RESTRICTEDWORLD TRADE
ORGANIZATIONS/WPGR/W/11/Add.22
3 April 1998
(98-1399)
Working Party on GATS Rules Original:  Spanish
COMMUNICATION FROM COSTA RICA
Reply to the Questionnaire on Government Procurement of Services
Addendum
The following communication is being circulated at the request of Costa Rica to members of
the Working Party on GATS Rules.
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I. EXISTING PROCUREMENT REGIMES
Definition
1. What is the definition of government procurement employed in completing this
questionnaire?
In Costa Rica, government procurement covers all contracting activities conducted by public
entities.  This includes not only procurement of all types of goods and services, but also the
construction of public works, concessions for government facilities, public services managementconcessions, public works concessions (governed by a special law) and the sale and leasing of
government property.
Administrative structure
2. How are government procurement activities administered?  To what extent are
procurement activities centralized?  Please specify the identity of any central procurementagencies and their respective responsibilities.
Each institution administers its own procurement activity.  Only in the case of the Executive
are the activities centralized in one unit, the Nationa l Supply Unit of the Ministry of Finance, although
a plan for the decentralization of the Ministries is currently being introduced.
Laws and regulations in force
3.(a) Please specify the laws, regulations, rule s, guidelines, decrees, decisions and other
measures governing government procurement.  What is the scope of their application?  Inparticular, please describe any exemptions that exist.  Please provide a brief summary of the
content of each of these measures.
With respect to government procurement, Article 182 of the Constitution stipulates that:S/WPGR/W/11/Add.22
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"Public works contracts concluded by the State, the municipalities and the autonomous
institutions, procurement using funds from such entities, and the sale or lease of goods
belonging to them shall be put out to tender, in accordance with the law as to the amount
concerned."
The laws enacted in the light of the above constitutional provision are:  the Law on
Government Procurement (Law No. 7494 of 2 May 1995) which came into force on 1 May 1996, andthe Regulation to the Law on Government Procurement (Executive Decree No. 25038-H), published
in the Official Journal of 28 March 1996.
This Law on Government Procurement governs the procurement activities of:
- Executive organs;
- the Judiciary;
- the Legislature;
- the Supreme Court of Elections;- the Office of the Comptroller-General of the Republic;
- the Office of the Ombudsman;
- the decentralized territorial and institutional sector;
- public enterprises (the majority of whose share capital is not in private hands);
- non-State public entities with more than 50 per cent public financing.
Other laws relating to procurement by public entities are:
- Organic Law of the Central Bank of Costa Rica, Article 171 of which regulates the
procurement activities of State commercial banks and the Central Bank itself.
According to this Article, each bank must issue its own procurement regulations,
which must be approved by the governing board and by the Office of the Supervisorof Financial Entities;
- Municipal Code as regards certain regulations, in particular those concerning the sale
and donation of municipal property;
- General Law on Public Works Concessions and the Regulations thereto, which
regulate public works procurement;
- National Emergency Law, which regulates the action to be taken when a national
state of emergency is declared;
- Law on Labour Corporations and Regulations thereto, developed to facilitate the
shifting of personnel from the public sector to the private sector for the performance
of auxiliary services;
- Law on Hydrocarbons and Regulations thereto, which regulate the procedures for
granting concessions for mining and extraction of hydrocarbons;
- Law on Passenger Transport against Payment, which establishes the procedures for
granting concessions in that sector and in the taxi transport sector;
- Precedents established by the Office of the Comptroller-General of the Republic,
which is the administrative entity resp onsible for issuing guidelines for the
interpretation of regulations in that area.S/WPGR/W/11/Add.22
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3.(b) Does the procurement regime distinguish between the procurement of goods and
services?  If so, then how is the application of  rules determined in cases of joint procurement
involving both goods and services?
The Costa Rican regime does not distinguish between the procurement of goods and services.
The procedures are the same, as are the rules to determine the appropriate procedures.
Procurement procedures applied
4.(a) What procedures are followed in the procurement process?
