December 2023

Legal Alert: Public Procurement Modernization and Labor Rights Protection (Law No. 21,634)

Date of publication: December 12, 2023

Author: Cristián Vásquez – Alvarez Abogados

On December 12, 2023, Law No. 21,634 was published, reforming Chile’s Public Procurement Law (Law No. 19,886) and other related statutes. The reform aims to improve public spending efficiency, enhance transparency and integrity, and incorporate circular economy principles into state procurement.

Effective dates

The law enters into force in three stages:

  1. Integrity and transparency provisions took effect upon publication.
  2. Provisions related to Innovation Contracts, Competitive Dialogue, Reverse Auctions, and Circular Economy will take effect 18 months later, on June 12, 2025, once regulations are enacted.
  3. The remaining provisions entered into force on December 12, 2024.

Integrity and transparency

Key measures include:

  • Mandatory registration in the Public Procurement Portal for all officials involved in tenders.
  • Ban on contracting with officials or relatives up to the second degree of kinship.
  • Conflict of interest declarations and confidentiality commitments required for evaluators.
  • Biannual asset and interest disclosures under Law No. 20,880.
  • A one-year post-employment restriction for former officials who participated in procurement procedures.

Contracts executed in breach of these provisions are null and void, without prejudice to applicable civil, administrative, or criminal sanctions.

Labor rights and union practices

From December 12, 2024, the law refines sanctions under Article 4 of Law No. 19,886:

  • Labor Courts may adjust the duration or application of ineligibility to contract with the State, considering the seriousness and recurrence of violations.
  • Ineligibility may be extended to companies forming part of the same economic group.
  • Courts may waive the sanction if it would cause serious social or economic harm to the community or the State.

Promotion of SMEs

The Public Procurement Directorate (DCCP) must promote micro, small, and medium-sized enterprises (MSMEs), local suppliers, and women-led businesses in public tenders.

Key measures:

  • Introduction of regional award criteria.
  • Formal recognition of Agile Purchases (up to 100 UTM), reserved for MSMEs.
  • Ban on discriminatory evaluation criteria.

New contracting mechanisms and principles

The reform introduces:

  • Innovation Contracts for unmet public needs;
  • Competitive Dialogue for complex procurement;
  • Electronic Reverse Auctions for standardized products.

It also establishes:

  • The Public Procurement Management and Information System;
  • The Committee for Innovation and Sustainability;
  • Circular economy principles, requiring resource reuse and responsible waste management.

 

For detailed advice on implementing Law No. 21,634, please contact Alvarez Abogados.