Winning Panama Government Contracts
If you or your company is interested in obtaining a Panama government contract, here are the ways to do it.
The 3 methods for doing business with the government of Panama are Procurement, Concessions, and Direct Contracts.
CONCESSIONS
Concessions are the most popular method for building, maintaining, and operating infrastructure projects. Panama government regulatory agencies will supervise the projects when any tolls or fees are charged by private companies. Infrastructure concessions are awarded by the Cabinet Ministers.
Here are the tax benefits for the Concessions:
• Value Added Tax (VAT) exemption;
• Exemptions from Import Duties;
• Exemptions from Income Taxes during the construction and first five years of operation with partial exemptions thereafter;
• Exemptions from Withholding Taxes on interest payments to finance companies financing the project.
The Concession Process:
• When a project is ready to receive bids the Panama government agency prepares the tender documents.
• Publication of the Notice of Purchase on the government Panama Compra website and in the national newspapers.
• 10% Bond: Most tenders require posting a 10% bond of the total concession value by each bidder. Losing bidders will receive a full refund.
• The Panama government agency awards the concession to the most qualified bidder who submitted the best bid under the tender specifications.
• A formal contract is prepared between the Panama government agency and the winning bidder abiding by the conditions and terms in the original tender.
• The concession is approved by the Panama Comptroller General and recorded.
• Concession contracts are always written in Spanish and usually provide that the Panama government can end the contract at will and will pay an indemnification fee to the contractor.
• Successful bids by foreign persons or entities will usually contain a diplomatic claims waiver clause.
Note: There are different rules for concessions regarding power generation, telecommunications, ports, mining, airports, and paid or public television.
Disagreements are resolved by special courts where final judgments can only be appealed to the Panama Supreme Court.
PROCUREMENTS
Procurements are methods for individuals or companies (foreign or national) to bid on a Panama government contract.
Panama has a government website regarding procurements with future contracts to be up for bidding where the entire process is explained at Panama Compra (http://www.panamacompra.gob.pa/).
The Process for a Panama Government Contract Procuring Services and Goods is:
• Panama government agency prepares the tender containing the procurement conditions and terms.
• Publication of the Notice of Purchase on the government Panama Compra website and in the national newspapers.
• Procurements valued over $175,000 must involve holding an Open Meeting by the Panama government agency to explain the project to all interested parties and to answer their questions.
• The Panama government agency may modify the tender documents based on questions raised at the Open Meeting.
• All written bids are submitted in Spanish either online at the Panama Compra website or directly to the Panama government agency.
Exception: When considered urgent and in the publics interest Panama government agencies can contract directly with a goods or services provider without going through a bidding process.
• 10% Bond: Most tenders require posting a 10% bond of the total contract value by each bidder. Losing bidders will receive a full refund.
• The Panama government agency awards the contract to the most qualified bidder who submitted the best bid under the tender specifications.
• A formal contract is prepared between the Panama government agency and the winning bidder abiding by the conditions and terms in the original tender.
• The contract is approved by the Panama Comptroller General and recorded.
The procurement contract provides that the governmental agency may terminate the contract at will and will pay an indemnification to the bidder.
A diplomatic claims waiver is included in the contract when the bidder is a foreign person or entity.
Note: The Panama Canal Authority has different rules concerning procurement of goods and services.
DIRECT CONTRACTS
Direct contracts do not fall within the procurement process. They are special concessions known as a “contract law” which are negotiated and approved by the Executive Branch and the National Assembly by creating a specific law to protect the goods or services provider.
A direct contract can only be modified with consent by the private company or individual and enacting a new law.
The government of Panama reserves the right to use this method for large projects in the national interest.
In Conclusion: Concessions, procurements, and direct contracts are available to foreigners wishing to provide goods or services or be involved with infrastructure projects to the Panama government. The bidding process is transparent and forthright.
Contact Us for all of your Panama Business needs along with assistance with doing business with the Panama government.