The procurement procedures applied in Costa Rica are:
(i) Public or open tender, in which any interested person may participate;
(ii) tendering by registration, in which any interested person may submit a bid whether
invited to do so or not provided that person appears in the register of bidders held by
each institution at the time of opening of the tender;
(iii) selected tendering, in which, as in the case of tendering by registration, any interested
party appearing in the register of bidders prior to the opening of the tender may
submit a bid, whether or not directly invited to participate;
(iv) single tendering, under which the government may directly select the bidder after
examining the prices and sometimes considers only one supplier;
(v) Auctioning, essentially an oral procedure used for the sale or leasing of government
property.
4.(b) Under what circumstances are different procedures used?  For instance, if the method
used depends on the value of the procurement, the thresholds should be given.
The use of tendering procedures depends on the ordinary annual budget of the institution
concerned and the estimated value of the specific transaction.  The public sector is divided into tencategories of entities according to budget.  For each category, a threshold is established for the use of
open tendering together with the amounts below which each of the other procedures may be used.  In
certain specific cases, the law expressly indicates that only open tendering may be used.
4.(c) What are the time-limits for the submission of bids?
In the case of open tenders, the time-limit for the submission of bids is 30 working days for
public works contracts or contracts involving goods or services that are imported or to be imported,
and 15 working days for all other types of goods and services.
In the case of tendering by registration, the time-limit for the submission of bids is ten
working days, regardless of the nature of the procurement.
For selective tender procedures, the time-limit is three working days.No time-limit has been set for single tendering.S/WPGR/W/11/Add.22
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In the case of auctioning, the minimum time-limit between the publication of the invitation to
tender and the date of the auction itself is ten working days.
In the case of open tenders for public works concessions, the time-limit is 60 calendar days.
Publicity for inviting tenders
5.(a) How are intended procurements publicized?  Are invitations to tender published?  If so,
where, and in what languages?
In the case of open tenders, publication of the call to tender is mandatory in the Official
Journal and optional in newspapers with national or international circulation.
In the case of tendering by registration, if there are more than ten registered bidders the
government may decide to publish the invitation in the Official Journal or to invite the bidders
directly.  If there are less than five bidders registered, publication in the Official Journal is mandatory.
In either case, the administration may choose to publish the notice of invitation to tender in
newspapers with national or international circulation, but not in lieu of publication in the OfficialJournal.
In selective tender procedures, publication of calls to tender in the Official Journal is not
mandatory.  As in the case of tendering by registration, notices can be published in national
newspapers.
Notices or invitations are published in Spanish, which is the official language.
5.(b) Do the extent and form of publicity differ according  tendering procedures applied
and/or the value of the procurement?
They do differ - see above.
5.(c) What details of the intended procurement are normally published?  Is there a minimum
set of information that is required to be published?  If so, please specify.
The following details are required to be published in the invitation:
- Identification of the procuring administration;
- type and number of the tender;
- brief but clear description of the procurement;
- identification of the office providing information;- cost of the tender documentation and where it can be obtained;
- date, time-limit and address for the submission of bids.
5.(d) Are there any charges for ob taining the full set of tender documents?  If so, please
specify and describe how these charges are set.
The government may provide the documentation free of charge or may charge for the
reproduction of the documents, depending on the procurement and the scope and complexity of the
tender conditions.
5.(e) Are electronic means used to advertise pr ocurement opportunities?  What is the nature
of systems that are in place?  Are different te ndering provisions applied to contracts advertised
in this manner?  If so, please describe.S/WPGR/W/11/Add.22
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Electronic means have not so far been used to advertise procurement opportunities.
Requirements laid down for possible suppliers
6.(a) Are there registration, residence or other requirements for potential suppliers?
For certain types of procedures (tendering by registration, selective tendering and single
tendering) potential bidders must enter their names in a register in order to submit a tender.  However,
registration may take place once the proceedings are already underway.  As regards residence, thereare no requirements except in the case of public works concessions.  In Costa Rica, any foreign
company may conduct business provided it does so in conformity with the laws in force.
Article 108 of the Law on Government Procuremen t stipulates that "Each institutional supply
agency shall keep a register of suppliers intere sted in participating in government procurement
procedures (...).  To enter such registers, potential participants must establish with the administration
their natural or legal personality, their nationality, the authority of their representatives and the nature
of their intended participation (as direct suppliers or as intermediaries)."
