Draft bill 77.

Summary.

The draft bill amends Article 111 of Law 37 of June 29, 2009, which decentralizes public administration. The provision concerns works funded by the State and carried out by private companies. In those cases, the companies must pay the applicable taxes, duties or fees to the municipalities. The rule connects those municipal payments to the private execution of state-funded works and identifies the municipality as the recipient of the amounts due under the provision.

The proposed Article 111 also provides for the municipality to issue a clearance certificate, or paz y salvo. The company must attach that document to each payment claim it submits to the contracting entity. The requirement therefore applies to every claim presented by the company in connection with works covered by the provision. The municipality acts by issuing the clearance certificate, while the contracting entity receives the payment claims to which it must be attached. This requirement forms part of the revised text of Article 111 of Law 37 of June 29, 2009.

The draft bill then adds Article lll-A to Law 37 of June 29, 2009. This provision requires the public contracting entity to include a clause in its contracts. The clause must state that the contractor undertakes to comply faithfully with Municipal Agreements governing construction permits and with other related local rules. That undertaking thus becomes part of the contract for the execution of the works. The reference to Municipal Agreements connects the contractor’s contractual compliance obligation to local construction-permit requirements and other related local provisions.

The following article adds Article lll-B to the same law. Under its wording, the public contracting entity must notify the contractor of the provisions of Articles 1, 2 and 3 of the proposed law before the corresponding contract is signed. Notification therefore takes place before the contract is executed and covers both the amendment to Article 111 and the provisions added by the draft bill. Finally, Article 4 provides that the proposed law would take effect on the day following its promulgation.

The proposal concerns municipalities and public contracting entities, as well as private contractors carrying out state-funded works. Its subject matter could interest the construction and public works contracting sectors, particularly in relation to municipal payment obligations, construction permits, compliance with local rules and the submission of payment claims.