Public Procurement 2024 Comparisons

As a rule of thumb, all contracts executed by the government or government-controlled entities must abide by public procurement regulation. Accordingly, the government can only contract engineering works, services, the provision of goods, the sale of its assets or the transfer to a private party of the right to provide public services after carrying out a competitive public bidding process with the purpose of choosing the most advantageous offer or proposal from among those presented by private interested parties.

In Brazil, Law No 14,333/2021 is currently the main legal framework for the procurement of government contracts. This statute provides general principles and rules on public procurement, steps and requirements for the contract award procedure, as well as guidelines governing the relationship between the government and private contracted parties. Law No 14,333/2021 was enacted in early 2021 with the purpose of substituting Law No 8,666/1993 (the previous public procurement statute).

For the sake of straightforwardness, this analysis shall focus on Law No 14,333/2021, which will be referred to as the “Brazilian Public Procurement Law” (PPL). When deemed necessary to point out the main innovations brought by the PPL, both laws will be referred to using their number.

Depending on the scope of the public procurement process or the government contracting authority, other laws may apply, such as the following.

• Law No 8,987/1995 provides general rules for concessions of public works and services, commonly used for self-sustainable infrastructure projects, such as toll roads.
• Law No 10,520/2002 provides rules for an alternative type of procurement process used for the acquisition of common goods and services that the government is used to contracting out on a regular basis. This law was formally repealed by the PPL on 1 December 2023.
• Law No 11,079/2004 is the legal framework applicable for public-private partnerships (PPPs) and defines them as a type of public concession in which the government engages with a private party with the purpose of providing public services (sponsored PPP) or the rendering of a service to the government itself (administrative PPP), which shall demand, in any case, high investments and a long-term amortisation period. The PPP Law was created with the aim of attracting a new wave of private investments for projects of high social interest, especially in the infrastructure sector, which, in other conditions, would not be economically feasible for the government.
• Law No 12,462/2011 was originally created to provide special public procurement rules for works and services related to infrastructure projects for the 2014 FIFA World Cup and the 2016 Olympic Games. It was then applied for various purposes, such as actions included within the National Growth Acceleration Program (PAC), the National Health System (SUS), the prison system, urban mobility, national security, and innovation and technology, among others. The law was replaced by the PPL on 30 December 2023.
• Law No 13,303/2016 and Decree No 8,945/2016 form the legal framework for government-owned companies and provide specific procurement rules applicable to public companies, mixed-capital companies and their subsidiaries. This statute allows government-owned companies to enter into strategic partnerships with the private sector with no requirement to launch a prior public bidding process.

Pursuant to the Brazilian Federal Constitution, public procurement rules are mandatory for all entities controlled directly or indirectly by the government. In this sense, public agencies of any kind, government funds, public foundations and government-owned companies at all levels of the federation – federal, state and local – shall comply with the public procurement steps and requirements provided in the applicable legislation to engage in contracts with private parties for the acquisition of goods, works and services, and to proceed with the sale of assets.

As a rule of thumb, all contracts executed by the government or government-controlled entities must abide by the public procurement regulation. Accordingly, the government can only contract engineering works, services, the provision of goods or the sale of assets after carrying on a competitive public bidding process with the purpose of choosing the most advantageous offer or proposal from among those presented by private interested parties.

However, there are exceptions to this general rule. According to the PPL, the government is allowed to proceed with a direct hiring in two scenarios:

• whenever the legislation itself waives the launching of the competitive public bidding (dispensa de licitação), with hypotheses provided exhaustively in Law No 14,133/2021 (Article 75); and
• whenever the circumstances lead to the conclusion that a competitive bidding proceeding is unfeasible or incompatible with the purpose of the contracting (inexigibilidade de licitação). The characterisation of such unfeasibility or incompatibility depends on the verification of the requirements provided by law (Article 74 of Law No 14,133/2021) – ie, technical service, the well-known expertise of the contractor and the singular nature of the services.

In both scenarios, the government is allowed to hire a third party to acquire goods and services directly. The direct hiring is a much more flexible process, in which the government is not obliged to observe all the steps provided in the PPL.