Under Article 5.4 of the Regulations to the Law on Government Procurement, a foreign
bidder may participate through a representative of foreign firms.  The bidder must so state expressly
in the original proposal.  Representatives of foreign firms may participate directly on behalf of a third
party if they can provide reliable proof of their status as representatives by supplying a certified copy
of the representation contract.  Moreover, all forms of representation recognized by common law arepermitted.  The tender conditions set forth the requirements for domestic and foreign bidders to
establish certainty with respect to their existence, representation and capital stock.
Finally, it should also be noted that Article 366 of the Commercial Code states that all foreign
firms may conduct their business freely in Costa Rica through distributors, concessionaires, agents or
factors and representatives of foreign companies, either Costa Rican or foreign, with the exception ofagencies and branch offices of foreign companies whose products are made in Costa Rica, which may
directly and freely distribute and represent their own products and products of duly certified
Central American origin.
For public works concessions, there are specifications for foreign participating countries,
which are required, before signing a contract, to submit a declaration sworn before a notary in whichthey irrevocably undertake to comply with the requirements of Article 8, paragraph 4 of Law
No. 7404 which stipulates that:  "If the contract is  awarded to a foreign legal person, that person must
transfer its head office to Costa Rica before signing the contract.  If such legal person should decide
not to transfer its head office, it must set up a domestic joint stock company in which it has full
ownership, to act as a concessionaire.  The shares of the concessionaire must be registered."
It is also important to note that according to Article 14 of the said Law, all conditions being
equal, priority is given to nationals.  This Article states that where a possible concessionaire does not
intend to construct the public works directly, but rather to sub-contract the work to another company,
preference will be given to bids which indicate that sub-contracted work will be carried out by
domestic companies.
The sworn declaration and the contract must be signed by a person authorized to conclude
contracts and enter into commitments on behalf of the company, who must prove such status bypresenting an authentic act, issued in accordan ce with the laws of his country of origin and
authenticated by the Consul of Costa Rica and the Ministry of Foreign Affairs.  The certificateS/WPGR/W/11/Add.22
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showing that the company has been duly constitute d in its principal place of business must also be
authenticated through the same channels.
The purposes of the company, whether Costa Rican or foreign, must expressly include the
performance of public works concessions.  The company is asked to ensure that the social pact defines
the social conditions and grants the necessary authority to conclude, perform and comply with the
contract in all its details, and assume the legal and economic responsibilities attached thereto vis-à-vis
the  government and vis-à-vis  third parties.  This social pact must extend at least ten years beyond the
concession.
6.(b) What is the nature of any conditions for participation required from suppliers - such as
financial guarantees, commercial standing and t echnical qualifications?  Do the conditions of
participation vary according to the nature of the tender process and/or the value of intended
procurement?
The Law on Government Procurement and the Regulations thereto provide for two types of
guarantees.  The first is a participation guarantee, which may be from 1 to 5 per cent of the amount of
the procurement as defined in the tender conditions.  This gives the offer legitimacy, and permits any
errors that are rectifiable to be corrected.  The exact amount is set by the government, and is
determined by the complexity of the procurement and the need to protect against any damage that
could be caused by breach of contract on the part of the bidder.  If the amount has not been mentioned
in the tender conditions, the minimum amount mentioned above is applied.  The government may also
establish a fixed guarantee amount (in cases where the amount cannot be determined or where no
expenditure is involved for the government).  For further details, see Article 33 of the above-
mentioned Regulations.
This guarantee is required for open tendering and tendering by registration, and may or may
not be required for the other procedures.
It is also possible to establish a so-called floating guarantee, which backs the same bidder in
several tender procedures (Article 34 of the above-mentioned Regulation).
The second guarantee is a performance guarantee, and represents 5 to 10 per cent of the
contract amount, as must also be specified in the tender conditions.  It is used to compensate for anydamages or prejudice attributable to the contractor.  If there is a penalty clause for delay, the
guarantee may only be enforced if the contractor refuses to cancel the amount in question.
The performance guarantee is required for open tendering and tendering by registration, and
is optional for the other procedures.  It must be specified in the tender conditions, failing which it is
understood to represent 5 per cent.  If the tender conditions do not specify the time-limit for providingthe guarantee, that limit is understood to be ten work ing days following the signature of the act.  The
government may also establish fixed amounts (see Articles 34 and 35 of the above-mentioned
Regulation).
