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Free Trade Agreement Between the

Government of Canada and the Government of the Republic of Chile

Part Three bis - Government Procurement

Chapter K bis - Government Procurement


Article Kbis-01: Scope and Coverage

1. This Chapter applies to any measure adopted or maintained by a Party relating to procurement by an entity listed in Annex Kbis-01:

a. by any contractual means, including purchase and rental or lease, with or without an option to buy; and

b. subject to the terms of Annex Kbis-01.

2. This Chapter does not apply to:

a. non-contractual agreements or any form of assistance provided by a Party or a state enterprise, including grants, loans, equity infusions, fiscal incentives, subsidies, guarantees, cooperative agreements, government provision of goods and services to persons or to a regional or local level of government, and purchases for the direct purpose of providing foreign assistance;

b. purchases funded by international grants, loans, or other assistance, where the provision of such assistance is subject to conditions inconsistent with the provisions of this Chapter;

c. hiring of government employees and related employment measures;

d. acquisition of fiscal agency or depository services, liquidation and management services for regulated financial institutions, and sale and distribution services for government debt; and

e. procurements made by an entity or state enterprise from another entity or state enterprise of that Party.

3. Where an entity awards a contract that is not covered by this Chapter, nothing in this Chapter shall be construed to cover any good or service component of that contract.

4. No entity may prepare, design, or otherwise structure or divide, in any stage of the procurement, any procurement in order to avoid the obligations of this Chapter.

5. In calculating the value of a contract for the purpose of ascertaining whether the procurement is covered by this Chapter, an entity shall include the maximum total estimated value of the procurement over its entire duration, taking into account all options, premiums, fees, commissions, interest and other revenue streams or other forms of remuneration provided for in such contracts.

6. Nothing in this Chapter shall prevent either Party from developing new procurement policies, procedures, or contractual means, provided they are not inconsistent with this Chapter.


Article Kbis-02: General Principles

National Treatment and Non-Discrimination

1. With respect to any measure relating to procurement covered by this Chapter, each Party shall accord to the goods and services of the other Party, and to the suppliers of the other Party of such goods and services, treatment no less favourable than the most favourable treatment the Party accords to its own goods, services, and suppliers.

2. With respect to any measure relating to procurement covered by this Chapter, neither Party may:

a. treat a locally established supplier less favourably than another locally established supplier on the basis of degree of foreign affiliation or ownership; or

b. discriminate against a locally established supplier on the basis that the goods or services offered by that supplier for a particular procurement are goods or services of the other Party.

Measures Not Specific to Procurement

3. Paragraphs 1 and 2 do not apply to measures respecting customs duties or other charges of any kind imposed on or in connection with importation, the method of levying such duties and charges or other import regulations, including restrictions and formalities, or measures affecting trade in services other than measures specifically governing procurement covered by this Chapter.


4. An entity shall not consider, seek, or impose offsets at any stage of a procurement.


Article Kbis-03: Publication of Procurement Measures

Consistent with Article L-02 (Publication), each Party shall promptly publish:

a. its measures of general application specifically governing procurement covered by this Chapter; and

b.any changes in such measures in the same manner as the original publication.


Article Kbis-04: Publication of Notice of Intended Procurement

1. For each procurement covered by this Chapter, an entity shall publish in advance a notice inviting interested suppliers to submit tenders for that procurement (“notice of intended procurement”). Each such notice shall be accessible during the entire period established for tendering for the relevant procurement.

2. Each notice of intended procurement shall include a description of the intended procurement, any conditions that suppliers must fulfill to participate in the procurement, the name of the entity issuing the notice, the address where suppliers may obtain all documents relating to the procurement, the time limits for submission of tenders, and the dates for delivery of the goods or services to be procured.


Article Kbis-05: Time Limits for the Tendering Process

1. An entity shall prescribe time limits for the tendering process that allow sufficient time for suppliers to prepare and submit responsive tenders, taking into account the nature and complexity of the procurement. An entity shall provide no less than 30 days between the date on which it publishes the notice of intended procurement and the deadline for submitting tenders.

