The Government Procurement Review: Dominican Republic

Introduction

On 5 August 2004, the United States signed the Dominican Republic–Central America–United States Free Trade Agreement (DR-CAFTA) with five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua) and the Dominican Republic, in which one of the main concerns was government procurement. In fact, a whole chapter was dedicated to the matter.2

Because of the DR-CAFTA, government procurement regulation in the Dominican Republic underwent a major modification to comply with its requirements. A new bill had to be enacted to comply with the requirements of Chapter 9 of the DR-CAFTA. This led to the enactment, on 18 August 2006, of Law No. 340-06 on Government Procurement and Contracting of Goods, Services, Works and Concessions (the Government Procurement Law), which governs any purchase made with taxpayer money nationwide.

Furthermore, on 6 September 2012, the Dominican government issued Decree No. 543-12,3 which constituted a relatively new regime in government procurement. This decree served to develop the regulations of the Government Procurement Law in a more specific fashion. As well as managing everything related to the different procurement procedures, this decree incorporated a mechanism that was new to the Dominican legal framework but well known in the government procurement world – a mechanism to fulfil collateral policies through state acquisitions. However, this regime is expected to change in the near future.

Decree No. 543-12 establishes the obligation for every contracting agency to set aside 20 per cent of its purchases to be contracted from micro, small and medium-sized enterprises (SMEs), provided that the goods or services to be acquired can be effectively delivered by a small business. In addition to the 20 per cent set aside in every government procurement process, Decree No. 543-12 establishes the possibility for SMEs to submit partial offers within the remaining 80 per cent. As a result, since 2012, the Dominican Republic has been familiar with the notion of making the trade-off against full and open competition (which is one of the main desiderata in government procurement) to achieve other high-priority social and economic goals, such as the growth of small businesses to create jobs. In this context, there are no 'buy Dominican' laws, but in the agricultural area, local production is privileged.

EU directives and the Agreement on Government Procurement (GPA) do not apply in the Dominican Republic. However, Dominican procurement law was highly influenced by the US procurement regime and most of the best practices in government procurement recommended in both the GPA and the UNCITRAL Model Law are, to some extent, included in the Dominican Republic's procurement culture.

The General Directorate of Public Procurement (DGCP) is the main body with competence for setting government procurement policy and enforcing compliance, and it is also vested with the power to oversee the bidding process. A dependency of the Ministry of Finance, the DGCP is a part of the central government and the executive branch. The DGCP has also the power to rule on bid challenges and its decisions can subsequently be appealed to the Superior Administrative Court.

Dominican procurement law is founded on the core principle of full and open competition, as a corollary of equal access to government procurement contracts as a right. In addition, the law enshrines the principles of efficiency, transparency, flexibility, responsibility, participation, fairness and reciprocity, which allow equal treatment to foreign offerors and contractors. The whole system is designed around these objectives. The evaluation process aims to identify the best-value proposal as the winning offer. However, there is some flexibility in the criteria used to make this assessment.

Year in review

Decree No. 36-21 calls for the creation of a government procurement compliance programme designed using International Organization for Standardization standards (i.e., ISO standards) and contains anti-bribery provisions. In line with this decree, on 18 May 2021, the DGCP put in place the Dominican Regulatory Compliance Programme in Government Procurement through Resolution No. PNP-05-2021. In sum, this programme aims at positioning government procurement compliance officers trained and appointed by the DGCP in every government contracting agency. Their goal is to guide contracting agents in the conduction of the procurement process through training and advisory services, and they do not have any veto powers over decisions made in the process. This programme started with a pilot in various public institutions. There is no official information yet available concerning its effects in the field.

Several corruption cases in government procurement targeting government officials from the 2016–2020 government have been charged by the General Attorney's office and are awaiting trial in court, setting forth the debatable issue of if alleged breaches in the procurement process that are subject to only administrative sanctions in the law can amount to criminal felonies.