In this regard, it is important to mention that Law No 13,303/2016 introduced a new legal hypothesis according to which a bidding process is not required. Government-owned companies are allowed to pursue a direct hiring in the following scenarios:

• for the direct commercialisation, rendering or execution of products or services by the government-owned companies specifically related to their corporate purpose; and
• in cases in which the choice of a strategic partner is associated with some of its particular characteristics, related to defined and specific business opportunities in scenarios where the impossibility of the competitive process is justifiable.

Minimum Value Thresholds

As a rule, all contracts are submitted to the public procurement regulation. There are minimum value thresholds, but they are significantly lower than those fixed in other jurisdictions. The PPL provides that the government is not required to launch a competitive public bidding process for contracting engineering works or services with a total value of up to BRL100,000 and other services or purchases with a total value of up to BRL50,000. Law No 13,303/2016 provides the same minimum value thresholds for government-owned companies.

These are the typical scenarios in which the public procurement regulation is waived and the government and government-owned companies can proceed with a direct hiring.

A public tender process must serve as a tool for the government to select the most advantageous proposal to meet a certain public need. In this sense, the PPL ensures the equal treatment of all parties interested in participating in a public tender process, provided that they comply with the conditions and requirements for qualification set forth in the applicable public procurement regulation and those established by the contracting government authority in the public tender documents.

The PPL strictly prohibits government agents from admitting, planning, including or tolerating clauses or conditions in public tender documents that may impair, restrain or frustrate the competitive nature of the process. Regarding participation in a public tender process, the government cannot create different rules for bidders based on their nationality, economic condition, domicile or any other condition that is irrelevant for the proper execution of the object of the contract. In addition, the PPL clearly states that the government cannot establish any discriminatory treatment of a commercial, legal or labour nature among the bidders, nor give priority or privileges to Brazilian or foreign companies in view of the applicable currency, modality and locale for payment, except in specific situations involving financing from international agencies and multilateral entities.

Nonetheless, the PPL allows the government to apply a margin of preference for contracts relating to manufactured goods and national services that meet Brazilian technical standards, and to recycled, recyclable or biodegradable goods.

Conditions Provided in Tender Documents

Another relevant factor in the openness of the public procurement process is the conditions provided within the tender documents for the participation of foreign companies. Depending on the scope of the procurement process, the contracting authority may establish that foreign companies can only participate in the tender through a subsidiary that is duly incorporated in accordance with Brazilian law, in cases known as “domestic tenders”. On the other hand, when foreign bidders can participate directly in the tender, they are required to prepare a sworn translation into Portuguese of any document in a foreign language. On top of that, Law No 8,666/1993 contained a provision that, in the case of a consortium formed between Brazilian and foreign players, leadership should always be given to the Brazilian party. The new PPL does not include such requirement.

Differing from private contracts, in which the contracting parties have full autonomy to negotiate all clauses and conditions, those who attend a public procurement process must strictly abide by all terms of the tender documents, with no room for negotiation with the contracting authority. The PPL provides general rules on the obligations of the government, as well as those of the parties awarded a public contract.

Both laws give the government special powers, with the purpose of preserving the public interest underlying the public contracts. Among such powers, two are ordinarily of application to private contractors:

• the right of the government to unilaterally terminate the contract due to “reasons of public interest”; and
• in unilateral amendments, the obligation of the contractor to accept any addition or reduction in the scope of a public contract up to 25% of the updated initial amount agreed between the parties and up to 50% in the particular case of works, services or purchases, and the restoration of a building or equipment.

The government awarding authority has to publish a formal notice containing the main features of the public tender process, such as:

• the scope of the contract;
• the evaluation criteria;
• the contract term;
• the date for proposal submission; and
• where the tender documents can be found.

The tender notice shall be published in an official gazette (either the federal or state gazette, depending on the level of the awarding authority) and in a newspaper with a wide audience.

Law No 13,303/2016 allows government-owned companies to adopt a slightly different and more flexible procedure for certain procurement processes in view of the particularities of the intended contract, whereby the contracting company sends a request for proposal (RFP) directly to a limited number of pre-selected players without the prior publication of a formal tender notice. In cases like this, only the result of the tender process and an extract of the contract are published in the official gazette.

Government awarding authorities can carry out preliminary market consultation before launching a contract award procedure. When the tender scope is of a simple nature, the consultation may consist of simple price research to formulate the price limit that would be paid by the government.