2. Notwithstanding paragraph 1, entities may establish a time limit of less than 30 days, but in no case less than 10 days, in the following circumstances:

a. where the entity has published a notice containing the information specified in Article Kbis-04(2) at least 30 days and not more than 12 months in advance;

b. in the case of the second or subsequent publications of notices for procurement of a recurring nature;

c. where an entity procures commercial goods or services that are sold or offered for sale to, and customarily purchased and used by, non-governmental buyers for non-governmental purposes; or

d. where an unforeseeable state of urgency duly substantiated by the entity renders impracticable the time limits specified in paragraph 1.


Article Kbis-06: Information on Intended Procurements

1. An entity shall provide interested suppliers tender documentation that includes all the information necessary to permit suppliers to prepare and submit responsive tenders. The documentation shall include all criteria that the entity will consider in awarding the contract, including all cost factors, technical requirements and the weights or, where appropriate, the relative values, that the entity will assign to these criteria in evaluating tenders.

2. Where an entity does not publish all the tender documentation by electronic means, the entity shall, on request of any supplier, promptly make the documentation available in written form to the supplier.

3. Where an entity, prior to the award of a contract, modifies the criteria referred to in paragraph 1, it shall transmit all such modifications in writing:

a. to all suppliers that are participating in the procurement at the time the criteria are modified, if the identities of such suppliers are known, and in all other cases, in the same manner as the original information was transmitted; and

b. in adequate time to allow such suppliers to modify and re-submit their tenders, as appropriate.


Article Kbis-07: Technical Specifications

1. An entity shall not prepare, adopt, or apply any technical specification with the purpose or the effect of creating unnecessary obstacles to trade between the Parties.

2. Any technical specification prescribed by an entity shall be, where appropriate:

a. specified in terms of performance requirements rather than design or descriptive characteristics; and

b. based on international standards, where applicable, otherwise on national technical regulations, recognized national standards, or building codes.

3. An entity shall not prescribe technical specifications that require or refer to a particular trademark or trade name, patent, design or type, specific origin or producer or supplier unless there is no sufficiently precise or intelligible way of otherwise describing the procurement requirements and provided that, in such cases, words such as “or equivalent” are included in the tender documentation.

4. An entity shall not seek or accept, in a manner that would have the effect of precluding competition, advice that may be used in the preparation or adoption of any technical specification for a specific procurement from a person that may have a commercial interest in that procurement.


Article Kbis-08: Conditions for Participation

1. Where an entity requires suppliers to satisfy registration, qualification, or any other requirements or conditions for participation (“conditions for participation”) in a separate process in order to participate in a procurement, the entity shall publish a notice inviting suppliers to apply for participation. The entity shall publish the notice sufficiently in advance to provide interested suppliers sufficient time to prepare and submit applications and for the entity to evaluate and make its determinations based on such applications.

2. Each entity shall:

a. limit any conditions for participation in a procurement to those that are essential to ensure that the potential supplier has the legal, technical, and financial capacity to fulfill the requirements and technical specifications of the procurement;

b. base qualification decisions solely on the conditions for participation that it has specified in advance in notices or tender documentation; and

c. recognize as qualified all suppliers of the other Party that meet the requisite conditions for participation in a procurement covered by this Chapter.

3. Entities may establish publicly available lists of suppliers qualified to participate in procurements. Where an entity requires suppliers to qualify for such a list in order to participate in a procurement, and a supplier that has not yet qualified applies to be included on the list, the entity shall promptly start the qualification procedures for the supplier and shall allow the supplier to participate in the procurement, provided there is sufficient time to complete the procedures within the time period established for tendering.

4. No entity may impose the condition that, in order for a supplier to participate in a procurement, the supplier has previously been awarded one or more contracts by an entity of that Party or that the supplier has prior work experience in the territory of that Party. An entity shall judge a supplier’s financial and technical capacities on the basis of its global business activities including both its activity in the territory of the Party of the supplier, and its activity, if any, in the territory of the Party of the entity.

5. An entity shall promptly communicate to any supplier that has applied for qualification its decision on whether that supplier is qualified. Where an entity rejects an application for qualification or ceases to recognize a supplier as qualified, that entity shall, on request of the supplier, promptly provide it a written explanation of the reasons for its decision.

