Puerto Rico

Pre-Qualification Requirements

Topic Yes/No Statutory Requirements Notes/Comments
Is There a State Licensing Requirement for General Contractors? Yes

23 Laws of Puerto Rico Annotated (LPRA) §§ 1020a to 1020h (Contractor's Registry)
  • Any person who submits or accepts an estimate or quote or offers to undertake construction work, or in any manner oversees construction work not of his/her property, or undertakes any task or phase thereof, must, before taking any of the above steps or advertising to do so, obtain a contractor certification.
  • This requirement does not apply to contractors working on federal projects for which the applicable federal regulation does not require such certification.
Is There a State Licensing Requirement for Construction Managers? Yes

23 LPRA §§ 1020a to 1020h (Contractor's Registry)
  • The contractor registration and certification requirements apply to any person or entity that “administers, directs or in any other manner, directly or indirectly, takes control of construction works” and to “any person engaged in the construction industry.”
Is There a State Licensing Requirement for Architects and Engineers Yes

20 LPRA § 711
20 LPRA § 711g
20 LPRA § 711s-1
20 LPRA § 711v
  • The unlicensed practice of architecture and engineering (including land surveying and landscape architecture) is prohibited.
  • However, an “Engineer in Training” – a person with an engineering degree from an accredited university who is registered with the Official Register – may practice in a limited fashion.  An Engineer in Training may not certify blueprints. 
  • Architects and Engineers must also be registered with the Official Register and be a member of the College of Architects or the College of Engineers, respectively. 
  • Any person requesting the board to grant him/her a license must meet certain requirements including: a) Puerto Rican residency; b) good conduct and moral repute; c) certificate of good conduct from Puerto Rico police or other U.S./foreign country official; d) 3 references from licensed professionals; and e) specified evidence of training and experience, depending on level of education.
  • The board may grant special licenses to a non-domiciliary design professional if certain stringent requirements are met or if the board determines the professional to be of renowned prestige in the international community.
Is There a State Licensing Requirement for Other Parties? Yes

23 LPRA § 1020e-1
20 LPRA § 711
20 LPRA § 943, -944 (plumbers)
20 LPRA § 2707 (electricians)
20 LPRA § 2060 (refrigeration and air conditioning technicians)
  • Any person who submits or accepts an estimate or quote or offers to undertake construction work, or in any manner oversees construction work not of his/her property, or undertakes any task or phase thereof, must, before taking any of the above steps or advertising to do so, obtain a contractor certification.
  • The Puerto Rican statutes recognize 3 categories of plumbers (apprentice, journeyman and master) each of which has its own licensing requirements.
  • The Puerto Rican statutes recognize 3 categories of electricians (Expert Electrician, Expert Electrician Assistant and Expert Apprentice Electrician), each of which has its own licensing requirements.
  • Refrigeration and air conditioning technicians must be licensed
Is There a Foreign Corporation Registration Requirement? Yes

14 LPRA §§ 3801 to 3815
  • Every foreign corporation must obtain a certificate of authorization to do business in Puerto Rico.
  • Any foreign corporation which fails to procure such certification cannot initiate any proceeding in Puerto Rico until such certificate is procured.
Must a Non-resident Contractor Post a Bond as Part of the Process of Qualifying to do Business? Yes

23 LPRA § 1020c
  • Department of Consumer Affairs is authorized to require an annual bond based on the contractor’s business volume during the previous year.
Sales/Use Tax Obligations Yes

13 LPRA § 8189
13 LPRA § 9091
13 LPRA § 9092
13 LPRA § 9092a
21 LPRA § 5001
21 LPRA § 5061
  • A tax of 5.5% on every sales transaction and on the use and storage of tangible personal property, except that manufacturing plants are exempt from paying taxes on raw materials including cement.
  • In addition, all municipalities are required to levy a sales and use tax of 1.5%. 
  • Municipalities are authorized to levy other taxes on all real and personal property within their jurisdiction.