Conversely, when the tender scope is of a complex nature (ie, for engineering works or services, or for the concession of public services), the government awarding authority usually hires consultancy services from specialist companies to carry out comprehensive studies (eg, financial, technical, legal and environmental analysis) with the purpose of defining the basis for the tender process.

The PPL provides the following modalities of tender procedure for the awarding of contracts:

• competitive tender;
• competitive dialogue;
• reverse auction;
• contest; and
• auction.

Competitive Tender

This is the most relevant and commonly used tender procedure modality, and encompasses the following phases:

• the preliminary phase, where the awarding authority verifies whether there is any impediment to the interested party contracting with the government, such as a debarment or any conflict of interest;
• the qualification phase, where the awarding authority assesses the interested party’s financial and technical conditions and capacity; and
• the competitive phase, where the proposal submitted by the bidders is classified and an auction with the best-classified parties may take place.

The government awarding authority issues an administrative decision after the end of each phase, which can be appealed by all bidders. The awarding authority has the power to postpone the qualification phase until the end of the tender procedure, whereby it assesses the qualification documents of the winning bidder only.

Competitive Dialogue

This is used for engineering works, services and purchases in which the public administration carries out dialogues with previously selected bidders according to objective criteria in order to develop one or more alternatives capable of meeting their needs. The bidders should present a formal proposal, after they have been hired. The competitive dialogue focuses on bidding that relates to technological innovation or needs market solution, or is used when the public administration cannot find or choose the best solution.

Reverse Auction

This tender procedure is designed for the acquisition of common goods and services whose minimum quality standards are previously stipulated in the bid invitation. It cannot be applied for the specialised technical services of a predominantly intellectual nature, nor for engineering services. In this tender procedure, the bidders dispute the contract among themselves through successive bids, which occur during an auction section or virtually through a website provided for the government authority, with the winner being the one that offers the lowest price for the goods or services demanded by the government awarding authority.

Discontinued Procedures

Law No 8,666/1993 established the following two tender procedures that were not preserved in the new Law No 14,133/2021 regulation, which means that government awarding authorities will not be allowed to use them after December 2023. Any of these discontinued procedures started before December 2023 shall remain valid and produce all legal effects.

Contest

The government awarding authority launches a competition that is open to all interested parties, intending to choose the best technical, scientific or artistic work suitable for a predefined purpose.

Auction

A typical tender procedure used by the government awarding authority for the sale of assets to the party who offers the highest bid that is equal to or higher than the appraisal value.

As referred to in 2.3 Tender Procedure for the Award of a Contract, the public procurement regulation establishes more than one tender procedure. The choice of which tender procedure shall be adopted for each case depends on the scope of the project and the estimated amount involved. The government awarding authority cannot choose the tender procedure at its discretion.

For instance, tenders aimed to contract common goods or services are subject to a simpler tender procedure, with no qualification phase and using lower prices as the evaluation criteria. Conversely, when contracting for a more complex project or when the tender refers to the concession of public services, the awarding authority shall use the open competitive procedure, which encompasses the phases mentioned in 2.3 Tender Procedure for the Award of a Contract.

In addition to the listed legal criteria, Law No 8,666/1993 provided the following amounts for defining the applicable tender procedure.

• For engineering works and services:
1. invitation – tenders up to BRL330,000;
2. price quotation – tenders up to BRL3.3 million; and
3. competitive tender – tenders higher than BRL3.3 million.
• For non-engineering works and services:
1. invitation – tenders up to BRL176,000;
2. price quotation – tenders up to BRL1.43 million; and
3. competitive tender – tenders higher than BRL1.43 million.

The values for defining the applicable tender procedure were excluded from the New Public Procurement Law (Law No 14,133/2021), meaning that the choice of process is now based on the object, as follows:

• competitive tender – for engineering and non-engineering works and services;
• reverse auction – non-engineering works and services;
• contest – technical, scientific and artistic works;
• auction – disposal of movable and immovable property; and
• competitive dialogue – used to identify alternatives and adapt new solutions when normal proceedings are not appropriate.