6. Nothing in this Article shall preclude an entity from excluding a supplier from a procurement on grounds such as bankruptcy or false declarations.


Article Kbis-09: Tendering Procedures

1. Entities may award contracts by means other than open tendering procedures, provided that the tendering procedure is not used to avoid competition or to protect domestic suppliers in the following circumstances, where applicable:

a. in the absence of tenders in response to an open tendering procedure, or where tenders submitted have resulted from collusion under domestic law, or do not conform to the essential requirements in the tender documentation provided in a prior invitation to tender, including any conditions for participation, on condition that the requirements of the initial procurement are not substantially modified in the contract as awarded;

b. where, for works of art, or for reasons connected with the protection of patents, copyrights or other exclusive rights, or proprietary information or where there is an absence of competition for technical reasons, the goods or services can be supplied only by a particular supplier and no reasonable alternative or substitute exists;

c. for additional deliveries by the original supplier that are intended either as replacement parts, extensions, or continuing services for existing equipment, software, services or installations, where a change of supplier would compel the entity to procure goods or services not meeting requirements of interchangeability with existing equipment, software, services, or installations;

d. for goods purchased on a commodity market;

e. where an entity procures a prototype or a first good or service that is developed at its request in the course of, and for, a particular contract for research, experiment, study, or original development. When such contracts have been fulfilled, subsequent procurements of such goods or services shall be subject to Articles Kbis-2 through Kbis-8 and Article Kbis-17;

f. where additional construction services that were not included in the initial contract but that were within the objectives of the original tender documentation have, due to unforeseeable circumstances, become necessary to complete the construction services described therein. However, the total value of contracts awarded for additional construction services may not exceed 50 percent of the amount of the initial contract;

g. in so far as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the entity, the goods or services could not be obtained in time by means of an open tendering procedure;

h. in the case of a contract awarded to a winner of a design contest provided that:

i. the contest has been organized in a manner that is consistent with the principles of this Chapter; and

ii. the participants are judged by an independent jury with a view to a design contract being awarded to a winner;

i. where an entity needs to procure consulting services regarding matters of a confidential nature, the disclosure of which could reasonably be expected to compromise government confidences, cause economic disruption or similarly be contrary to the public interest; or

j. for purchases made under exceptionally advantageous conditions that only arise in the very short term, such as unusual disposals by enterprises that are not normally suppliers or disposal of assets of businesses in liquidation or receivership, but not routine purchases from regular suppliers.

2. An entity shall maintain a record or prepare a written report providing specific justification for any contract awarded by means other than open tendering procedures, as provided in paragraph 1.


Article Kbis-10: Awarding of Contracts

1. An entity shall require that in order to be considered for award, a tender must be submitted in writing and must, at the time it is submitted:

a. conform to the essential requirements of the tender documentation; and

b. be submitted by a supplier that has satisfied the conditions for participation
that the entity has provided to all participating suppliers.

2. Unless an entity determines that it is not in the public interest to award a contract, it shall award the contract to the supplier that the entity has determined to be fully capable of undertaking the contract and whose tender is determined to be the most advantageous in terms of the requirements and evaluation criteria set out in the tender documentation.


Article Kbis-11: Information on Awards

Information Provided to Suppliers

1. Subject to Article Kbis-15, an entity shall promptly inform suppliers participating in a tendering procedure of its contract award decision. On request, an entity shall provide a supplier whose tender was not selected for award the reasons for not selecting its tender and the relative advantages of the tender the entity selected.

Publication of Award Information

2. After awarding a contract covered by this Chapter, an entity shall promptly publish a notice that includes at least the following information about the award:

a. the name of the entity;
b. a description of the goods or services procured;
c. the name of the winning supplier;
d. the value of the contract award; and
e. where the entity has not used open tendering procedures, an indication of the circumstances justifying the procedures used.

Maintenance of Records

3. An entity shall maintain records and reports relating to tendering procedures and contract awards covered by this Chapter, including the records and reports provided for in Article Kbis-09(2), for a period of at least three years.


Article Kbis-12: Ensuring Integrity in Procurement Practices

Each Party shall ensure that criminal or administrative penalties exist to address corruption in its government procurement, and that the Party and its entities have in place policies and procedures to eliminate any potential conflict of interest on the part of those engaged in or having influence over a procurement.


