The Chilean Public Works Ministry has already begun the tender process this year for five concessions totaling almost US$2 billion, the highest amount since the concessions program began. The total for 2021 is expected to reach almost US$5 billion.
This could make 2021 a record year in Chile for public tenders. According to data provided by the Public Works Ministry, the call for tenders on five projects exceeds the average number for previous years.
This year, projects worth a total of US$1,973 million are already underway, the highest amount since the concessions program began in Chile. The highest previous amount was US$1,878 million in 1996.
Public Tenders in Chile
According to Public Works Minister, Alfredo Moreno, “Chile’s call for tenders over the past decade, before this government took office, averaged about US$800 million annually. The plan implemented by the government of President Piñera called for increasing this amount to an average of US$3 billion per year. This requires carrying out the projects, preparing background information, completing engineering studies, and designing works.”
In fact, by the end of this year, it is hoped that the portfolio will total more than US$4 billion in tenders, which would double the previous maximum and be 4 times greater than the annual average for the 2010-2018 period.
The average for 2010-2018 was US$828 million, while the average for 2019-2022 is expected to be US$3,047 million.
Moreno noted that “since this government took office, there has never been an instance when a call for public tender was not awarded,” and he explained that “from January until now, we have already awarded contracts for projects totaling US$1.75 billion, which have either been awarded or are waiting for the decree to be drafted for awarding the project (the Talca- Chillán segment of Highway 5, airports in the Austral Network, La Serena Airport, hospitals in the Maule Region, the Biobío Region and the Buin-Paine hospital).”
The Pandemic impact in Chile's Public Tenders
The Minister noted that the pandemic has had several impacts. First, bidding companies asked for more time because they had mobility problems that affected their ability to conduct studies, bring in technicians, and move around the country.
“Another outcome, especially with highway and airport projects, was a need to modify the tender terms and conditions to alter the business model for the concession: from a fixed term model to a present value of income model. In other words, companies no longer have to submit a bid for a predetermined concession period, but rather they submit a bid for a total sum, and the length of the concession period varies depending on the level of demand. Therefore, the risks tied to demand are much lower for the concessionaires and adjust to any new circumstances in the country and the world. This was the reason behind the lower number of bids last year,” said Moreno.
To learn more about businsess opportunities and Public Tenders in Chile, read this article.