Direct contracting under the Public Works Law regime of Santa Fe

Summary: I. Introduction. II. Direct contracting under the Public Works Law regime of Santa Fe. III. Principles of public procurement. IV. Urgency as the basis for direct contracting. The principles of good governance and transparency as the rule for selection mechanisms. V. The recent experience of the Rosario International Airport. Direct contracting with mitigated competitive concurrency. VI. Doctrinal relevance of the case. VII. Conclusions.

By Pablo A. Franchi () and Lisandro E. Castagno ()*

Abstract: This paper analyzes the direct contracting regime regarding public works in the Province of Santa Fe, in light of Law No. 5,188, its amendments, and its regulatory framework. It also examines the structural principles of public procurement—legality, concurrency, equality, transparency, and reasonableness—and their application in exceptional contractor selection procedures. Likewise, it addresses the notion of public urgency as the legal basis for direct contracting and analyzes the experience related to the rehabilitation and reconstruction of the runway at the “Islas Malvinas” Rosario International Airport as an example of the implementation of this institute.

I. INTRODUCTION

The legal regime of public works constitutes one of the most relevant areas of administrative law and, particularly, of administrative contracting, as it is directly linked to the management of essential infrastructures for the economic, productive, and social development of a given community. In the Province of Santa Fe, this regime is primarily structured on the basis of Public Works Law No. 5,188 (and its amendments) and its Regulatory Decree No. 0822/61 (BO 3/21/61) and its amendments, a normative body that establishes the procedures, principles, and guarantees that must govern administrative contracting intended for the execution of works of public interest. Within this normative system, public bidding is configured as the ordinary procedure for selecting the state contractor. As Miguel S. Marienhoff explains, public bidding constitutes the normal mechanism by which the Administration seeks to obtain the best contractual conditions for the public interest, through competitive concurrency among interested parties. However, the legal system itself recognizes the existence of exceptional situations that justify the use of more agile contracting procedures. Among them is direct contracting, a figure that allows dispensing with the bidding procedure when particular circumstances—such as urgency or non-deferrability—make holding a bid inconvenient or impossible. The analysis of this contractual modality acquires particular relevance in the contemporary context of public management, characterized by the need to reconcile administrative legality with efficiency in the execution of public policies and strategic infrastructures for the progress of society.

II. DIRECT CONTRACTING UNDER THE PUBLIC WORKS LAW REGIME OF SANTA FE

Law No. 5,188 (and amendments) establishes as a general rule that public works must be contracted through public bidding; specifically, this norm refers to the private co-contractor selection procedures as adjudication systems, prioritizing that mechanism (articles 20 and concurring). This principle responds to the need to guarantee competition among bidders and ensure that the State obtains the most convenient offer for the public interest. However, the regime itself provides for the possibility of resorting to exceptional contracting modalities, among them, direct contracting.

This modality constitutes an exceptional procedure that is justified when reasons of public interest make the use of ordinary competitive mechanisms (public or private bidding) inconvenient or impossible. Direct contracting does not imply an exception to the principles of administrative law, but rather a procedural adaptation in the face of specific circumstances that require a faster and more agile state response. Therefore, even in these cases, principles such as legality, reasonableness, transparency, and equality among bidders must be preserved.

We are not, then, before a sphere of absolute discretion, as is erroneously often argued regarding direct contracting. Such a conception is incompatible with the Rule of Law, in which all administrative action is legally conditioned. Even when the legal system confers margins of appreciation, these are always inscribed in a scheme of regulated discretion, subject to norms, principles, and controls. Consequently, the non-observance of such requirements invalidates the procedure, configuring a case of manifest arbitrariness. Thus, direct contracting is not removed from the general regime of public procurement; rather, its validity—whatever the cause justifying it—depends on full compliance with the principles structuring the State’s contractual activity. It must be made clear that the principles of transparency and efficiency do not exclude each other, nor are they opposed; rather, in modern public procurement, with multiple technological means available to the official, efficiency has gradually acquired a predominant role—which it perhaps did not enjoy some time ago—since compliance with public purposes, the primary goal of all State activity, is channeled with greater agility. It should also be emphasized that in this type of private co-contractor selection procedures, the task of weighting the offer—or offers in the case of abbreviated comparison—is also carried out; therefore, the choice is not made by mere caprice of the acting official; on the contrary, there must be a comprehensive analysis prior to adjudication, supported by technical reports that enjoy a presumption of validity and deserve full faith as long as they meet the requirements of seriousness, precision, and reasonableness (2).