Article Kbis-13: Domestic Review of Supplier Challenges

Consultations between the Procuring Entity and Supplier

1. Each Party shall ensure that its entities accord impartial and timely consideration to any complaints from suppliers regarding an alleged breach of measures implementing this Chapter arising in the context of a procurement in which they have, or have had, an interest. Where appropriate, a Party may encourage suppliers to seek clarification from its entities with a view to facilitating the resolution of any such complaints.

Independent Review Authorities

2. Each Party shall establish or designate at least one impartial administrative or judicial authority that is independent of its procuring entities to receive and review complaints of suppliers arising in the context of a procurement covered by this Chapter in which it has or has had an interest.

3. Each supplier shall be allowed a sufficient period of time to prepare and submit a challenge, which in no case shall be less than 10 days from the time when the basis of the complaint became known to the supplier or reasonably should have become known to the supplier.

4. Each Party shall provide that an authority it establishes or designates under paragraph 2 has authority to take interim measures, pending the resolution of a complaint, to preserve the supplier’s opportunity to participate in the procurement. Such interim measures may result in suspension of the procurement process. However, procedures may provide that overriding adverse consequences for the interests concerned, including the public interest, may be taken into account when deciding whether such measures should be applied.

5. Notwithstanding other review procedures provided for or developed by each of the Parties, each Party shall ensure that any authority it establishes or designates under paragraph 2 shall have procedures which shall be in writing and made generally available. Such procedures shall be timely, effective, transparent and non-discriminatory and shall provide that:

a. the procuring entity respond in writing to the complaint and disclose all relevant documents to the review body;

b. the participants to the proceedings have the right to legal representation, and to be heard prior to a decision of the review body being made on the complaint;

c. the participants to the proceedings have access to all proceedings; and

d. the findings and recommendations relating to supplier complaints be provided in a timely fashion, in writing, with an explanation of their basis.

6. Each party shall ensure that a supplier’s submission of a complaint will not prejudice the supplier’s participation in ongoing or future procurements.


Article Kbis-14: Modifications and Rectifications

1. Where a Party modifies its coverage under this Chapter, the Party shall

a. notify the other Party in writing; and

b. propose appropriate compensatory adjustments to the other Party to maintain a level of coverage comparable to that existing prior to the modification.

2. Notwithstanding paragraph 1(b), a Party need not provide compensatory adjustments where the Parties agree that:

a. the modification in question is a minor amendment or rectification of a purely formal nature; or

b. the proposed modification covers an entity over which a Party has effectively eliminated its control or influence.

3. If the other Party does not agree to the compensatory adjustments proposed under paragraph 1(b), or that the modification is a minor amendment or rectification of a purely formal nature, or that government control or influence has been effectively eliminated from the entity in question, the other Party must object in writing within 30 days of receipt of the notification or be deemed to have agreed.

4. Where a Party has raised its objection in writing within the time periods prescribed in paragraph 3 and considers that:

a. an adjustment proposed under paragraph 1(b) is not adequate to maintain a comparable level of mutually agreed coverage;

b. the proposed modification is not a minor amendment or a rectification under paragraph 2(a); or

c. the proposed modification covers an entity over which a Party has not effectively eliminated its control or influence under paragraph 2(b),

the Party may have recourse to dispute settlement procedures under Chapter N (Institutional Arrangements and Dispute Settlement Procedures).

5. Where the Parties are in agreement on the proposed modification, rectification, or minor amendment, including where a Party has not objected within 30 days under paragraph 3, the Commission shall give effect to the agreement by modifying forthwith the relevant Section of Annex Kbis-01.


Article Kbis-15: Non-Disclosure of Information

1. The Parties, their entities, and their review authorities shall not disclose confidential information the disclosure of which would prejudice legitimate commercial interests of a particular person or might prejudice fair competition between suppliers, without the formal authorization of the person that provided the information to the Party.

2. Nothing in this Chapter shall be construed as requiring a Party or its entities to disclose confidential information the disclosure of which would impede law enforcement or otherwise be contrary to the public interest.