Three types of guarantee are required for public works concessions:  a guarantee of
participation in the open tendering procedure, a performance guarantee for the construction of the
works, and a performance guarantee for the operation of the works.
The participation guarantee is intended to ensure the seriousness of the bid until the
corresponding public instrument has been signed and the next guarantee deposited.  Its value varies
from 1 to 5 per cent depending on the amount allocated in the bid to the construction of the new
works or to the repair, extension, preservation or renovation of the already existing public works.S/WPGR/W/11/Add.22
Page 7
The performance guarantee amounts to 5 per cent of the cost allocated in the bid to the
construction of the new works, or of the cost of the repair, extension, preservation or renovation of the
already existing works.  Subject to authorization by the Office of the Comptroller General and to the
conditions expressly set forth in Article 28 of the Regulations to Law No. 7404, it is possible to
demand a higher percentage.  Unless otherwise indicated in the tender conditions, it is understood that
the guarantee must be deposited within 30 working days following the date of the public act to besigned.
The performance guarantee for the operation of the works must be deposited within ten
working days following the date of handing over of the works to the full satisfaction of the
government.  The amount is fixed by the government, and consists of a percentage based on the
average annual expenditure deemed necessary to look after, repair and maintain the goods in question.
6.(c) Do there exist lists of approved suppliers?  If so, what are the procedures for checking
the capability of firms applying for inclusion on  tenderers' mailing lists?  Are lists of approved
suppliers, if any, regularly reviewed/updated?
The registers of suppliers do not address aspects such as the financial capability or experience
of the enterprise.  They contain more general data on potential bidders such as, for example, their
address, ownership, representatives and company origin.
These lists must be updated at least once a year, but any interested party may ask to be
included in the appropriate register at any time subjec t to the requirements laid down by the institution
concerned.
The financial capability of a firm tends to be evaluated during the review of the bids in
conformity with the tender conditions.  Article 45 of the Regulations to the Law on Government
Procurement stipulates that "The tender conditions must contain at least the following: ... preciseindication of the documents to be submitted for the ev aluation of the suitability of the bidder from the
economic, technical or other point of view when the nature or complexity of the transaction so
warrants."
Criteria for assessing bids and awarding contracts
7.(a) What criteria are taken into account in the award of tenders?  Are criteria for award of
contracts made available in advance to potential suppliers?
Following the criteria indicated in the tender documents, the tender is awarded to the bid
which on balance is deemed to be the most suitable.
In the case of open tendering, Article 56, paragraph 2 of the Regulations of the Law on
Government Procurement stipulates that the government must study and assess the bids in the light ofthe conditions and specifications contained in the tender conditions and the relevant regulations.
Bidders that fail to meet basic tender conditions or that are in breach of the relevant legal provisions
in any significant way are excluded from the procedure.  As stated in Article 56, paragraph 3 of the
Regulations, bids in which the price is unacceptable must also be rejected.
The Regulations to the Law on Government Proc urement (Article 45.1.10) also state that the
tender conditions must contain a description of the system for the evaluation and comparison of bids,
expressly indicating the factors to be considered, the degree of importance of each such factor in theoverall comparison of bids and the method of evaluati ng and comparing bids in relation to each factor.S/WPGR/W/11/Add.22
Page 8
Once the bids that are eligible from the legal, financial and technical point of view have been
selected, the government proceeds to their qualifica tion, seeking to determine, in accordance with the
tender conditions, which bid is most likely to satisfy the public interests pursued.
For tendering by registration and selective tendering procedures, the Regulations state that the
government must apply the rules and principles of public tendering, particularly with respect to the
conditions governing selection and award, to the extent that they are compatible with each individualtendering procedure.
In the case of public works concessions, the government must appoint an Assessment
Commission for each procedure.  This Commission is responsible for analysing and evaluating the
bids.  This involves carefully checking the bids against the conditions and specifications contained in
the tender documents and comparing in accordance with the methodology defined therein.  The
rejection of bids on the grounds that they are not in line with the estimates reached by the government
in previous studies is prohibited.
The analysis should make it possible to establish which bid or bids are most conducive to the
general interest bearing in mind the nature of concessions and the particular characteristics of the
works or services concerned.