On 27 February 2022, the executive branch formally submitted to Congress a bill to substantially modify the Government Procurement Law. However, the core principles of its acquisition procedure and procurement system remain unchanged. Key aspects to highlight of the new bill are:

  1. political parties would be included within the law's scope of application;
  2. the exceptions regime (clear exceptions are included to the contracting of legal services as well as the purchase and rent of real estate) would be modified;
  3. the core principles of the law would be broadened to add inclusion, sustainability, due process and others;
  4. a mandatory administrative file figure in government procurement would be created;
  5. electronic procurement would be set as a mandatory rule;
  6. clear permission would be needed to buy from government agencies qualified by law to sell;
  7. the prohibitions to contract regime would be widened by the inclusion of new prohibitions (i.e., the possibility for public officials to have a 10 per cent stake in companies that serve as contractors) and the clarification of others (i.e., the express prohibition against relatives of the President and the Vice President);
  8. the available types of government contracts would be substantially modified (joint contracting, framework agreements and simplified bidding would be included);
  9. the threshold of application of procurement law, which is currently determined by a formula using the executive branch's budget every year, would be freely determined by the DGCP;
  10. the evaluation criteria would be made objective;
  11. a nullity regime of government contracts for the breach of the procurement process would be created;
  12. the factoring of government contracts would have to be explicitly qualified;
  13. collateral policies in government procurement would be listed (SMEs, women-owned businesses and sustainable procurement would be given special treatment);
  14. the procurement procedure for local procurement would be simplified;
  15. although the DGCP would still be a dependency of the Ministry of Finance, it would be given some independent powers, such as budgetary autonomy and immobility of its director for four years following his or her appointment by the President;
  16. the Contracting Unit would be created and regulated by law to serve as the main technical office of each contracting agency;
  17. the claims and bid protest procedure would be substantially modified;
  18. a faculty of the DGCP would be created to train and create a special programme and certification in government procurement for public officials, as professionalisation is a main concern in the new bill; and
  19. sanctions would be amplified and explicit crimes specified as a consequence of breaches in the procurement process.

Scope of procurement regulation

i Regulated authorities

The Government Procurement Law states that its provisions regulate the central government, decentralised and autonomous institutions, local and city governments, and public enterprises. The Government Procurement Law constitutes a main regulatory principle governing any entity that contracts the acquisition of goods, services and works using public funding.

ii Regulated contracts

All supply of goods, services, works, consulting and leasing for the government is regulated by procurement rules. Additionally, infrastructure and development 'concession' contracts are now regulated by the Public–Private Partnership Law. Furthermore, as a general rule, the Government Procurement Law covers any government contract that is not expressly excluded by the Government Procurement Law or is not subject to a special regime.

The following are excluded from the application of the Government Procurement Law:

  1. loans or grant agreements with other states or entities of international public law when so stipulated in the agreements, in which case they will be governed by the agreed rules;
  2. public credit operations and public employment contracting, which are governed by their applicable regulations and laws;
  3. purchases with petty cash funds, which will be made in accordance with the corresponding regime;
  4. any acquisition activity contracted between public sector entities;
  5. those who – for reasons of security or national emergency – could affect the public interest, the lives or the economy of the country, after declaration and support by decree;
  6. the acquisition of scientific, technical and artistic (or restoration of historical) monuments, the execution of which must be entrusted to companies, artists or specialists, provided that they are the only ones who can carry this out;
  7. the purchase and contracting of exclusive goods or services, or those that can be supplied only by a certain supplier;
  8. those that, because of emergency situations, do not allow the carrying out of another selection procedure in time (in all cases, this scenario must be based on objective reasons, prior qualification and support by resolution of the highest competent authority);
  9. purchases and contracts made for the construction, installation or acquisition of offices for foreign diplomats;
  10. rescinded contracts, the termination of which does not exceed 40 per cent of the total amount of the project, work or service;
  11. purchases aimed at promoting the development of SMEs; and
  12. the hiring of advertising services through social media.