And the reasonableness of selection in direct public works is not exhausted by factual urgency; it requires the accreditation that the chosen contractor possesses the specific technical-financial capacity for the magnitude of the risk assumed. Of course, in this case, motivation will be one of the essential elements of the administrative act of adjudication, even with greater care (although this requirement applies to all administrative acts) (3) because the greater the power attributed to an authority, the greater its zeal must be to demonstrate that in the exercise of its legal power it acted correctly, and that the issued act conforms to the respective background of fact and law (4).

III. PRINCIPLES OF PUBLIC PROCUREMENT

Administrative contracting is governed by a series of principles that guide state action and guarantee the adequate protection of the public interest. Among them, succinctly, stand out the principle of legality, which requires that every administrative action be based on a prior legal norm; the principle of reasonableness, which imposes an adequate relationship between the means used and the pursued ends; and the principle of concurrency, which seeks to guarantee the participation of various bidders. Likewise, the principle of equality requires equitable treatment among all participants in the procedure, while the principle of transparency seeks to ensure publicity and control of administrative decisions. These principles constitute legal limits to administrative discretion and guarantee the correct use of public resources.

IV. URGENCY AS THE BASIS FOR DIRECT CONTRACTING. THE PRINCIPLES OF GOOD GOVERNANCE AND TRANSPARENCY AS THE RULE FOR SELECTION MECHANISMS

One of the most relevant assumptions for the use of direct contracting is administrative urgency, which doctrine characterizes as that situation in which the delay inherent to a bidding procedure could generate serious harm to the public interest. Urgency is configured when the Administration faces a situation requiring an immediate response incompatible with the deadlines typical of ordinary contracting procedures. In such circumstances, the legal system enables the Administration to adopt more agile contracting mechanisms, provided that the urgency is duly accredited and that the procedure respects the fundamental principles of public procurement. Indeed, certain extraordinary events justify and impose that the State resort to direct contracting to select the private co-contractor, perhaps the most well-known being when situations of urgency or emergency arise. Faced with these situations, the Administration is exempt from using the public bidding modality, a process that inevitably entails a greater amount of time.

The enabling urgency must respond to objective and proven circumstances, and of such magnitude that it prevents carrying out another selection procedure in a timely manner; this is prescribed—in the field of the acquisition of goods and services—by Decree No. 1104/16 when regulating article 116 inciso c) of Law No. 12510: Subsection 2 – The contractions intended to be made in application of the exception to the use of public bidding or competition provided by article 116°, c), subsection 2, must be evaluated and authorized by the corresponding official according to their amount, and the grounds making up the urgency or emergency must be recorded in the proceedings, taking as a basis that it must be concrete, immediate, unforeseen, and proven, preventing the realization of another selection procedure in a timely manner.

That being so, urgency is the situation that admits no delays in the solution adopted, and escapes subjective interpretations, requiring instead that objectively the situation be of unquestionable haste to arbitrate actions aimed at overcoming it. The authorization does not arise solely in the hypothesis of a demand for celerity in the solution of management; there must exist and be accredited a concrete and imminent damage to the public interest—whether in social, economic, sanitary, or security matters—to be able to raise certain assumptions of affectation of essential public duties. Certainly, the public interest is the standard of interpretation proper to the administrative-legal relationship, an idea now expressly positivized by article 2, inc. c), of Public Ethics Law No. 25,188, which mandates public officials to watch over the interests of the State in all their acts, oriented toward the satisfaction of general well-being, thus prioritizing the public interest over the private one (5).

