Ministry of Public Works (Panama)

Ministerio de Obras Públicas

Country

Location

Regulated area

Panama

Panama City

Energy & natural resources

Useful pages on the regulator website

Key individuals

  • Rafael José Sabonge Villar: Minister of Public Works
  • Librada de Frías: Vice Minister of Public Works

Regulatory oversight

Major infrastructure projects in Panama are carried out by the government and are awarded following the government procurement procedures set out in Law 22 of 27 June 2006 as amended to date (the Procurement Law). The Procurement Law regulates the tender process for procurement of goods and services by the state, any subdivision thereof, autonomous agencies and other government entities. The Procurement Law regulates different procedures for the award of public contracts that range from public tender proceedings to direct contracting in emergency situations. Infrastructure projects whose estimated price exceeds US$500,000 are generally awarded following the best-value public bidding process (licitación por major valor). The project is awarded to the bid with the highest number of points.

Reporting and disclosure obligations

Entities that participate in public tender processes for the sale of goods or services to the state or other government entities subject to the Procurement Law, where the price may exceed US$500,000, must provide a sworn statement certifying the ultimate beneficial owners of that entity who own 10% or more of its issued and outstanding shares. In the case of consortiums, all members of the consortium must comply with this requirement. Government suppliers of goods and services are required to provide an annual update of this information. Companies that have their shares listed on stock exchanges in jurisdictions recognised by the Superintendence of Capital Markets are exempt from this requirement.

Monetary sanctions and recent behaviour

The Procurement Law sanctions any applicant of a public procurement who initiates the work, services or construction of a project without having obtained the countersignature of the General Comptroller of the Republic, with a fine equal to double the amount of the damage caused to the state or double the amount the state would have received as a result of the concession. Non-compliance with contractual obligations of a contract awarded through the Procurement Law can carry a fine of between 1% and 15% of the total amount of the contract. If there are delays in the completion of a project for causes attributable to the contractor, the contracting entity may impose fines ranging from one-thirtieth of 1% to one-thirtieth of 4% of the value of the work that was not executed or delivered.

Non-monetary sanctioning powers and behaviour

The Procurement Law establishes that the contracting entity may impose sanctions, which range from fines to the termination of the public contract, in addition to any legal actions, whether civil or criminal, that may be applicable. Non-termination sanctions can be applied for delays in the completion of the project, extension requests not filed in a timely manner or non-compliance with the terms of the contract.

The contracting entity may unilaterally terminate the contract if it is a matter of public interest and indemnify the contractor. The statutory causes for a contracting entity to terminate a public contract include: breach of the contract, judicial liquidation of the contractor, dissolution of the contractor or of one of the members of a consortium unless the other parties can perform that entity’s obligations. The termination of the contract will allow the contracting entity the right to execute the performance guarantee issued on behalf of the state.

Recent and upcoming developments

Major projects have been awarded during the past year by the government, government agencies and state-owned companies, including the construction of a highway to connect Panama City to the countryside, a fourth bridge over the Panama Canal and the third line of the Panama City Metro. These projects seek to connect thousands of residents who commute daily to Panama City for work. The third line of the metro will cross the Panama Canal. The Japan International Cooperation Agency has executed an agreement to finance the construction of this new metro line.

Panama’s National Assembly recently enacted Law 93 of 19 September 2019 on Public Private Partnerships (the PPP Law). The PPP Law seeks to bolster infrastructure investment and job creation as well as continuing public infrastructure needs. The PPP Law will permit the state, after a tender process, to enter into agreements with private partners for the design, construction, repair, financing, exploitation, development, operation or maintenance of public infrastructure previously identified by the Cabinet Council.

Challenges

The Panama City Metro and the fourth bridge over the Panama Canal were initially designed to be executed simultaneously, as the intention was that the third line of the Panama City Metro would cross the Panama Canal via the fourth bridge. The government has announced that it is considering changes to the design of the two awarded projects. These structural changes will require consent from each of the contracting entities and the private contractors that were awarded the contracts.

The companies that provide services via online platforms for transportation have challenged before the Supreme Court of Justice government regulations issued by the Land Transit and Transportation Authority (Autoridad de Tránsito y Transporte Terrestre (ATTT) that banned them from receiving cash payments from users. The Supreme Court, in deciding the case, ruled in favour of the plaintiffs, declaring that the decree issued by the ATTT that limited their ability to receive payment in cash form was illegal. The judgment has not been fully complied with and the authorities have requested further clarification from the Supreme Court on certain aspects of the judgment. Until this matter is resolved, these companies cannot accept payments in cash.

Interacting with the regulator

The Ministry of Public Works manages all communications in writing and in Spanish.

Notes for foreign investors

Not applicable.

Other regulators it works closely with

Ministerio de Economía y Finanzas
MEF
Ministry of Economy and Finance (Panama)
In charge of providing funding and access to financing to undertake public infrastructure work.

Contraloría General de la República de Panamá
Office of the General Comptroller of the Republic of Panama

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