Although the rule applicable to the government in terms of public procurement is to contract third parties by means of a competitive public bidding process, the legislation allows contracts to be awarded directly. Pursuant to the PPL, the government can proceed with a direct hiring in two situations:

• whenever the legislation itself waives the launching of the competitive public bidding; and
• whenever the circumstances lead to the conclusion that a competitive bidding process is unfeasible or incompatible with the purpose of the contracting, which could be named as an exemption to the bidding proceeding requirement. The demonstration of such unfeasibility or incompatibility depends on the verification of the technical service, the expertise of the contractor and the singular nature of the services.

In both scenarios (waiver or unfeasibility of a public bidding process), the government is allowed to directly hire a third party to acquire goods and services. The direct hiring is a much more flexible process, as the government is not obliged to observe all the steps of a competitive public bidding process.

Furthermore, Law No 13,303/2016 introduced new rules pursuant to which government-owned companies are allowed to move forward with a direct hiring, as follows:

• for government-owned companies’ direct commercialisation, rendering or execution of products or services specifically related to their corporate purpose; and
• to enter strategic partnerships with the private sector, when the choice of strategic partner is associated with some of its particular characteristics, in relation to defined and specific business opportunities in scenarios where the impossibility of the competitive process is justifiable.

The PPL provides for a minimum timeframe between the publication of the tender notice and the tender procedure, which varies depending on the type of tender, as follows:

• for goods in general:
1. eight business days for the acquisition of goods when the evaluation criterion is “lowest price” or “bigger discount”; and
2. 15 business days in cases of other evaluation criteria;
• for services:
1. ten business days in case of ordinary services and ordinary engineering works and services when the evaluation criterion is “lowest price” or “bigger discount”;
2. 25 business days in case of special services and special engineering works and services when the evaluation criterion adopted is the “lowest price” or “highest discount”; or
3. 15 business days for auctions (in which the evaluation criterion is the highest bid);
• 35 business days for competitive tender (in which the evaluation criterion is technique and price or the best technique or artistic content) and semi-integrated contracting; and
• 60 business days for competitive dialogue or integrated contracting.

If there is any change in the public tender documents, the government awarding authority shall publish a new tender notice and observe the minimum timeframe between the publication and the tender procedure. In addition, for those tender procedures that involve a substantial amount, the government awarding authority shall promote a public hearing to receive contributions from the interested parties.

The interested parties shall submit their proposal on the specific day provided in the tender invitation.

The legislation establishes the eligibility requirements to be met by the interested party. In any scenario, the interested party shall demonstrate that it:

• is a legal entity duly constituted under Brazilian law, or under foreign law in the case of an international contract award procedure;
• has no impediment to contract with the government;
• has no debt to the federal, state or municipal tax authority; and
• has no debt to its employees.

Depending on the features of the tender, the awarding authority may establish financial requirements, such as minimum net equity or specific financial condition, and technical requirements, relating mostly to prior experience through attestation or the demonstration of having qualified employees in the workforce.

The public procurement legislation allows the government awarding authority to restrict the competition in specific and exceptional situations, such as in tenders aimed at small purchases, where the awarding authority may reduce the competition to three providers who will be invited to the tender through a request for proposal.

Another situation where the awarding authority can restrict the competition is in the case of restricted procedures, whereby the tender is targeted at companies that are pre-registered in the government provider list. However, any company may request to be included in this list up to three days before the tender auction day. Once on the list, the interested party can take part in the tender.

The legislation sets forth the following evaluation criteria:

• lowest price;
• best technical expertise or artistic content;
• higher purchase offer when the government is selling something and for those tenders aiming to transfer the provision of public utilities to the private sector;
• lowest fee paid by the user;
• higher offer for the concession award;
• greater economic return; and
• bigger discount.

As a rule, the awarding authority tends to use the lowest price criterion to contract common goods and services.

The PPL defines eligibility requirements that shall be met by any bidder. In any public bidding process, a bidder shall demonstrate at least that it:

• is a legal entity duly formed under Brazilian law or foreign law in the case of international bidding procedure;
• has no impediment to contract with the government;
• has no debt with the federal, state or municipal tax authority; and
• has no debt with its employees.

Both the PPL and Law No 13,303/2016 grant to the government and state-owned companies respectively the prerogative to apply penalties that restrict a private party from participating in bidding processes and in engaging in contracts with the public administration. Those penalties are applicable in case of significant non-compliance with the contract obligations and generally are applicable as a last resort.