Manifest urgency—as a cause for direct contracting—is directly linked to pressing situations in application of the postulate of the preeminence of the public interest over the principles of equality, free concurrency, and competition that underlie bidding or competition, in the objective reasoning that a process of that nature entails a time that cannot be wasted if the goal is not to affect the public interest that urgently demands the good, work, or service. It is rightly stated that the lack of competing bidders is distinctive of direct contracting, an issue related to the freedom granted to the Administration to select the contractor via this route (6); however, nothing prevents selection via this route following an abbreviated comparison, which will allow the Administration to compare potential offers from different companies to thus obtain advantageous offers, making concrete concurrency evident in this hypothesis. It must also be emphasized that this contracting modality is not equivalent to the free choice of the bidder, since in the former the Administration must justify, through a certain procedure, that the factual assumption admits the invocation of this type of contracting and does not require another legally foreseen form (7).

Nor are the principles of publicity and transparency resented, since the former pursues making known the activity carried out by the Public Administration in a given contracting procedure, while transparency seeks to allow citizens to know what happens within Public Administrations regarding public procurement (8). Note that under the direct contracting modality, all postulates imposed by the principles inherent to public procurement must be fulfilled; thus, the recurrent assertion maintaining that the competitiveness and opposition proper to public bidding will always result in a benefit to the Public Administration since it can obtain more reasonable prices resembles more an empty dogma than an invariably advantageous reality. That the public bidding selection procedure is prioritized or even established as a rule is a success; however, considering it improper and even obstructing—by preaching transparency—the other mechanisms provided by the rule is, to say the least, misguided. And that error is aggravated when it is argued that bidding is founded on reasons of administrative ethics, making exceptions restrictively interpreted (9).

Indeed, this hasty assertion assigns a moral superiority to a single co-contractor selection mechanism, leaving the others isolated and plunged into an unjust legal gloom. It goes without saying that assigning an exclusionary moral hierarchy to public bidding implies ignoring the systematic unity of the contracting regime. Administrative ethics is not an exclusive attribute of form, but a presupposition of validity for all state activity. In this sense, transparency, good faith, and legitimate trust (now positively received in Santa Fe through article 2 of Law No. 14,428) do not admit watertight compartments; they bind with equal intensity both in the pageantry of bidding and in the haste of direct contracting. Maintaining the contrary, as has been done under the guise of an axiom, amounts to admitting zones of legal gloom where the Administration could relax its duties of probity, which, of course, is inadmissible in a Rule of Law. The restrictive interpretation of exceptions must not be an excuse for administrative paralysis or useless ritualism, inasmuch as the true standard of contractual justice resides in Good Administration, which mandates choosing the path that best satisfies the compromised public interest.

The ethical superiority of a procedure is measured by its capacity to obtain the due performance in a timely manner, preventing blind adherence to the general rule of bidding from ending up, due to its delay, as a denial of essential services or an unjustified waste of public funds. Good governance is good government that responds to the expectations and needs of citizens and translates into the responsible exercise of public authority and the offering of quality services (10) and, naturally, this principle exceeds a co-contractor selection procedure as it must be applied directly to the exercise of the administrative function. In any case, any private co-contractor selection mechanism must be presided over by the principle of transparency, beyond the unswerving compliance with the rest of the principles characterizing them. The fact is that without transparency in administrative action, it matters little which procedure is used, for it will in any case be tainted by corruption.

Regarding the principle of transparency, it is emphasized that it ceased to be an ethical standard to become a supranational legal mandate; indeed, according to article III paragraph 5° of the Inter-American Convention against Corruption (OEA) approved by Law No. 24,759, State Parties shall create, maintain, and strengthen systems for the hiring of public officials and for the acquisition of goods and services by the State that ensure publicity, equity, and efficiency of such systems, which obliges the Administration to publish not only the call, but the results and final settlements, even in direct contracts, to allow society’s scrutiny.

In our Province, transparency is operationalized today through the Data Governance and Access to Public Information Law No. 14,256 (11) or articles 5 and 28 of Law No. 14,428 when referring to “Algorithmic Traceability” or the use of electronic systems, which guarantee the auditability of processes. As stated, direct contracting due to urgency does not constitute a waiver of the principles of contracting, but a procedural displacement based on the factual impossibility of waiting for the times of bidding without compromising public service or people’s safety.