Lien Law Requirements

Topic Yes/No Statutory Requirements Notes/Comments
Lien Statute Yes

29 LPRA §§ 186 to 189
  • Every worker or employee involved in the construction, expansion, conservation, or repair of a project, house or building may pursue a lien action on the property for work provided. In Puerto Rico, there is no lien on construction work for suppliers. See Montalvo & Comas Electric Corp. v. Commonwealth, 107 D/P.R. 558 (1978). The lien shall have preference as to payment over all other debts of the property owner.
  • A lien action must be initiated within 1 year of the last date of work for which payment is being sought.
Notice Requirements Not Definitive

29 LPRA § 187
  • Before filing the lien action, the worker or employee must request payment from the owner or assignee of the property or its agent or representative, either through the Department of Labor and Human Resources or by written notice from the worker or employee.

Public Procurement Laws

Topic Yes/No Statutory Requirements Notes/Comments
Is Competitive Bidding the Principal Vehicle for Public Construction? Yes

22 LPRA §§ 41 to 46
3 LPRA § 413
23 LPRA § 6465
3 LPRA § 927b
  • Public works construction projects will be awarded to the lowest responsible bidder, but the Secretary of Transportation and Public Works reserves the right to reject any and all bids.
  • Certain contracts are exempt from public bidding requirements and can be made through private contract or force account, including: a) works to be done or goods to be produced in the U.S. or any other foreign country as long as the Secretary of Transportation and Public Works (STPW) approves such private contracts; b) works which do not exceed $25,000 can be done through force account; c) works which are declared essential or urgent, as long as declared as such by the STPW or the General Services Administrator.
  • The Puerto Rico Convention Center District Authority does not have to abide by the competitive bid requirements discussed above.
  • The Secretary of Transportation and Public Works has discretion to do what is most advantageous for Puerto Rico.
  • With regard to contracts where competitive bidding is not required and where the Commonwealth is a party, the Commonwealth shall require materials manufactured in Puerto Rico.
Is Negotiation an Available Delivery Vehicle for Public Construction? Yes

22 LPRA §§ 43, 46, 84
9 LPRA § 2004g
23 LPRA § 6465
  • The Secretary of Transportation and Public Works has discretion to negotiate a contract.
  • The Puerto Rico Convention Center District Authority does not have to abide by the competitive bid requirements discussed above.
  • The Secretary of Transportation and Public Works may contract, without competitive bidding, for the service of professional or technical personnel.
  • Highway and Transportation Authority contracts for the design, construction, and operation of highways, bridges, etc. may be awarded by means of negotiated competitive bids.
Is Construction Management an Available Delivery Vehicle for Public Construction for "Vertical" Construction Projects? Yes

23 LPRA § 6465
  • The Puerto Rico Convention Center District Corporation may use the construction methodology known as construction management or construction manager as constructor, and any variation thereof in the contracting of its construction projects.
  • There is no express limitation on the use of Construction Management as a delivery vehicle for public “vertical” construction projects. Indeed, Construction Management appears to be an acceptable delivery vehicle.  See Colegio de Ingenieros y Agrimensores de Puerto Rico v. Autoridad de Acueductos y. Alcantarillados de Puerto Rico, 1992 JTS 137, 131 D.P.R. 735 (1992).
Is Construction Management an Available Delivery Vehicle for Public Construction for "Horizontal" (Highway) Construction Projects? Yes

9 LPRA § 2004a
  • Under 9 LPRA § 2004a, the only delivery limitation is that the design must be performed by an entity that is different from the entity performing construction. 
  • There is no express limitation on the use of Construction Management as a delivery vehicle for “horizontal” (Highway) construction projects.  Indeed, Construction Management appears to be an acceptable delivery vehicle.  See Colegio de Ingenieros y Agrimensores de Puerto Rico v. Autoridad de Acueductos y. Alcantarillados de Puerto Rico, 1992 JTS 137, 131 D.P.R. 735 (1992).
On Public Construction Projects, Does any Statute Distinguish Between CM Agency and CM/GC (CM at Risk)? Yes

23 LPRA § 6465
  • Under 23 LPRA § 6465, the Puerto Rico Convention Center District Corporation may use the construction methodology known as construction management or construction manager as constructor, and any variation thereof in the contracting of its construction projects.
Does Any Statute Authorize Electronic Bidding (“E-Bids”)? Yes