Judicial courts have the authority to apply a similar restriction based on Law No 8,429/1992, which provides sanctions to improbity acts, ie, misconducts related or not to the execution of public contracts that somehow cause harm to the public administration. The Federal Court of Accounts also can apply such restriction based on Law No 8,443/1992, which regulates the functions of such court, rules on audit of public accounts, and establishes the prerogative of the court to penalise private parties that engage in misconduct against the public administration.

A company penalised with such restriction is prohibited from participating in any bidding process. There are official lists prepared and maintained by public authorities indicating the private players that are prohibited to participate in new public procurement procedures. In practice, the government authorities usually check the official list in the early stage of the bidding process just to make sure that the private party is not bypassing the restriction.

The public tender documents must provide the criteria and other elements that would be used by the government awarding authority to select the winner of the contract award procedure. In this sense, any interested party knows what is necessary to take part in the competition and how the offers shall be evaluated, right from the beginning of the tender procedure.

The government awarding authority must select the bidders to participate in the contract award procedure according to the requirements and criteria provided for in the tender documents. Any exclusion of participants must be followed with a public statement issued by the government awarding authority with the reasons for the exclusion. In this scenario, the excluded party can request a reconsideration of such decision from the awarding authority, which may review the decision or confirm it. With the confirmation of the exclusion, the party cannot take part in the contract award procedure and can challenge the administrative decision in court.

The government awarding authority is not obliged to directly notify any of the interested parties about the contract award decision. All formal communications within the public tender procedure shall be made through publication in the official gazette or through the website of the awarding authority. In this sense, the party that did not win the tender shall be informed by the official statement made widely available by the awarding authority, which lists the criteria that were used to evaluate the offers and the identification of the winning bidder.

Under the PPL there is no provision granting to bidders the right to prior hearing before a decision is taken in the context of a contract award procedure. Bidders must abide by the terms of the bidding documents and are not allowed to discuss or negotiate new terms or conditions with the government authority responsible for the contract award procedure. Also, bidders must prepare and submit their proposal following all rules and requirements provided in the documents governing the public bidding procedure that have been published by the government awarding authority. Any questions about the terms of the bidding process should be directed to the authority (or commission) responsible for the procedure at the appropriate stage and timing, as set forth in the bidding documents.

The Brazilian public procurement regulation does not provide for a specific “standstill period” between the notification of the contract award decision and the execution of the contract. In practice, the tender documents usually provide a term after the contract award decision in which the winner shall attend the call to execute the contract. The tender documents may provide precedent conditions to the execution of the contract that should be met by the winning bidder, such as the contracting of a performance bond, payment of the award price, and even the incorporation of a special purpose company (SPC), especially in the concession of public services to the private sector.

Any interested party can ask the government awarding authority to reconsider any decision issued during the tender procedure. There is no appeal to a higher authority or a different body: the awarding authority is responsible for reviewing its own decision. The decision on the reconsideration request is considered final at the administrative level.

However, the interested party may challenge any administrative decision in the Judiciary or before the Court of Accounts. Both courts have the power to issue injunctions determining the suspension of the whole tender procedure until the merits of the dispute have been analysed.

In Brazil, the Court of Accounts is the public entity responsible for auditing government tender procedures and contracts arising therefrom. Please note that the Court of Accounts does not monitor and/or conduct audits over the private contractor, but only regarding the execution of a contract entered into with a government entity under its jurisdiction. Each government level in Brazil is audited by a Court of Accounts: the federal government and all federal entities shall respond to the Federal Court of Accounts (Tribunal de Contas da União – TCU), while the state and local governments – as well as their entities – shall respond to the State Court of Accounts (Tribunal de Contas do Estado – TCE) of the respective state in which they are located. Only the Cities of São Paulo and Rio de Janeiro have a specific Local Court of Accounts (Tribunal de Contas dos Municípios – TCM). All the other cities in Brazil shall respond to the corresponding State Court of Accounts of the state where they are located.

The Courts of Accounts are independent government entities responsible for exercising the accounting, financial, budgetary, operational and equity control of the corresponding government. Despite their denomination, the Courts of Accounts are not part of the Judiciary Branch, but are in fact connected to the Legislative Branch of each level of government and assist the parliamentarians in controlling and evaluating public accounts and contracts from three perspectives:

• legality, which refers to an assessment of an act or contract in view of the applicable legislation;
• legitimacy, which refers to the legal ability to perform the act or contract; and
• economic, which corresponds to an analysis of the public resources spent and the results obtained by the government.