In public works via direct contracting, the principle of transparency shifts to the motivation of the adjudication act. The Administration must incorporate into the file a price comparison or an invitation to a minimum number of companies in the field, guaranteeing that, even amidst haste, the most convenient offer was sought. Public bidding, although it is the general rule at the national level and in the Province of Santa Fe, often becomes a refuge of “disciplined incapacity,” and as Gordillo well points out (12), formalism excess can end up conspiring against the essential purpose of obtaining the best offer that satisfies the compromised public interests, adding that remnants of old practices led the official to limit their action to a blind application of forms, violating the central principle of competitiveness or concurrency. That being so, “Good Administration” (now a legal principle in Santa Fe based on the provisions of article 2 of Law No. 14,428) is the standard allowing the validation of a direct contract; if the administrator acted with diligence to avoid greater damage to the treasury or service, the form (direct contracting) is fully justified against the dogma of public bidding. In short, direct contracting, erroneously stigmatized, is a legitimate and necessary mechanism when legal causes are configured. The key then does not reside in the exclusion of this procedure, but in its exhaustive motivation and compliance with the premises of efficiency and transparency.

V. THE RECENT EXPERIENCE OF THE ROSARIO INTERNATIONAL AIRPORT. DIRECT CONTRACTING WITH MITIGATED COMPETITIVE CONCURRENCY

The rehabilitation and reconstruction of the runway at the “Islas Malvinas” Rosario International Airport constitutes a recent precedent allowing the examination of the operativity of direct contracting for reasons of urgency, within a framework of full observance of public procurement principles, and as an apt instrument to effectively and timely attend to an un-deferrable state need. In the case under analysis, the critical deterioration of airport infrastructure—particularly the runway—generated certain risks for operational safety and the continuity of air transport service. Faced with that scenario, the Airport Board of Directors resolved to resort to a direct contracting procedure allowing the execution of works within a timeframe compatible with the terminal’s operational demands, thereby ensuring the effective provision of the public service during a high-demand period.

In this context, and attending to the un-deferrable nature of the required intervention, the administrative decision was based on the provisions of article 20 of Law No. 5,188, a norm that—as noted—contemplates exceptions to the general rule of public bidding when the circumstances of the case make the substantiation of ordinary procedures impossible or unreasonable, particularly when reasons of urgency or situations admitting no delay intervene. The adopted procedure contemplated the invitation of specialized companies, the reception and technical evaluation of proposals, the intervention of an evaluating commission, and the subsequent adjudication of the work to the company whose offer was considered most convenient for the public interest. Thus, even dealing with an exceptional direct contracting mechanism, the principles of transparency, concurrency, reasonableness, and selection of the most advantageous offer structuring the public procurement system were preserved.

Specifically, it was a reasoned application of the exceptional direct contracting regime, in which the enabling preconditions were accredited: a) Existence of objective urgency: The state of the runway presented advanced structural deterioration, with increasing risk to operational safety. Technical reports incorporated into the file indicated that residual risk tended to become unacceptable, exceeding tolerable safety thresholds for airport operations. This configured a situation demanding immediate intervention on critical public service infrastructure. b) Practical impossibility of carrying out a public bidding: The ordinary bidding procedure previously promoted in coordination with the National Airport System Regulatory Body had been left without effect by supervening causes, which completely altered the administrative scenario. The resolution authorizing direct contracting points out that restarting a bidding process would imply deadlines incompatible with the urgent need to execute the work, particularly facing the growing deterioration of infrastructure.

This prior bidding precedent, although frustrated, was relevant because it provided objective technical and budgetary parameters serving as a reference to evaluate the economic reasonableness of the new procedure. c) Protection of the compromised public interest: The Airport Board emphasized that the runway constitutes essential infrastructure for the provision of the public air transport service, so its deterioration directly affects the general interest. Among the factors considered, the following stand out: the anticipated increase in air operations, the development of the provincial air connectivity program, the future opening of new international routes, and the need to guarantee regional logistical operativity. There was no doubt that delay in executing the work would cause operational restrictions, flight cancellations or diversions, with significant economic and regional impact.