Contracts cannot be transferred to a different supplier. However, it is possible for contractors to subcontract to complete the awarded contract. In a case of contract modification or variation, the Government Procurement Law provides that work contracts can be modified to an extent of 25 per cent of the object contracted and services contracts to an extent of 50 per cent of the contract without the need to tender the varied contract. However, contracts for the acquisition of goods cannot be varied at all.

There is a financial threshold below which contracts are not regulated, which is determined in accordance with the yearly government-planned budget. The law contemplates a formula and the exact amount is updated annually by the government procurement agency. The current threshold is 164,982 Dominican pesos.

Special contractual forms

i Framework agreements and central purchasing

Framework agreements and central purchasing are not regulated in the Government Procurement Law. This type of contracting, such as indefinite delivery or indefinite quantity contracts, is not used. However, the new bill submitted to congress by the executive branch aims at enabling the DGCP to conduct framework agreements through central purchasing of the regulator.

ii Joint ventures

Joint ventures are admissible in the bidding process under Dominican procurement law. Foreign companies can team up with locals to create consortiums to present a joint offer in any tender procedure. The rule of thumb in this case is that the consortium can jointly meet the qualifications as if were one participant. Joint ventures can also take the form of a subcontracting relationship, where one company supplies the company that won the award for the government contract.

Public–private partnerships (PPPs) are governed by special legislation. The established procedure is that first there must be an initiative brought by the private (Interested party) or the public sector (any government agency with a PPP initiative). The presentation, evaluation and selection of initiatives and winners of public–private alliances are held over the next five phases: presentation of the initiative; evaluation of the initiative by the National Council of Public–Private Partnerships; further declaration of public interest; a competitive selection process to determine the successful bidder; and, finally, the award of the PPP.

The bidding process

i Notice

It is mandatory in every procurement procedure that a notice be published in a local newspaper. The notice is also published on the applicable government agency website and on the DGCP portal. There is no central journal for contract opportunities, although there are some companies that provide a service informing potential offerors of contract opportunities in their field. After a person registers an interest in a procedure, the government sends out direct emails for every update during the process, until the final notice award.

ii Procedures

There are six prescribed procedures that awarding authorities must follow for contractor selection. Depending on the type of contract and the amount involved, government agencies can choose between the following:

  1. National public tender: this is the main procedure and almost every procurement process is carried out using this procedure. Although it is meant only for big contracts, some contracting authorities prefer this procedure because it guarantees high levels of competition and transparency.
  2. International public tender: this is for procedures that involve international and foreign offerors.
  3. Restricted tender: reserved for procedures where only a handful of potential offerors exist in the market. Possible interested parties are directly contacted to participate in the tender and no one else can take part.
  4. Raffle of works: this is a very infrequently used procedure wherein, haphazardly, offerors are awarded a contract.
  5. Price comparison: this procedure is similar to what, in US government procurement law, is known as the 'lowest price technically acceptable' process. In this process, the contract should be awarded to the lowest price offer from among those that comply with the minimum technical requirements.
  6. Reverse auction: offerors bid for the prices at which they are willing to sell their goods to the government. This procedure is seldom used in the Dominican Republic.

All these procedures are conducted physically. Although there is a portal through which awarding authorities send out notices and information, the procurement process is currently not electronic.

iii Amending bids

Limits to changes in offers during the procurement process are set out in the procedure specifications. Usually, there is a deadline before which the government can ask for corrections to the offer. However, there is no limit on the changes that the contracting authority can make to the process. It is normal for several amendments to be made to conditions, among other things.

Eligibility

i Qualification to bid

Article 8 of the Government Procurement Law states that anyone who wishes to contract with the state shall demonstrate its capacity by satisfying the following requirements:

  1. they must possess the professional and technical qualifications that ensure the capacity, financial resources, equipment, physical means, reliability, experience and staff necessary to execute the contract;
  2. their commercial purposes and activity must be compatible with the contractual object;
  3. they must be solvent and not in a bankruptcy or liquidation process, nor must their commercial activities have been suspended; and
  4. they have complied with their tax and social security obligations.

