers, these positions shall also require the following: Superior Officers and Professional Staff:

a. Professional or academic degree, granted by a Stateowned or Stateaccredited university, and

b. Experience in information technologies, supply management or administrative law. NOTE Article 1 from the Executive Order 11 of the Ministry of Finance, issued on 03-01-2010, creates in the list of the staff in the The Public Procurement Bureau, contained within this article, the position that is indicated below Staff Categories Degree (scale of supervisors) Number of Positions Degree Director affected by article 8 of the Adminstration Statute Director 10 1 Total Staff 1

Article 34.The modes that govern the agreements with the legal entities described in Article 16 of Decree No. 1,608 (1976), and its regulations, are provided by the regulations of this Law. Until these regulations are passed, Supreme Decree No. 98 of the Ministry of Finance (1991) shall continue remain in effect.

The contracting of complementary actions such as those described in Law No. 18,803 must be made according to Section 3, Article 8 of Law

No. 18,575, in cases in which a private tendering process is conducted for those contracts.

Article 35.- The Public Procurement and Contracting Information System shall be the legal successor of the system established by Supreme Decree No. 1,312 of the Ministry of Finance (1999).

Article 36.- This Law hereby modifies Section 2, Article 3, letter b) of Supreme Decree No. 104 of the Ministry of the Interior (1977), and establishes the renewed, coordinated and systematized text of Law No. 16,282, including permanent provisions for earthquakes or natural catastrophes, inserting the expression “or private” between the word “public” and the phrase “to the agencies.”

Article 37.This Law hereby revokes Article 28 of Decree No. 3,529 (1980); Article 16 of Decree No. 2,879; Article 84 of Law No. 18,482; and Supreme Decree No. 404 of the Ministry of Finance (1978), which established the renewed, coordinated and systematized text of Delegated Law No. 353 (1960).

This Law hereby replaces Article 66 of the Organic Constitutional Law of Municipalities, with the following:

“Article 66.- The administrative procurement procedures carried out by the Municipalities shall be governed by the Law on Terms and Conditions for Administrative Supply and Services Contracts and its regulations.

Notwithstanding the aforementioned, in the case of framework agreements, these must be established according to Section 3, letter d) of Article 30 of this Law.”

Article 38.- This Law hereby establishes the following modifications and revocations to Law No. 18,928, which established rules regarding purchases and transfer of goods, movable property and services for the Armed Forces:

a.This Law hereby substitutes Section 1 of Article 1 with the following:

“Article 1.This Law hereby authorizes the Army Director of Logistics, the General Director of the Navy Services, and the Commander of the Air Force Logistics Command to purchase physical or intangible goods and contract or convene services in representation of the State, for free or for good and valuable consideration, according to the Law on Terms and Conditions for Administrative Supply and Services Contracts. They may also transfer physical or intangible goods, whether for free or for good and valuable consideration, and subscribe contracts for the rental, commodatum or other agreements allowing for the use or enjoyment of these goods by the corresponding institution.”

b.This Law hereby revokes Section 1 of Article 3. c.This Law hereby substitutes Section 1 of Article 4 with the

following: “Article 4.The procedures for procurement processes shall be

established in the special regulations that shall be issued jointly to this effect by the Ministries of Finance and National Defense. As for the transfers, they shall be governed by the regulations of Decree No. 42 of the Ministry of Defense National (1995).”

d.This Law hereby substitutes letter c) of Article 4 with the following: “c) To authorize the purchase of food, clothing, equipment, fodder,

fuel and lubricants in the last quarter, to be charged to the funds of the subsequent year’s Budget Law, provided that these goods are consumed during the term of the corresponding Budget Law and according to the regulations issued jointly for this purpose by the Ministries of Finance and National Defense. In the event that such purchases require advances of funds, the provisions of the preceding letter b) must be complied with.”

e) This Law hereby revokes Article 6. f) This Law hereby substitutes Article 11 with the following:

“Article 11.The rules of this Law and the Law on Terms and Conditions for Administrative Supply and Services Contracts shall apply, whenever they may be pertinent, to the Police Force, and the powers given to the Commanders-in-Chief of the Armed Forces and the Army Director of Logistics, the General Director of the Navy Services and the Commander of the Air Force Logistics Command shall be deemed conferred upon the General Director of the Police Force, the Director General of the Investigative Police, the Director of Logistics of the Police Force and the Head of Logistics of the Investigative Police.”

g) This Law hereby substitutes the Transitory Article with the following final Article:

“Final Article.The rules regarding the acquisition of physical and intangible goods and services by the Armed Forces shall be complemented by the regulations dictated jointly by the Ministries of Finance and of National Defense within one year after the Law on Terms and Conditions for Administrative Supply and Services Contracts enters into effect.”

Article 39.- This Law shall enter into effect 30 days after its date of publication.

In the case of the Municipalities, this Law shall enter into effect on January 1, 2004. However, these institutions may voluntarily choose to follow the provisions of this Law before this date, through an agreement adopted by the majority of the Council members.

As regards the Armed Forces and the Police Force, this Law shall enter into effect on January 1, 2005, notwithstanding a Supreme Decree

issued by the Ministry of National Defense that may establish an earlier incorporation of these entities to this Law. Transitory Articles

Article 1.- Within a period of one year after the date of publication of this Law, the President of the Republic, through one or more decrees issued by the Ministry of Finance, shall adopt all regulations necessary for the enforcement of the law.