Now then, although it was a direct contract admitting a margin of discretion in selecting the private contractor, the procedure nevertheless incorporated mechanisms proper to competitive processes, reinforcing its legitimacy. Indeed, invitations were sent to specialized companies and to the Argentine Chamber of Construction, and publications were made on the airport’s institutional website and the official page of the Province of Santa Fe. A public act was also held for the opening of presented offers, which were analyzed by an Evaluating Commission integrated by technical specialists and officials designated by administrative resolutions. That Commission performed a technical, economic, and formal analysis of the proposals, concluding that all complied with the requirements of the specifications and recommending adjudication to the company Obring S.A. as it was the economically most convenient offer. The Airport Board adhered to the technical opinion and adjudicated the work for a final amount of $36,555,666,186.70.-, following a 1% improvement on the original proposal.

VI. DOCTRINAL RELEVANCE OF THE CASE

The case of the Rosario International Airport constitutes a particularly valuable example for analyzing direct contracting in public works matters, as it demonstrates that this exceptional mechanism can be implemented in full compatibility with the structural principles of administrative law. Indeed, the analyzed experience highlights that direct contracting can be validly structured on objective and controllable bases, such as: (i) adequate technical justification of the urgency situation; (ii) existence of bidding precedents or market parameters allowing the weighting of the economic reasonableness of offers; (iii) implementation of instances of concurrency and transparency, even within an exceptional procedure; and (iv) intervention of independent technical evaluation bodies or instances ensuring the selection of the most convenient offer for the public interest. Consequently, the analyzed case allows affirming that direct contracting, far from implying a discretionary or arbitrary exception to the public bidding principle, constitutes a valid and necessary legal mechanism within the administrative contracting system, whose use—duly grounded in reasons of urgency and subject to respect for governing principles—enables an effective state response against un-deferrable public needs.

VII. CONCLUSIONS

Direct contracting in public works matters, far from constituting an area exempt from lawfulness or a sphere of free administrative arbitrium, legitimately integrates the co-contractor selection system foreseen by the Santa Fe legal system, provided that the legal causes enabling its employment effectively and accreditedly concur. Its exceptionality does not place it outside the principles of public procurement; rather, it imposes a reinforced burden of motivation, grounding, and control. Under the regime of Law No. 5,188, public bidding continues to be the general rule in public works matters. However, this does not authorize conceiving the remaining selection modalities as suspicious mechanisms by definition, nor as ethically degraded forms of contracting. A systematic interpretation of the legal system leads to affirming that the legitimacy of each procedure does not depend on its greater or lesser formalism, but on its concrete aptitude to satisfy the compromised public interest with adherence to legality, reasonableness, transparency, equality, and good administration. From that perspective, administrative urgency appears as an enabling cause of singular relevance, but its invocation cannot be left to dogmatic or subjective appreciations. It must be an objective, concrete, immediate, unforeseen, and proven situation of such magnitude that it renders the use of ordinary procedures incompatible without certain risk of affecting the public interest. Only under such assumptions does direct contracting find sufficient legal justification as an idoneous mechanism to avoid damage to service, safety, or the public treasury.

In turn, this paper intends to show that direct contracting does not necessarily suppose the disappearance of the principles of concurrency, publicity, and competition. Rather, such principles may undergo functional reconfiguration in view of the circumstances of the case, without thereby losing their ordering efficacy. The Administration, even when not obliged to summon a formal public bidding, must seek—to the extent possible—to introduce instances of comparison, contrast of offers, sufficient publicity, technical evaluation, and motivation of the adjudication act. Thus, procedural exceptionality does not translate into opacity, but into reasonable adaptation of the legal means to the public need to be satisfied. At this point, the experience of the “Islas Malvinas” Rosario International Airport holds special doctrinal relevance. The case evidences that a direct contract for reasons of urgency can be structured on objective and verifiable bases: the technical accreditation of a critical situation, the practical impossibility of re-editing the ordinary bidding procedure in useful time, the precise identification of the compromised public interest, and the implementation of mitigated competitive concurrency mechanisms aimed at preserving transparency, economy, and rationality in selecting the contractor.

