Since the entry into force of the current Chilean concessions law, which dates back to 1996, and its later modification in 20101, which established – among other things – a dispute board mechanism called the Technical Concessions Panel (from now on the ‘TCP’ permanent and institutional, mandatory for technical and economic disputes, although not binding), there has been an evolution in the way of addressing the various discrepancies that arise in the execution of these types of administrative contracts, which are public-private partnerships, especially in their construction phase (which also recognises an exploitation stage that allows the recovery of the investment).
The Chilean public-private partnerships system is responsible for an accumulated investment that reaches almost $26bn as of the second quarter of 2023, and more than 75 contracts in force today2. Added to this is the government announcement of the Public-Private Infrastructure Plan 2022-2026, which considers a portfolio of 42 tenders, corresponding to 52 projects for an estimated amount that exceeds $13bn3.
However, beyond how reasonably successful the Chilean concessions model has become in generating new public infrastructure, it has not been free of controversies between investors and the state. Changes to the standards of services, requirements for new works, changes in design standards, delays in engineering approval or operation under extraordinary conditions derived from the Covid-19 pandemic are just some of the disputes where the TCP has had to issue decisions4.
Within these disputes, special attention should be paid to those that arise from relevant errors or omissions in the reference preliminary project (hereinafter, the ‘RPP’) of engineering that is provided by the state to tender and offer the amount of the investment in these processes. Let us not forget that in the Chilean system, the state provides a preliminary project that will establish the minimum construction standard that the bidding winner must meet, with the latter having the possibility of providing, during the bidding phase, an alternative preliminary project, if it fulfills such minimum standards.
The issue is that frequently the state’s RPP contains errors or omissions that are not detectable in the bidding phase, which for many reasons – time or complexity – do not allow complementary studies to be carried out during that specific pre-contractual phase, but which later may produce material differences in the investment amount.
Furthermore, during the bidding phase it is customary to include clauses waiving the state’s liability for any errors or omissions present in the RPP, and said studies are usually categorised as referential, but at the same time are enforceable if their minimum standard is not met by the investor. This is, to us, a clear inconsistency that is difficult to sustain, given their aleatory binding nature.
For some time, these differences were treated and resolved by the TCP as a technical standard problem, that is, resorting to the concept of a minimum requirement. This meant that if the preliminary project was not executable in the terms provided by the state, and the technical standard needed to be modified, any extra costs had to be financed by the investor, precisely because of the merely referential or indicative nature of these RPP.
Such way of resolving conflicts, in our view, posed an inadequate solution to the problem of serious errors or omissions in the RPP.
The underlying problem in this regard is reflected at the level of: (i) logical inconsistency when considering that the same requirement would be binding for one party (as a minimum requirement for the awarded investor) and not for the entity that has prepared it – the state; (ii) at the level of object theory of the contract (if the RPP has no value because it is referential, then how is it possible for the administrative contract to have a defined object?); (iii) at the level of waivers of liability for serious errors or omissions, without any law that authorises the state to grant this release in bidding processes; and (iv) as uncertainty in the amount of the actual investment that will be required to materialise the project.
In a recent decision5, the way of resolving these issues by the TCP underwent a significant evolution. The panel decided that the RPP must, on the one hand: (i) comply with being potentially constructible, that is, it must satisfy the standards of the lex artis in order to be materialised in practice.
On the other hand, (ii) the fact that it is referential or indicative does not mean that it could have significant errors, since the engineering project prepared by the concessionaire must comply with the standards of the preliminary project (prepared by the state). Said preliminary projects are mandatory for both parties.
Likewise, (iii) that the estimation of a referentiality of the preliminary projects creates significant ambiguity and uncertainty in regards to the object of the contract and make it difficult to present comparable offers in the bidding stage, which is not something that the law provides for.
Furthermore, (iv) the forms and affidavits required during the bidding phases cannot be interpreted as an early waiver of the state’s liability in the preparation of the project, nor contradict the law, even more so when this type of contract is governed, fundamentally, by public law (with continental roots in Chilean law).
Lastly, (v) that these contracts are governed by the principle of good faith and legitimate trust in the actions of the state, which must be reflected in the information provided.
In summary, we identify an evolution in the way of deciding these types of conflicts, which dampens an unfair situation (if not incompatible with the law). Historically, the solution has been to validate the releasing of the state of any liability for its errors and important omissions incurred at the RPP during the bidding stages of these administrative contracts, which in our view does not adequately resolve such a disparity in the quality of the technical information delivered during these bidding processes, which are so relevant, both for their social function as well as for the investment amounts they entail, which, therefore, require a sophisticated approach when resolving
this type of dispute.
Notes
- Law no. 20.410, dated 14 December 2009, which modifies the public works concessions law and other regulations.
- Quarterly report of the General Directorate of Concessions, the period between April and June 2023.
- Public-Private Infrastructure Plan 2022-2026. Consulted at: https://concesiones.mop.gob.cl/Documents/2022/PLAN_INFRAESTRUCTURA_APP_2022_2026.pdf.
- See as an example the recommendations of the TCP to discrepancies D08-2017-10 and D03-2018-10.
- Technical Panel on Concessions, Disagreement D03-2023-2021.