The Municipalities that had established previous regulations for their procurement processes must adjust them to the new rules and regulations by January 1, 2004.

Article 2.- The rights and obligations set forth in Supreme Decree No. 1,312 of the Ministry of Finance (1999), for the operator of the computer support procedures for the Public Procurement and Contracting Information System, shall continue according to the terms of the corresponding contract.

Article 3.- The administrative contracts with bidding specifications that had been approved before the law entered into effect shall be governed by the law in effect on the date of approval of those bidding specifications.

Article 4.- The first provision of the job positions at the Public Procurement and Contracting Bureau shall be filled by public contest, to be executed within 60 days of the entry into effect of this Law. In this contest, the selection committee shall be composed of the department heads of the Public Procurement Bureau, complying with Law No. 18,834 in all other aspects.

Article 5.- The employees of the State Supply Bureau that are not transferred to Public Procurement and Contracting Bureau shall preserve their seniority regarding the two year period bonuses they had been entitled to, as well as the corresponding time in the case of a new one, and shall preserve their right to retire under the terms provided for in Article 132 of Delegated Law No. 338 (1960), regarding the conditions established in Transitory Articles 14 and 15 of Law No. 18,834, while they shall not be affected by the rights established by Transitory Article 2 of Law No. 18,972, if applicable.

Article 6.The employees of the State Supply Bureau that are not transferred to the Public Procurement and Contracting Bureau or any other public agency and, accordingly, cease to be public employees, shall be entitled to receive the compensation provided for in Article 148 of Law No. 18,834, notwithstanding any other retirement, pension or annuity to which they may be entitled within their social security system. This compensation shall be compatible with any other severance pay they may be entitled to.

The employees that receive the benefits indicated in the previous section may not be appointed or hired (whether as regular employees or as independent workers) to work for the Public Procurement and Contracting Bureau, for a period of five years after the termination of their work relationship, unless they previously refund the compensation received, expressed in UF (unidades of fomento, the Chilean unit of account) plus the regular interests applicable to readjustment.

Article 7.- The obligations and rights derived from the procurement procedures carried out by the State Supply Bureau that are pending when this Law enters into effect, shall be transferred to the new Public Procurement and Contracting Bureau, which shall be understood as its successor for all legal purposes, up to the time when those procedures are concluded.

The rights and obligations relating to the Information System and all other online procurement services tendered by the Ministry of Finance through its Subsecretariat, by virtue of Supreme Decree No. 1,312 (1999), modified by Supreme Decree No. 826 (2002), both of the Ministry of Finance, shall also correspond to the Public Procurement and Contracting Bureau.

Article 8.- The assets of the Public Procurement and Contracting Bureau shall include all the physical or intangible goods that were exclusively reserved for the operation of the State Supply Bureau, which shall be understood as transferred along with the enactment of this Law.

In order to implement the appropriate registrations in the corresponding Real Estate Registrar or National Registry of Motor Vehicles, the Director of Public Procurement and Contracting shall issue a public resolution containing an inventory of all the real estate and vehicles that, by virtue of this provision, are to be transferred.

Article 9.- Beginning on the date when the staff structure established in Article 33 enters into effect, this Law hereby authorizes the Public Procurement and Contracting Bureau to hire a maximum of 22 workers, according to the current Budget Law for the Public Sector. This shall not include the limitations contained in Section 2, Article 9 of Law No. 18,834, regarding the independent positions considered in this allotment.

Article 10.- The expenses incurred through the application of this Law for the present year shall be funded with the current resources allocated in the budget of the State Supply Bureau. However, should it prove impossible to cover these expenses with its own resources, the Ministry of Finance may supplement this budget through item 50-01-03-25-33.104, corresponding to a budgetary allowance of the Public Treasury.

Article 11.- The Ministry of Finance must establish, through Supreme Decree, the gradual inclusion of the public agencies governed by this Law into the systems described in Articles 18, 19 and 20 of this Law.

Having fulfilled the conditions established in No. 1 of Article 82 of the Political Constitution of the Republic, and having considered it convenient to approve and sanction it; therefore it is hereby enacted as a Law of the Republic.

Santiago, July 11, 2003.JOSE MIGUEL INSULZA SALINAS,

VicePresident of the Republic.María Eugenia Wagner Brizzi, Deputy Minister of Finance.Francisco Huenchumilla Jaramillo, Minister Secretary General of the Presidency.

To be transcribed for your information.Greetings and salutations, María Eugenia Wagner Brizzi, Subsecretary of Finance. Constitutional Tribunal Bill on Terms and Conditions for Administrative Supply and Services Contracts.

The undersigned, Clerk of the Constitutional Court, does hereby certify that the Honorable Chamber of Deputies has referred this Bill, approved by the National Congress, for this Tribunal to exercise its control of the constitutionality of Articles 1, 22, 23, 24, 25, 26, 27, 37 – Section 2 and 39 Section 2, of this bill, and by a ruling dated on June 18, 2003, it has found: 1. That Articles 1, 22, 23, 24, Sections 1 and 2, 26, 37, Section 2, and 39, Section 2, of this Bill, are in fact constitutional. 2. That this Tribunal offers no comment on Articles 24, Sections 3, 4, 5 and 6, 25 and 27 of the aforementioned bill, since they pertain to matters that are not part of the jurisdiction of the Organic Constitutional Law.

Santiago, June 20, 2003.Rafael Larraín Cruz, Clerk.__