Precisely, one of the main contributions of the analyzed case lies in demonstrating that direct contracting should not be understood as a synonym for discretionary selection of the co-contractor. On the contrary, when the procedure incorporates invitations to specialized companies, institutional publicity, public opening of offers, intervention of technical bodies, and objective comparison of proposals, it is possible to notice that a competitive logic subsists, albeit modulated by the urgency of the case. Such “mitigated competitive concurrency” thus appears as a useful category to describe exceptional procedures that, without fully reproducing public bidding, conserve its substantial requirements of control and rationality. Ultimately, the conducted study allows concluding that direct contracting in public works should not be stigmatized nor un-critically promoted. Its validity depends on a rigorous equation between enabling cause, sufficient motivation, adequate procedure, and respect for the guiding principles of administrative contracting. When such extremes are verified, direct contracting ceases to be seen as a mere tolerated exception to reveal itself as a legally legitimate, constitutionally and legally admissible, and administratively necessary tool to ensure effective state responses against un-deferrable public needs.

Under that understanding, the true discussion should not focus on an abstract opposition between public bidding and direct contracting, but on the system’s capacity to demand, in one case or the other, founded, transparent, traceable decisions oriented toward the best satisfaction of the public interest. There resides, ultimately, the measure of the lawfulness of administrative action and the meeting point between legality, efficiency, and good administration.

————- (1) ARTICLE 20°.- The public works referred to in article 1º that are not carried out by administration shall be adjudicated through public bidding. Exempted from this requirement and able to be adjudicated through private bidding, price competition, or direct contracting are the cases exposed below and in accordance with the rules established in the regulations: (.) c) Those that do not allow bidding procedures due to being urgent, un-deferrable, or demanded by unforeseen circumstances requiring prompt execution. (2) State Attorney General’s Office of the Province of Santa Fe, Opinions No. 011:2024; 0142/2024, 46:2025 and 149:2025. (3) Article 10 inc. e) of the new Law No. 14,428 (LPA of the province of Santa Fe), which requires that the act be motivated “expressing in a concrete and clear manner the reasons leading to issue the act”. (4) MARIENHOFF, Miguel, “Tratado de Derecho Administrativo”, Volume II, p. 328 et seq., cited by TCA in Sent. 2/90, 54/90, 267/98. (5) IBM Argentina S.R.L. c/ Provincia de Santa Fe s/ Recurso Contencioso Administrativo, 02/23/2022, Contentious-Administrative Chamber of Santa Fe, A y S, volume 75, page 394. With citation to: COMADIRA, Julio, La licitación pública. Nociones, principios, cuestiones, Depalma, pages 282 et seq., Buenos Aires, 2000; and Derecho Administrativo. Acto Administrativo. Procedimiento Administrativo. Otros Estudios, 2nd Updated and Expanded Edition, Lexis-Nexis, Abeledo-Perrot, pages 284 et seq., Buenos Aires, 2003; criteria cited by this Chamber in “Ivalsa” (A. and S. T. 52, page 162). (6) MARTÍNEZ, Hernán J., Contrato de obra pública, Ed. Nova Tesis, p. 219. (7) MARTÍNEZ, Hernán J., Op. cit. p. 219. (8) MELLADO RUIZ, El principio de transparencia integral en la contratación del sector público, 2017, p. 91. (9) PTN, Opinions, 77:265. Cited in DROMI, Roberto, Licitación Pública, 5th Edition, Ed. Ciudad Argentina, p. 181. (10) FERRO ILARDO, Susana B., Estados latinoamericanos. Palabras claves para la región, Buenos Aires, Dunken, 2008, p. 249. (11) Law 14256, Article 1 – Public Innovation. Definition. Public Innovation is understood as the development, implementation, improvement, or incorporation of new solutions, processes, or approaches that improve the responses, action capabilities, and adaptation of the State to dynamic and changing collective challenges, improving the quality and effectiveness of interventions, citizen participation, and democratic quality. (12) GORDILLO, Agustín, Tratado de Derecho Administrativo, p. 732 see in: Chapter VII: Informalism and concurrency in public bidding. () Practicing attorney at the Castagno – Franchi & Marcos – Law Firm. Heading the following areas: administrative law, contract law, insolvency law and restructurings, also actively intervening in matters regarding capital markets and investments and asset protection.* () Practicing attorney at the Castagno – Franchi & Marcos – Law Firm. Heading the following areas: public procurement, regulated public services, environmental law, renewable energies, also actively intervening in complex matters regarding infrastructure financing and public works.