These requirements are not restrictive, however, and the contracting authority can require any additional elements it deems necessary to ensure that the contractor is responsive and able to properly carry out the awarded contract. In addition, any contractor must be registered as a state provider to be able to participate.

ii Conflicts of interest

Conflicts of interest are strictly regulated by the procurement law in the Dominican Republic. As a principle, government officials and their relatives cannot directly or indirectly participate in a procurement process. Also, some types of organisational conflicts of interest are in place.

Article 14 of the Government Procurement Law states that the following persons may not be bidders or contract with the state:

  1. government officials, including:
    • the President and Vice President of the Dominican Republic;
    • the Secretaries and Undersecretaries of State;
    • the senators and deputies of Congress;
    • the supreme magistrates of the Supreme Court of Justice, of the other courts of the judicial order, of the Chamber of Accounts and of the Central Electoral Board;
    • the trustees and aldermen of the municipalities and the National District;
    • the Comptroller General of the Dominican Republic and the Deputy Comptroller;
    • the Budget Director and Deputy Director;
    • the National Planning Director and the Deputy Director;
    • the Attorney General of the Dominican Republic and the other members of the Public Prosecutor's Office;
    • the National Treasurer and the Deputy Treasurer; and
    • other officials of the first and second level of hierarchy of the institutions included in Article 2, Nos. 1 to 5;
  2. the Chief and Deputy Chiefs of Staff of the Armed Forces, as well as the Chief and Deputy Chiefs of the National Police;
  3. public officials with decision-making power at any stage of the administrative contracting procedure;
  4. all personnel of the contracting entity;
  5. relatives by a blood relationship to the third degree or by affinity to the second degree, themselves included, of officials related to the procurement covered by the ban, as well as spouses, couples in free union, people linked with an analogous relationship of affective coexistence or with whom they have had children, and descendants of these persons;
  6. legal entities in which those natural persons referred to at (a)–(d) have held a participation greater than 10 per cent of the share capital in the six months before the date of the notice;
  7. any person or company who has intervened as an adviser at any stage of the recruitment procedure or has participated in the creation of the applicable technical specifications or designs, except in the case of supervision contracts;
  8. any person or company that has been convicted by means of a sentence that has acquired the authority of the thing irrevocably judged for crimes of falsehood or against property, or for bribery offences, public embezzlement, influence peddling, prevarication, disclosure of secrets, use of privileged information or crimes against public finances, until a period has elapsed equal to double the sentence (if the conviction was for a crime against public administration, the prohibition on hiring with the state will be perpetual);
  9. companies whose managers have been convicted of crimes against public administration, crimes against public faith or crimes covered by international conventions of which the country is a signatory;
  10. any person or company that is disabled under any legal system;
  11. people who supply false information or who engage in related illegal or fraudulent activities related to hiring;
  12. any person or company that has been sanctioned administratively with temporary or permanent disqualification from contracting with public sector entities, in accordance with the provisions of this law and its regulations; and
  13. natural or legal persons who are not up to date with their tax or social security obligations, in accordance with what is established by current regulations.

These conflicts of interest are screened during the first step of the evaluation process, which is the qualification of the offers.

iii Foreign suppliers

Foreign suppliers can only bid in an international public tender. However, foreign suppliers can participate in any other procurement process if they set up a local branch or subsidiary, or have local tax residence through a mercantile registry.

Award

i Evaluating tenders

The criteria for evaluating tenders are left to contracting authorities to determine following the principles of best value, and the full and open competition guidelines established by the Government Procurement Law. The criteria depend on the type of procurement procedure selected. For example, public tender evaluation criteria will be based on best value, while price comparison criteria will be the lowest-priced bid.