3 LPRA § 932
  • The Administrator of the General Services of Administration has the duty to lessen the costs of the bidding process by using the Internet for convocations to bid.
Does Any Statute Authorize the Use of Reverse Auctions in the Award of Public Construction Contracts? No
Is There any Statutory Preference for In-State Contractors? No
Is There any Statutory Preference for MBE, DBE, WBE or Other Identified Groups? Yes

3 LPRA §§ 8641to 8649
3 LPRA §§ 927 to 927h
  • Every instrumentality or agency of the government of Puerto Rico must reserve 15% of its procurement budget for Small and Medium Size Businesses, which are Puerto Rican businesses with less than 25 employees and a gross income not exceeding $5,000,000.
  • There is a statutory preference for the purchase of Puerto Rican products and materials.
    All bid documents pertaining to public projects must require that bidders obtain materials from Puerto Rican vendors.
  • This requirement does not apply where the materials are not available in sufficient amounts or are not of acceptable quality.
Is There any Statute Expressly Prohibiting Preferences for Identified Classes of Contractors? No
Is There any Statutory Requirement for the Use of a Multi-Prime Delivery Vehicle on Public Projects? No

Design-Build Contracting

Topic Yes/No Statutory Requirements Notes/Comments
Is Design-Build Contracting Permitted on Public Projects for Vertical Construction Projects? Not Definitive

23 LPRA § 2910
  • The Port Authority of the Americas may use design-build contracts to carry out the design, development, construction, financing, operation, and maintenance of the Port of the Americas.
Is Design-Build Contracting Permitted on Public Projects for “Horizontal” (Highway) Construction Projects? No

9 LPRA § 2004a
  • The preliminary design of a project may be assigned by the Secretary of Transportation and Public Works or the Highway and Transportation Authority to any competent, licensed person except that it cannot be the same private entity contracted for the construction.
Is Design-Build Contracting Permitted on Private Projects? Not Definitive
  • Design-build contracting on private projects is not addressed by statute.
Is Design-Build Expressly Prohibited by Statute? Not Definitive
Is Design-Build Expressly Prohibited by Statute on Public Projects? Yes

9 LPRA § 2004a
  • The preliminary design of the project may be assigned by the Secretary of Transportation and Public Works or the Highway and Transportation Authority to any competent, licensed person except that it cannot be the same private entity contracted for the construction.
Is Design-Build Expressly Prohibited by Statute on Private Projects? No
  • Design-build contracting on private projects is not addressed by statute.
Is There any Statute Requiring that the Design-Build Contractor Hold Either an Architect's or Engineer's License? No

Bond Requirements on Public Projects

Topic Yes/No Statutory Requirements Notes/Comments
Bid Bonds Yes

21 LPRA § 4506(c)(purchase of equipment, supplies and services with municipalities)
22 LPRA § 59
  • Every municipality must create a bidding board to oversee the public bid programs, and such board can require bid bonds.
  • Commissioner of Interior may require bid bond in the letting of a contract for insular public works. Indemnity Co. v. Boise 60 P.R.R. 412 (1942).
Performance Bonds Yes

22 LPRA § 46
9 LPRA § 2004a(f) (highway and transportation contracts)
  • All contractors are required to give sufficient bond conditioned on the faithful performance of the works in a proper manner and within the time described in the contract.
Payment Bonds (sometimes known as Little Miller Act) No

29 LPRA §§ 195, 196
22 LPRA §§ 47-48
  • Any contractor whose estimated cost as specified in the construction permit issued by the Permit Office of the Planning Board is greater than $15,000 shall post a payment bond in favor of the Secretary of Labor and Human Resources, which shall be binding and effective on and after the date the work is started. The amount of the bond shall not be less than 20% the cost of construction.
  • Every contractor awarded a public works contract must post a payment bond on behalf of the Commonwealth of Puerto Rico in the form of cash, certified check or through the surety of a bonding company authorized to do business in Puerto Rico.  The payment bond shall secure jointly and severally with the contractor, to the extent of liability covered by the bond: 1) the payment to the workers and employees (of the contractor); and 2) the payment to the vendors and suppliers of equipment, tools, and materials for the work.
  • The amount of the payment bond must be at least one-half of the total value of the contract (22 LPRA § 48).

