On August 12, 2024, the executive branch published in the Official Gazette National Decree 713/2024 (the “Decree”), which regulates Law 27,742 (the “Law” or “Basic Law”), which in Annex I and III, introduced amendments regarding construction contracts.
Annex I of the Decree regulates the procedure to renegotiate or terminate public contracts signed before December 10th., 2023, as authorized by the Bases Law. This process may be initiated ex officio or at the request of the contractor.
The Ministry of Economy, within 30 days, will establish the financial and economic guidelines to be taken into account for the renegotiation or termination of the contracts involved.
Once these guidelines have been established, the competent authority will begin the renegotiation of those contracts whose continuity is considered financially or economically convenient for the public interest. After a technical analysis, the contracts which are determined as not convenient to continue, shall be terminated for emergency reasons.
In the event of renegotiation, the contractor must waive claims for consequential damages, loss of profits, unproductive expenses and any similar economic damage caused by the reduction in the rate of execution, suspension or stoppage of the work or services due to the emergency situation. In addition, the contractor must expressly waive any claim or action, present or future, related to the issues resolved in the renegotiation agreement.
The National Executive Branch will be in charge of approving the renegotiation agreement or the administrative act of termination, after the intervention of the Comptroller General’s Office and the Attorney General’s Office. Once the administrative act of termination has been notified, the necessary actions for the final liquidation of the contract will be taken.
Likewise, the procedure for the National Government to reach possible settlement agreements with its contractors was regulated, which may be initiated ex officio or at the request of a party. These transactions must comply with certain minimum conditions:
- a reduction of not less than 30% of the amount of the claim in favor of the National State;
- each party shall bear its own costs and the common costs shall be divided equally;
- waiver and/or abandonment by both parties and/or their shareholders of any claim or action related to the subject matter of the transaction.
The mere request or ex officio initiation of the proceeding does not imply waiver of rights by either party.
On the other hand, Annex III of the Decree states:
- It shall apply to various procurements in the systems governed by Laws No. 13,064 (Public Works Law), No. 17,520 (Public Works Concession Law), No. 23,696 (State Reform Law) and No. 27,328 (Public-Private Participation Law).
- Private Initiatives must be submitted to the Minister, Secretary of the Presidency or the highest authority of the competent agency, either through a call or spontaneously. In the case of being submitted without a call, the promoter of the initiative must justify the reasons of public interest that support the execution of the project. A Private Initiatives Database will be created, accessible to the public free of charge.
- If the Minister, Secretary of the Presidency or the highest authority of the competent agency considers that the project may be declared of public interest, it will submit a non-binding report to the National Executive Power, which will decide, within 90 days, extendable for another 90 days, whether to grant such qualification.
- Within 60 days after the declaration of public interest of the Private Initiative, the competent authority must call for public bidding.
- The offer of the promoter of the Private Initiative will have preference if it does not exceed 10% of the best amount offered. If the difference is between 10% and 15%, both bidders will be invited to improve their proposals.
This new regime came into effect on August 12, 2024.