Substantive criteria such as the price of the goods or services, quality, the supplier's record,
after-sales service or any other element considered in the award must be duly indicated in the tender
conditions, which must specify the criteria used and the weight given to each one of them.
7.(b) Is procurement subject to any offset provisions, such as local content, technology
transfer or counter-trade requirements?
There are no offset measures.
7.(c) Is preference given to any particular enterprises or group of enterprises?  If so, please
specify.
No preference is given to any particular enterprises or group of enterprises.  One of the
underlying principles of government procurement in  Costa Rica is the principle of non-discrimination.
7.(d) Do the procurement criteria differ according to sector or region of the economy?
There is no difference according to sector or region of the economy.
7.(e) What is the margin of choice or discreti on allowed to the purchasing authority?  What
does the extent, if any, of discretion allowed depend upon?
The extent of discretion consists simply in the possibility of defining the factors and
parameters which form the system of qualification for a particular tender and their weight or influence
in a specific case.  Once this has been defined, the government no longer has any discretion, since aproperly- structured and well-balanced evaluation syst em must inevitably lead to the selection of the
best bid, which is the one that achieves the highest rating.S/WPGR/W/11/Add.22
Page 9
Disclosure of bids received and contracts awarded
8.(a) How are tenders received, registered and opened?
Tenders are received by the office responsible for conducting the procurement proceedings
(usually the supply department of that office) up to the established time-limit for submission, in a
sealed envelope.  Once the time-limit has elapsed, the envelopes are opened, in the presence of the
interested parties and their representatives if they so wish.  An official record is drawn up known as
the Tender Protocol, containing a confirmation of the bids received, a description of their basic
aspects and such observations as may be made by those present.
8.(b) Are entities required to publish details of contracts awarded and/or notify unsuccessful
tenderers?
In Costa Rica, the responsible institutions are required to inform the participants (not only the
successful tenderer) in a particular procurement procedure of the results of the tender through the
same channels used to transmit the invitation to tender.  In other words, if the invitation was publishedin the Official Journal, the award must also be published in the Official Journal;  if, on the other hand,
the invitation was transmitted directly, the award is also communicated directly.
8.(c) Are entities required to publish, or provide to unsuccessful bidders, pertinent reasons
why their bid was rejected?
There is no obligation for the government to communicate or publish the reasons why a bid
was rejected or why it was not selected in a particular case.  However, the interested parties may learn
of the reasons by consulting the administrative file of the case, which is open to the public.
Treatment granted to domestic and foreign services and/or suppliers
9. What laws, regulations, procedures or practices accord domestic services and/or
suppliers treatment more favourable than that acco rded to foreign services and/or suppliers, or
accord services and/or suppliers of a Member more favourable treatment than those of another
Member?  Please specify how, if at all, more favourable treatment is accorded.  Please also
specify the working definition of "domestic" in  relation to domestic services and suppliers.
Most-favoured-nation treatment
In Costa Rica, the most-favoured-nation principle is applied to all legislation in the field of
government procurement, subject to the following reservations and observations:
(i) The most-favoured-nation principle is subject to the principle of reciprocity.
Article 5 of the Law on Government Procurement states that as a matter of general
principle, government procurement procedures shall respect the principle of equality
of participation of all potential bidders.  It also states that the Regulations to the Lawand the provisions governing the specific procedures for each case shall not include
any rule that hinders free competition between potential bidders.
According to this same provision, the participation of foreign bidders is governed by
the principle of reciprocity, according to which they are treated in the same way as
Costa Ricans are treated in their country of origin.  Article 5 of the Regulations to the
Law stipulates that foreigners shall be denied participation advantages if Costa RicansS/WPGR/W/11/Add.22
Page 10
are not granted such advantages in the bidder's country of origin.  In order to help to
establish this reciprocity, the Law stipulates that the government may request a
potential bidder to provide proof of any aspects it deems relevant as a condition for
participating in the tender.
(ii) Most-favoured-nation treatment with respect to the selection of bids is granted for the
countries of Central America and Panama in the case of goods, and to Mexico in the
case of services.  This is done pursuant to agreements concluded with those countries
and without prejudice to the application of the most-favoured-nation principle to
other countries with which reciprocity can be demonstrated.