If there is a breach of the procurement legislation, the interested party may claim proper remedies in court to declare the tender procedure null and void, or to remedy the breach of the procurement legislation (eg, declaration of annulment of the interested party due to wrongful exclusion from the contract award procedure). Remedies available in the Judiciary Branch include writ of mandamus, action for annulment, indemnification, injunctions and popular action.

The writ of mandamus (mandado de segurança) is the typical lawsuit for challenging any administrative act and decision. The plaintiff is required to prove its claim by means of documentary evidence. Pursuant to Law No 12,016/2009, the writ must be filed within 120 days of the date of the unlawful administrative decision/act.

Claims for annulment and indemnification may be filed by the bidders for any purpose. In terms of standing, the applicant needs to prove its participation in the tender procedure and the type of breach incurred by the government awarding authority.

Injunctions can only be obtained in court if plaintiffs establish the following elements:

• a reasonable likelihood of success on the merits of the case (fumus bonis iuris); and
• imminent, irreparable harm will result if the injunction is not granted (periculum in mora).

The popular action is an appropriate remedy to void administrative acts or contracts causing damage to public assets (federal, state or local). The plaintiff thereby defends not its own right, but certain collective rights associated with a public interest. Any citizen (ie, a person who is entitled to vote) may file a popular action to protect (besides the public asset itself) the administrative morality, the environment, and the historical and cultural heritage.

The Judiciary Branch and the Court of Accounts may order the suspension of the contract award procedure if there is a breach of the procurement legislation. The suspension will last until the awarding authority remedies the irregularity identified or until a final decision is taken by the courts.

The awarding authority issues a decision on the following under the contract award procedure:

• whether the bidder complies with the legal, technical and financial requirements provided in the tender invitation; and
• which offer best meets the government expectation under the evaluation criteria provided for in the tender invitation.

Any interested party may challenge the awarding authority’s decisions, even when such a decision does not refer to that specific party. In this sense, one participant may challenge the awarding authority’s decisions regarding the qualification classification of other bidders. Any citizen may challenge the awarding authority’s decisions to the Judiciary Branch or the Court of Accounts.

The awarding authority’s decision may be challenged under the contract award procedure within five working days of its release. Under the Judiciary Branch, the time limits depend on the remedy used by the interested party but it is reasonable to work with an average time limit of five years. After this time limit, even if an irregularity is identified, the Judiciary Branch tends to preserve the contract and convict the persons involved in the wrongdoing; the Court of Accounts tends to take a similar approach.

The PPL provides that the bidders have three business days to present their claim/appeal, and that the government awarding authority that issued the decision has the same three business days to respond; in the case of non-reconsideration, the claim or appeal would be sent to the superior authority, which has ten business days to decide. Brazilian law does not provide for a specific timeframe for administrative proceedings before the Court of Accounts. The length of judicial challenges of a government’s decision may vary depending on the complexity of the dispute, the authority responsible for judging the claim and the place of the dispute, among other factors.

There is no official information on the average number of procurement claims filed per year in the public bidding process. Ordinarily, government authorities do not have this kind of statistical control. Nonetheless, experience in dealing with public procurement shows that it is more common than not for bidders to try to challenge the awarding government’s decision with the purpose of reverting an unfavourable result. Administrative challenges are usually based on:

• the government’s failure to comply with the public procurement regulation and the specific rules provided in the tender documents; and/or
• an attempt to disqualify competitors by means of identifying flaws in their documentation.

No fees are required from a party in challenging an awarding authority’s decision. Pursuant to the PPL and Law No 9,784/1999, any bidder has the right to challenge administrative decisions within a public bidding process without the assistance of a lawyer (although the participation of lawyers at this stage is a common market practice). Conversely, the judicial challenge of an awarding authority’s decision requires a licensed lawyer and the payment of the applicable fees to the court, which may vary depending on the amount in dispute and the state in which the lawsuit will be filed.

