Panama: Changes To The Public Procurement Law In Panama

Last Updated: 5 June 2018
Article by Luis Horacio Moreno IV

Public Procurement in Panama is regulated by Law 22 of 2006 ("Law 22").  Since its promulgation, the Law dictates the rules, principles and procedures applicable to public contracts entered into by the Central Government, autonomous entities or semiautonomous entities, municipalities, the Social Security Agency, financial intermediaries, and Panamanian companies where the Panamanian government has a stake of 51% or more.

Recently, Law 22 was subject to mayor changes, mainly motivated by the need of a more organized, complete and uniform legal framework for public procurement and the desire to achieve more efficiency and more transparency in procurement processes.

Among the most significant changes to Law 22 are the following:

  1. Law 22 will not be directly applicable to purchases made by the Social Security Agency (Caja del Seguro Social);
  2. Purchases made by NGO´s that manage or receive public funding shall be subject to the application of Law 22, as well as those made by district boards (Juntas Comunales);
  3. Minor construction contracts (under USD250,000) may now be procured through bid for framework agreement (Contrato Marco);
  4. The contract amounts that partially determine the applicable procurement method were updated;
  5. The amount that a contracting entity can assign as advance payment was limited to 20% of the total contract amount;
  6. The clause regulating legal incapability to enter into public contracts has been strengthen, considering crimes against the Public Administration, Money Laundering, Terrorism, among others. Also the parameters to determine the extent of the incapability to enter into public contracts were amended;
  7. The principles that govern public procurement in Panama were explained in mayor detail, and the Equality of Proponents principle was incorporated to ensure fairness in all procurement processes;
  8. Water and energy efficiency terms are now required to be included in the bid specs, as well as the efficient use of natural resources;
  9. In all procurement processes that exceed USD500,000, companies that participate as bidders must reveal who are the final beneficiaries that hold 10% or more of its shares (except when such company is publicly traded);
  10. The terms between the publication of proposal requests for different procurement process and the submission of the bid proposals changed;
  11. The minimum term to modify the bid specs prior to the date of submission of the proposal was also reformed;
  12. The correction of certain non-ponderable documents of the bid proposal was made more flexible;
  13. The Abbreviated Procurement Procedure was eliminated and the Special Procurement Process was created;
  14. Contract assignment and credit assignment clauses were modified;
  15. A cap for contract price amendment was set at 40% of the original contract price;
  16. Additional requirements were established for subcontracting;
  17. In order to determine the solvency of issuers of bid/performance/advance payment bonds, the Insurance and Reinsurance Superintendence (Superintendencia de Seguros y Reaseguros) shall publish a list of the companies authorized to issue said bonds every six months, with the corresponding solvency margins;
  18. The Objection Bond (legal recourse), was lowered to a 10% of the bidder´s economic proposal (for goods and services);
  19. Language regulating the procedure for execution of contracts by bond issuers who opt to substitute the breaching contractor was clarified;
  20. The maximum aggregated penalty amount for delays by the contractor was raised to 20% of the value of the contract;
  21. The timing for admission and decision of legal recourses against actions or omissions during the procurement process was simplified (2 days for admission and 5 days for decision); and
  22. The proponent's registry clause was modified to simplify procurement processes, avoiding the request to proponents of documentation previously filed at the proponent´s registry.

These changes entered into effect at the end of March 2018, and shall apply to all new procurement processes that the Panamanian Government and its entities subject to the application of Law 22, undertake hereinafter.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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