Bid Mistake Relief on Public Projects

Topic Yes/No Statutory Requirements Notes/Comments
Is Bid Mistake Relief Available by Statute for Public Projects? No
Is There any Statutory Provision Addressing the Consequences for Seeking Bid Mistake Relief? No
Is Bid Mistake Relief Available per any Court Decision? No

Sole Source or Closed Specifications on Public Projects

Topic Yes/No Statutory Requirements Notes/Comments
Is There any Statutory Restriction on Sole Source or Closed Specifications? Yes

9 LPRA § 2011
3 LPRA § 927b (use of construction material manufactured in Puerto Rico)
22 LPRA § 151 (Aqueduct & Sewer Authority)
22 LPRA § 205 (Puerto Rico Electric Power Authority)
23 LPRA § 341 (Puerto Rico Ports Authority)
23 LPRA § 3060 (Maritime Shipping Authority)
28 LPRA § 910 (Puerto Rico Mineral Resources Development Corp.)
  • Advertisements for bids (involving all work or service contracts and all purchases made by the Highway and Transportation Authority) shall not be required when:  1) the estimated sum for the purchase or work does not exceed $25,000; 2) the immediate delivery of supplies, goods, or equipment, or rendering of services, is required due to an emergency; 3) spare parts, accessories, equipment or services for goods or previously rendered or contracted services are needed; 4) professional or expert services or works are required and the Authority deems that such shall be contracted without advertisement; and 5) prices are not competitive because there is a single supply source or because prices are regulated by law.

Bid Protests on Public Projects

Topic Yes/No Statutory Requirements Notes/Comments
Is There any Administrative Body that Addresses Bid Protests? Yes

3 LPRA § 2169
21 LPRA §§ 4504 - 4506
  • Adjudication proceedings for bid protests are informal proceedings, the regulation and terms of which are established by the agencies.
  • The party adversely affected by the decision may, within 10 days after adjudication of the bid, present a motion for reconsideration before the agency. The agency will consider the motion within 10 days of filing. If the agency takes no action with respect to the motion within the ten-day period, it shall be understood that the motion was denied and the term for judicial review shall commence to run as of that date.
  • Municipalities must create a bidding board to resolve disputes.
Who May Assert a Bid Protest? Yes

3 LPRA § 2169
  • Any party who has been adversely affected by a decision may, within 10 days after adjudication of the bid, present a motion for reconsideration.
Is Recovery of Bid Preparation Costs the Exclusive Remedy? No

Subcontracting on Public Contracts

Topic Yes/No Statutory Requirements Notes/Comments
Listing Requirements Yes

3 LPRA § 932
29 LPRA § 202
  • The Puerto Rican General Services Administrator must keep a Register of all vendors qualified to participate in the acquisition and purchase program of any executive agency.
  • A contractor must file with the Secretary of Labor and Human Resources a copy of any subcontract executed in furtherance of the construction within 10 days of its execution.  The contractor shall have this same duty if the subcontractor, in turn, contracts with a second subcontractor for any part or labor of the work under construction.
MBE/DBE/WBE Set-Asides No

Payment Terms

Topic Yes/No Statutory Requirements Notes/Comments
Is There a Statute Addressing Prompt Payment on Public Projects? Yes

22 LPRA §§ 49, 50
29 LPRA § 197
  • On a public works contract a contractor is under an obligation to pay the salaries and wages of the employees and workers on the work for periods not longer than 1 week and to pay punctually, as they fall due, the bills and invoices presented by any supplier or vender of materials, equipment, and tools for the work.
  • In any case in which payment is not being made in the above-mentioned manner, the inspector of the work shall notify the Secretary of Transportation and Public Works and the Secretary of Labor and Human Resources.  The inspector, together with an officer or official appointed by the Secretary of Labor and Human Resources, shall make the proper investigation and take the necessary course of action, including, if necessary, deducting the sum total of any payment due from the amount of the voucher issued monthly to the order of the contractor for the work done, or from the 10% withheld by the Department of Transportation and Public Works.
  • In all contracts, the salaries earned by the workers employed in the work shall enjoy absolute preference, as to payment, over all other debts of the contractor, with the exception of mortgage credits on certain real or personal property or property rights of the debtor, recorded in the Registry of Property prior to the date on which the salary has been earned, and with the exception of any taxes which the contractor may owe to the Commonwealth or its municipalities.
Is There a Statute Addressing Prompt Payment on Private Projects? Not Definitive