The PPL provides general rules on how public contracts can be modified after being awarded to the contracted party. Amendments are permissible, with proper justification, in the following cases:

• unilaterally, by the contracting government, under:
1. qualitative modification – the project or its specifications must be qualitatively modified to improve the technical adequacy thereof. In this situation, the contract may be amended by up to 25% of the adjusted initial amount of the contract, or up to 50% in the case of building or equipment refurbishment that requires additional works, services or supplies; or
2. quantitative modification – the amounts specified in the contract have to be adjusted in view of a quantitative increase or decrease of the scope, within the same percentage limits established above; or
• upon mutual agreement between the parties whenever:
1. replacement of the performance bond is required;
2. it is necessary to modify aspects of the works or the service regime, as a result of a technical verification that renders the original contract terms no longer applicable;
3. the form of payment has to be modified, as a result of supervening circumstances, provided that the initial value is adjusted and maintained; or
4. the economic conditions of the contract need to be rebalanced.

It is also worth mentioning that public contracts can only be amended up to the total term of 60 months, including the original term.

According to the PPL, both the government contracting authority and the contractor can terminate a public contract. The government can terminate a contract in the following circumstances (Article 137):

• failure to perform or to meet the standards or requirements provided for in the tender documentation or contract, including any specifications provided by the contracting authority;
• non-compliance with regular orders issued by the authority designated to monitor the execution of the contractual obligations;
• change in the corporate name or in the company’s purpose or structure that may restrict its ability to perform contractual obligations;
• adjudication of bankruptcy or insolvency, dissolution of the company or death of the contracted party;
• Act of God or force majeure, duly evidenced, that may impede the performance of the contract;
• delay in obtaining the environmental permit or failure to obtain it, or material change in the preliminary design resulting therefrom, even if obtained within the expected period;
• delay in clearance of areas subject to expropriation, vacancy or easement, or impossibility to clear such areas;
• reasons of public interest, justified by the highest authority of the government contracting entity; and
• failure to perform the obligations regarding the reservation of positions provided by law, as well as other specific rules, for persons with disabilities and for rehabilitated persons under the social security system.

On the other hand, the contractor shall have the right to terminate the contract in the following cases (Article 137, paragraph 2):

• cancellation by the administration of works, services or purchases, entailing a change in the initial amount of the contract beyond the limits permitted by law;
• cancellation of the performance of the agreement, by written order of the administration, for more than three months;
• repeated cancellations that amount to 90 business days, notwithstanding mandatory payment of compensation for consecutive and unexpected and expected retirements and mobilisations thereunder;
• delay of more than two months of the issuance of the invoice, of payments, or instalment payments due by the administration regarding expenses arising from the works, services or supplies; and
• failure by the administration to clear the area, place or object within the terms set forth in the contract, for the performance of the works, services or supplies, and sources of natural materials specified in the design, including due to delay or failure to perform the obligations assigned to the administration in the contract regarding the expropriation, de-occupation of public areas or environmental permitting.

As a rule of thumb, the termination of public contracts by the government shall only be determined after an administrative procedure carried out by the contracting authority, ensuring the contractor the rights to full defence and to contradictory. Once a public contract is unilaterally terminated without causes attributable to the contractor, the government would have to:

• pay all the amounts due to the contracted parties for the services that have already been performed; and
• immediately step in to perform the object of the agreements, which does not require any type of court authorisation.

The PPL provides prerogatives to the government with the purpose of preserving the public interest underlying certain public contract. Among such prerogatives, two have been commonly taken by the awarding authorities against contractors, as follows: (i) the right of the government to unilaterally terminate the contract due to “reasons of public interest”, as referred above; and (ii) the obligation of the contractor to accept any addition or reduction in the scope of a public contract up to 25% of the updated initial amount agreed between the parties and up to 50% in the particular case of restoration of a building or equipment.

The government also has the prerogative to apply administrative sanctions to the contractor in case of default of obligations or breach of the public contract and/or Brazilian law. Applicable sanctions are those strictly provided in law (the PPL) and that are incorporated into the contracts. In the imposition of the sanctions, the following shall be taken into account by the responsible government authority:

• the type and severity of the violation;
• the singularities of the case;
• the aggravating and mitigating circumstances;
• the harm to the public administration; and
• the implementation or improvement of an integrity programme, pursuant to rules and guidelines of regulatory entities.