To ensure certain uniformity in evaluation standards in contracting authorities, through Decree No. 543-12, the Dominican government made it mandatory for government agencies to follow model specifications established by the DGCP. These specifications are sent out as soon as the procurement procedure is published and are very similar to what is known in the United States as a 'request for proposal'.

Nonetheless, evaluation guidelines will vary depending on the type of contract and the goods or services that are sought, which will directly influence the specifications and criteria for the award.

ii National interest and public policy considerations

In Dominican procurement law, there is no such thing as a 'buy Dominican' provision. However, domestic suppliers are usually favoured when it comes to food production. The government gives preference to local producers' products over imported products. However, authorities cannot specify that goods and services must have national quality marks and usually, when they ask for certain quality specifications, they accept those that are of equivalent or superior quality. Full and open competition is at the core of the Dominican Republic's government procurement system.

Collateral policies in government procurement are highly sought after in the Dominican Republic. Environmental products and procedures, energy-efficient electronic products, women-owned businesses, SMEs, depressed areas, etc., are elements taken into account at the evaluation procedure. In any case, if these considerations will be considered, they must be expressly stated in the procedure specifications.

Information flow

Disclosure obligations are limited to the information required to identify the offeror and its corporate structure as well as the representatives that will sign the contracts and so on. These obligations will vary depending on the type of contract object. The information bidders have access to is limited to what is included in the procurement specifications.

There is a specified period in which bidders can ask questions and request any information they require. The government is obligated to debrief bidders by responding to all these questions, within reason. After this period, no further questions or requests for information can be made.

For complicated procurements, some contracting authorities hold public debriefing hearings so that interested parties can ask questions and request information, but this is not mandatory.

There is a general obligation of information and transparency for every stage and decision concerning procurement procedures. Changes, amendments, and unsuccessful and disqualified bidders must be properly notified.

Confidentiality is usually mandated in procedures where special and security items are procured; apart from that, all information must remain public.

Challenging awards

Bid protests and award challenges are not very frequent mainly because of the low chance of success, which is influenced by the very low response rate. It is not costly, but time frames for award challenges in the administrative court and with the DGCP range from two to three years.

i Procedures

Complaints procedures can be brought by disgruntled offerors to the contracting authority directly, appealed to the enforcement body and later challenged in court. One can also go directly to each of those stages without having to previously exhaust the other.

Limitation periods for challenges vary depending on the type of procedure. Court challenges must be brought within 30 days of the date of the act that is being challenged. Challenges to the contracting authority must be made within 10 days. The decision rendered by the awarding agency can be appealed within 10 days.

ii Grounds for challenge

Challenges can be brought on almost any grounds of breach of procurement law, whether a specific statute or a violation of a principle such as transparency or competition. It is possible to challenge the specifications, particular decisions made by the contracting authority, the award and even the contract.

iii Remedies

Courts have broad powers to grant relief in government procurement cases. However, they cannot rule on areas of discretionary government authority. Courts usually order new tenders and fines in the event of breaches of procurement procedures, and may impose suspension and debarment sanctions, which are provided in law.

Outlook

With the submission of a bill that calls for a significant modification of the law, major developments are expected in 2022 in government procurement in the Dominican Republic. Also, we have high expectations of the execution of the Dominican Regulatory Compliance Programme in Government Procurement, from which we are hoping for good results. The trials scheduled to be held in 2022–2023 of what will be landmark cases in corruption will also be important to the Dominican procurement landscape in the following years.

Footnotes

1 Luis Ernesto Peña Jiménez is the managing partner at Martínez, Peña & Fernández.

2 DR-CAFTA, Chapter 9, 'Government Procurement': http://www.ustr.gov/sites/default/files/uploads/agreements/cafta/asset_upload_file766_3926.pdf (accessed 29 March 2022).

3 A decree in the Dominican Republic is similar to an executive order in the United States.

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