Article Kbis-16: Exceptions

1. Nothing in this Chapter shall be construed to prevent a Party from taking any action or not disclosing any information which it considers necessary for the protection of its essential security interests relating to the procurement of arms, ammunition or war materials, or to procurement indispensable for national security or for national defence purposes.

2. Provided that such measures are not applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination between Parties where the same conditions prevail or a disguised restriction on trade between the Parties, nothing in this Chapter shall be construed to prevent a Party from adopting or maintaining measures:

a. necessary to protect public morals, order, or safety;
b. necessary to protect human, animal, or plant life or health;
c. necessary to protect intellectual property; or
d. relating to goods or services of handicapped persons, of philanthropic institutions, or of prison labour.

Article Kbis-17: Public Information

1. In order to facilitate access to information on commercial opportunities under this Chapter, each Party shall ensure that electronic databases that provide current information on all procurements covered by this Chapter that are conducted by entities listed in Annex Kbis-01, including information that can be disaggregated by detailed categories of goods and services, are made available to interested suppliers of the other Party, through the Internet or a comparable computer-based telecommunications network. Each Party shall, on request of the other Party, provide information on:

a. the classification system used to disaggregate information on procurement of different goods and services in such databases; and

b. the procedures for obtaining access to such databases.

2. For each covered procurement, a procuring entity shall publish a notice of intended procurement through the Internet or a comparable electronic network that is widely disseminated and readily accessible to the public. Each Party shall maintain a gateway electronic site that includes links to all notices of procuring entities.

3. Each Party shall encourage its entities to publish, as early as possible in the fiscal year, information regarding the entity’s procurement plans.


Article Kbis-18: Committee on Procurement

The Parties hereby establish a Committee on Procurement to address matters such as increasing the understanding of their respective government procurement systems, with a view to maximizing access to government procurement.


Article Kbis-19: Further Negotiations

1. If, after the entry into force of the provisions of this Chapter, either Party enters into another international agreement that revises procurement procedures and practices, including the introduction of shorter bid periods, on the request of either Party the Parties shall enter into negotiations with a view to harmonising the current Chapter with the new international agreement.

2. If, after the entry into force of the provisions of this Chapter, either Party enters into another international agreement that provides greater access to its procurement market than is provided through this Chapter, including with respect to sub-federal government procurement, either Party may request that the Parties enter into negotiations with a view to achieving an equivalent level of market access through this Chapter as is contained in the other international agreement.


Article Kbis-20: Definitions

For purposes of this Chapter:

construction services means a contractual arrangement for the realization by any means of civil or building works, whether paid for directly by the Party or through, for a specified period of time, any grant to the supplier of temporary ownership or a right to control and operate, and demand payment for the use of such works, for the duration of the contract;

entity means an entity listed in Annex Kbis-01;

in writing or written means any expression of information in words, numbers, or other symbols, including electronic expressions, that can be read, reproduced, and stored;

international standard means a standard that has been developed in conformity with the document Decisions and Recommendations adopted by the Committee since 1 January 1995, G/TBT/1/Rev.7, 28 November 2000, Section IX (Decision of the Committee on Principles for the Development of International Standards, Guides and Recommendations with relation to Articles 2, 5 and Annex 3 of the Agreement), issued by the WTO Committee on Technical Barriers to Trade;

offsets means conditions imposed or considered by an entity prior to, or in the course of, its procurement process that encourage local development or improve a Party’s balance of payments accounts by means of requirements of local content, licensing of technology, investment, counter-trade, or similar requirements;

procurement means the process by which a government obtains the use of or acquires goods or services, or any combination thereof, for governmental purposes and not with a view to commercial sale or resale, or use in the production or supply of goods or services for
commercial sale or resale;

procurement official means a person who performs procurement functions;

publish means to disseminate information in an electronic or paper medium that is distributed widely and is readily accessible to the general public;

supplier means a person that provides or could provide goods or services to an entity;

technical specification means a specification that lays down the characteristics of goods to be procured or their related processes and production methods, or the characteristics of services to be procured or their related operating methods, including the applicable administrative provisions, and a requirement relating to conformity assessment procedures that an entity prescribes. A technical specification may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements, as they apply to a good, process, service or production or operating method.

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