There are four administrative sanctions that may be applied to government contractors in the event of misconduct under the PPL, as follows:

• warning;
• fine;
• temporary suspension of the right to participate in procurement processes and contracts with the government; and
• “declaration of not in good standing to tender”, resulting in the prohibition of entering into contracts with the government.

The warning and the fine are sanctions of less gravity and applicable in cases of misconduct in the performance of the contracts. Fines are calculated pursuant to parameters defined in the tender documentation or in the contract and may not be less than 0.5% or more than 30% of the amount of the contract.

On the other hand, the temporary suspension and the “declaration of not in good standing to tender” are likely to apply in situations that involve corruption or fraud. These sanctions may be imposed upon companies or individuals that have committed wrongdoing acts with the purpose of affecting or defrauding the competitive nature of the bidding and contracting proceedings. Both sanctions may only be applied by means of a due administrative process carried out by the government contracting party, in which the right to full defence is ensured.

The temporary suspension of the right to participate in tender processes and the respective prohibition of contracting with the government may be applied to entities that perform illegal acts aimed at defrauding a bidding procedure, and may last for a period of no longer than three years. According to the position of TCU, this administrative sanction shall be effective only to restrict new agreements with the same level of government that imposed it, which means that a company that was punished by the federal government may still contract with state and local governments. In addition, the temporary suspension is limited to the punished company and it does not automatically extend to other companies in the same economic group.

The “declaration of not in good standing to tender” is the most severe sanction provided in the PPL. It prohibits the person responsible from participating in procurement processes or contracts with the public administration of all federated states, for at least three years and no more than six years. In order to apply this sanction, the government authority shall observe the following rules:

• when it is applied by a body of the Executive Branch, it shall be in the exclusive jurisdiction of a minister of state, state secretary or municipal secretary, and when it is imposed by an independent agency or public foundation, it shall be in the exclusive jurisdiction of the highest authority of the entity; and
• when it is applied by entities of the Legislative and Judiciary Branches, by the Prosecution Service, and by the Public Defender’s Office carrying out administrative duties, it shall be in the exclusive jurisdiction of an authority with a hierarchical level equivalent to the authorities referred to in the preceding bullet item, pursuant to the applicable regulations.

Fines may be applied cumulatively with any other sanction. If the fine and the applicable indemnifications are larger than any amounts that would be payable by the administration to the contractor, in addition to the loss of such amount, the difference shall be deducted from the guarantee provided by the contractor or shall be charged in courts by the government. In any case, the application of sanctions does not exclude the obligation of the contractor to fully redress the damage caused to the public administration.

Nonetheless, the government awarding authority also has the prerogative of monitoring the execution of public contracts through several actions, which include on-site visits, request for information or documents, imposition of periodic report on the status of the contractual obligations, etc.

In December 2023, the Federal Court of Accounts (TCU) recognised in Ruling No 1,378/2023 that Law No 13,303/2016 – the statute for procurement rules applicable to government-controlled companies – is more flexible than the PPL and allows tender documents with provisions imposing a time limit for technical certificates. This case is relevant for public procurement in Brazil because it confirms a substantial difference between the legal framework within the PPL and the one provided in Law No 13,303/2016. While, in public bidding processes governed by the PPL, bidders are free to submit technical certificates of any date to prove their capability to perform the obligations under the contract to be awarded, bidders participating in processes governed by Law No 13,303/2016 may face time-limit conditions for technical certificates depending on the rules provided in the bidding documents. According to the TCU’s ruling, having a time limit for technical certificates does not constitute a violation or a limitation of the competitiveness of a bidding process governed by Law No 13,303/2016 because government-controlled companies are free to impose this type of restriction in order to select their contractors.

Since the PPL establishes that terms should be counted in business days, the Brazilian National Congress is considering a bill that aims to alter this provision to determine that terms should be counted in calendar days, making bidding procedures more efficient.

Another important matter currently under discussion in the Brazilian Parliament is that the PPL requires almost 80 supplementary regulation acts, which are at different stages of development. According to public information, 35 of them are already published, but the elaboration of many relevant regulations has not begun (such as the competitive dialogue regulation by the federal authorities).

Furthermore, the Brazilian National Congress is discussing a new legal statute to regulate the concession of public utilities. According to public information, the bill is at an advanced phase of discussion and Congress is working to approve it by the end of 2024.