29 LPRA § 197
  • In all contracts, the salaries earned by the workers employed in the work shall enjoy absolute preference, as to payment, over all other debts of the contractor, with the exception of mortgage credits on certain real or personal property or property rights of the debtor, recorded in the Registry of Property prior to the date on which the salary has been earned, and with the exception of any taxes which the contractor may owe to the Commonwealth or its municipalities.
Is There a Statute Addressing the Enforceability of a “Pay-if-Paid” clause on Public Projects? No
Is There a Statute Addressing the Enforceability of a “Pay-if-Paid” clause on Private Projects? No
Are There Statutes Addressing the Escrow or Release of Retainage? No
Is There a “Trust Fund” Statute Addressing Payment to the General Contractor for Subcontractors’ Work? No

Other Contract Terms

Topic Yes/No Statutory Requirements Notes/Comments
Is There a Statute Addressing No Damages For Delay Clauses? No

31 LPRA § 3372
  • Contracting parties may make agreements and establish clauses and conditions they deem advisable so long as they do not contravene law, morals or public order.
Is There a Statute Addressing Choice of Law Provisions in Subcontracts? Yes

19 LPRA § 404 (commercial transactions)
  • The parties may agree as to the law that shall govern their rights and duties, be it the law of Puerto Rico or of any state or nation.
  • In interpreting a forum selection or choice of law clause, the court looks to the plain language of the contract.  Scotiabank De Puerto Rico v. Residential Partners, S.E., 350 F.Supp.2d 334, 338 (D.P.R. 2004).
  • Choice of law provisions is generally valid provided the chosen jurisdiction has a substantial connection to the contract unless the provision is contrary to fundamental public policy considerations.  Walborg Corp. v. Tribunal Superior, 104 D.P.R. 184, 192 (1975).
Is There a Statute Addressing Forum or Venue Selection Clauses in Subcontracts? No
  • Forum selection clauses are prima facie valid and should be enforced unless doing so is shown by the resisting party to be unreasonable under the circumstances.  Intercall Telecommunications, Inc. v. Instant Impact, Inc., 376 F.Supp.2d 155, 158 (D.P.R. 2005).
  • Puerto Rico has developed a presumption of the enforceability of forum selection clauses based on federal law.  Medika Intern., Inc. v. Scanlan Intern., Inc., 830 F.Supp. 81, 86 (D.P.R. 1993).  In interpreting a forum selection or choice of law clause, the court looks to the plain language of the contract.  Scotiabank De Puerto Rico v. Residential Partners, S.E., 350 F.Supp.2d 334, 338 (D.P.R. 2004).

Immigration

Topic Yes/No Statutory Requirements Notes/Comments
Are There state Statutes Obligating a Contractor or Subcontractor to Verify That it’s Workers Are U.S. Citizens or Legally in the United States? No

Indemnity

Topic Yes/No Statutory Requirements Notes/Comments
Are There Statutes Limiting the Scope of Permissible Indemnity Clauses as a Matter of Public Policy? No

9 LPRA § 2004a(g)
31 LPRA § 3023
  • Every contract with the Department of Transportation and Public Works for the construction of roads, bridges, etc., shall contain an indemnity provision.
  • Indemnity for losses and damages includes not only the amount of the loss which may have been suffered, but also that of the profit which the creditor may have failed to realize.
Are There Statutes Establishing Certain Conditions Precedent on the Enforcement of Certain Indemnity Clauses? Yes

9 LPRA § 2004a(g)
  • Contracts for construction, operation and maintenance shall contain an indemnity clause by which the private entity commits itself to defend and to pay any suit filed under § 422 of Title 3 and §§ 5141, 5142, 5146 and 5148 of Title 31, for the Commonwealth and the Transportation Authority. This obligation shall be secured or covered by a public liability insurance policy that shall include the Commonwealth and the Authority as co-insureds. The sums or amounts to be secured in said policy shall be fixed by the Authority or the Secretary of Transportation and Public Works and their decision shall be backed by the evaluation of a professional with expertise in the field of insurance, in relation to the risks involved in the stages of design, construction, operation and maintenance of the public highway being contracted.
Are There Statutes Requiring Indemnity Provisions in Public Construction-Related Contracts?