Article 12 of the Industrial Production Incentives Law (Law No. 7017 of
16 December 1985) states that "in any procurement by the Government of the
Republic, autonomous institutions, semi-autonomous institutions, municipalities or
any other official entities, preference shall be given to products manufactured by thedomestic industry where the quality is comparable, the supply adequate and the price
equal to or less than that of imported goods."
This provision also applies to the countries of Central America pursuant to Article III
(establishing the principle of national treatment) of the General Treaty on Central
American Economic Integration, and to Mexico pursuant to Article 12.4 (NationalTreatment and Non-Discrimination) of the Free Trade Agreement between Costa
Rica and Mexico (Law No. 7474 of 20 December 1994) and Panama, pursuant to
Article 12 (National Treatment) of the Free Trade and Preferential Exchange
Agreement (Law No. 5252 of 31 July 1973).
Similarly, where there is proof of reciprocity, the law permits the granting of national
treatment to countries which apply that principle to bids from Costa Rica.
(iii) An exception is made to the principle of national treatment in the case of the
subcontracting of domestic construction companies when the bidder for a
public works concession does not plan to build the works itself.
In such cases, as will be seen, preference is given to domestic construction
companies.  Article 14 of the Law on Public Works Concessions states that in
the selection of a concessionaire, where the potential concessionaire does not
intend to build the public works itself preference will be given to bids which
indicate that the work will be done with subcontracted domestic enterprises.
Procedures for hearing and reviewing complaints/appeals
10. What, if any, are the procedures available for parties, domestic and foreign, to lodge
complaints against the award of a contract?  Please provide details.
In Costa Rica there are two possible procedures for challenging an award:  remedy of review
and appeal.  The two remedies are mutually exclus ive, and no distinction is made between nationals
and foreigners with respect to their use.  In other words, the national treatment and most-favoured-
nation principles are fully applied.  The choice of remedy depends on the amount of the challenged
award and the budget of the institution that organized the tender.  There is also a difference in theamount required to appeal public works contracts and other contracts.S/WPGR/W/11/Add.22
Page 11
Remedies of review and appeals must be submitted in writing and must contain the reasons
for the appellant's challenge together with the releva nt evidence, signed by the legal representative of
the challenging bidder.
Either of the remedies has a suspensive effect on the award.
If the amount of the challenged award does not warrant an appeal, the challenging party
should file a remedy of review.  This remedy should be filed with the institution that organized thetender, which is responsible for hearing and settling the case.
The remedy must be filed within five working days following the communication of the
award, and is notified to the successful bidder.  Following such notification, there is a time-period of
15 working days to settle the case.
Appeals are submitted to the Office of the Comptroller-General of the Republic within ten
working days following the publication of the notice of award in the Official Journal.  The Office ofthe Comptroller must grant the parties concerned at least two hearings, and must resolve the appeal
within a period of 40 working days, extendable by 20 additional working days where necessary tocollect evidence that could not be obtained within the initial time-limit.
In the case of both remedies of review and appeals, the final decision marks the exhaustion of
administrative remedies, and may only be reviewed through judicial channels.
II. MEMBERSHIP OF PLURILATERAL, REGIONAL AND/OR BILATERAL
AGREEMENTS
11. Is the Member party to any plurilateral, regional and/or bilateral agreements with
provisions on government procurement?  If so, please describe the relevant provisions.
Yes, Costa Rica is party to the General Treaty on Central American Integration, Article 3 of
which establishes the applicability of the principle of national treatment with respect to goods.
Similarly, the Free Trade and Preferential Exchange Agreement with Panama (Law No. 5252
of 31 July 1973) contains a provision (Article XII) on national treatment with respect to goods.
Finally, the Free Trade Agreement concluded between Costa Rica and Mexico (Law No. 7474
of 20 December 1994) contains a chapter specifically devoted to government procurement(Chapter XII).
III. ECONOMIC IMPORTANCE OF SERVICES PROCUREMENT
12.(a) Please provide statistics (if available) on  the number and value of services procurement:
- On both an aggregate and sectoral basis;
- by origin of services and suppliers.
12.(b) Please provide statistics (if available) on the:
- Share of services procurement in total procurement;
- share of procurement of each service in total domestic output of the service;
- share of procurement of each service in total domestic consumption of the
service.
Updated statistical information will be supplied to the WTO Secretariat at a later date.
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