Claims

Topic Yes/No Statutory Requirements Notes/Comments
Is Sovereign Immunity Waived? Yes

32 LPRA § 3077, 3 LPRA § 422
  • The Commonwealth is responsible for all injuries caused to travelers on the thoroughfares for defects, lack of repairs or lack of protections.
  • Breach of contract claims for an amount up to $75,000 is authorized.
Is There a Designated Forum for the Resolution of Disputes/Claims on Public Projects? Yes

22 LPRA §§ 52, 56
29 LPRA § 201
  • Every action involving a public works project shall be instituted in the name of the interested party in the part of the Court of First Instance within which the work is located or in which the complainant, or, if more than one, any of them, resides.
  • All claims for salaries and wages may be joined in one single complaint and all claims for material and equipment may be joined in another single complaint.
  • The Secretary of Labor and Human Resources may also demand payment of any sum due workers for wages.  Said action may be brought in the part of the Court of First Instance or District Court corresponding to the place where the work is being carried out or where the worker or employee lives on the date of the claim.  All workers are entitled to collect, in addition to the unpaid amounts, another equal sum as additional compensation, plus costs, expenses and attorney's fees, and the bond shall answer for the payment of the judgment that may be passed, up to the amount of the bond.
Is There a Statutory Provision Requiring the Use of an ADR Process to Resolve Claims on Public Projects? No

Public Records Access

Topic Yes/No Statutory Requirements Notes/Comments
Public Records Access Yes

32 LPRA § 1781
  • Every citizen has a right to inspect and copy any public document of Puerto Rico, except as otherwise expressly provided by law.

Other Statutes Governing Public Contracts

Topic Yes/No Statutory Requirements Notes/Comments
Has the American Bar Association Model Procurement Code with Local Variations Been Adopted? No

Other Statutes Affecting Construction Disputes

Topic Yes/No Statutory Requirements Notes/Comments
Is There a Statute of Repose Limiting the Length of Time Allowed to File a Legal Action Related to Construction Project? Yes

31 LPRA § 4124
  • The contractor of a building which may have been destroyed by reason of defects in the construction shall be liable for the losses and damages if said building should collapse within 10 years, to be counted from the completion of the construction; and during the same time the same liability shall be incurred by the architect who may have directed the work if the collapse is due to defects in the ground or in the direction.
  • If the cause should be the noncompliance of the contractor with the conditions of the contract, the action for indemnity may be brought within 15 years.

State Occupational Safety & Health Plans

Topic Yes/No Statutory Requirements Notes/Comments
Has a State OSHA Plan Been Approved? Yes

29 LPRA §§ 361 et seq.
  • Covers both private sector and Commonwealth/local government employees.
Are There State OSHA 10 Hour Training Laws? No

Private-Public Partnerships ("P3s")

Topic Yes/No Statutory Requirements Notes/Comments
Are P3s Permitted on Public Projects for Vertical Construction Projects? No
  • No statute expressly permits or prohibits P3s for vertical public construction projects.
Are P3s Permitted on Public Projects for "Horizonal" (Highway) Construction Projects? Yes

9 LPRA §§ 2002, 2004a(1)
  • The Puerto Rico Highway and Transportation Authority may contract with private entities and use private funds for the design, construction, operation and maintenance of new highways, bridges, avenues, expressways and ancillary transit facilities.
Does any Statute Permit a Public Agency to Consider an Unsolicited P3 Proposal Without Seeking Competitive Proposals from Other Firms? No

Statutes Key

LPRA - Laws of Puerto Rico Annotated

Legislative Dates

Session: January 14, 2013 to November 19, 2013

*Estimated date, subject to change 
According to www.statenet.com