Public Procurement & Government Contracts 2021

Last Updated April 07, 2021

Brazil

Law and Practice

Authors



Machado, Meyer, Sendacz e Opice has been building its history since 1972, inspired by sound ethical principles, highly technical skills of its professionals, accumulated synergy among the practices, and close relationships with clients. This full-service law firm has a pioneering history in public and regulatory law matters with active participation in privatisation of government-owned companies, concessions, public-private partnerships (PPPs), complex infrastructure projects, mergers and acquisitions in regulated sectors, and settlements with authorities. The dedicated team has more than 40 lawyers, all of them with an extensive experience serving clients from different industries, including Patria Investimentos, Accenture, Arteris, Maersk, BNDES, IFC, Vale, B3 – Brasil, CCR, Ecorodovias Oracle, Ford, Braskem, Viasat, Santander, JP Morgan and Barclays.

In Brazil, Law No 8,666/1993 (the Public Procurement Law or PPL) is the main legal framework for the procurement of government contracts. The PPL provides general principles and rules on public procurement, steps and requirements for the contract award procedure, as well as guidelines that shall govern the relationship between the government and private contracted parties.

Depending on the scope of the public procurement process or on who is 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 contract on regular basis.
  • Law No 11.079/2004: legal framework applicable for public-private partnerships (PPPs). PPP, as defined in this Law, is 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 purpose 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: this law was originally created with the purpose of providing special public procurement rules for works and services related to infrastructure projects for the World Cup FIFA 2014 and the Olympic Games 2016. Afterwards, this law started to be applied for various purposes, such as actions included within the National Growth Acceleration Program (PAC); the National Health System (SUS); prison system; urban mobility; national security; innovation and technology; among others.
  • Law No 13,303/2016 and Decree No 8,945/2016: the legal framework for government-owned companies provides specific procurement rules applicable to public companies; mixed-capital companies; and their subsidiaries. This statute allows the government-owned companies to enter strategic partnerships with the private sector with no requirement to launch a prior public bidding process.

These laws are still in force to date and are ordinarily applied as legal grounds for public procurement. However, the Brazilian Federal Senate approved on 10 December 2020 the Bill No 4,253/2020 that shall replace the PPL, Law No 10,520/2002, and Law No 12,462/2011 with a new framework for public procurement. See 5.4 Legislative Amendments under Consideration for further details on this new piece of legislation.

Pursuant to the Brazilian Federal Constitution and to rules provided in the PPL, public procurement rules are mandatory to 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 in all levels of the federation – federal, state, and local – shall comply with 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, as well as to proceed with the sale of assets.

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

Nonetheless, the Brazilian public procurement legislation provides for scenarios where the government can move forward with a direct hiring. Those scenarios are as follows:

  • waiver – whenever the legislation itself allows government to waive the competitive public bidding and to directly hire a contracting party in specific situations, such as: emergency or public calamity; acquisition of small value products or services.
  • unfeasibility/non-requirement of a bidding process – whenever the circumstances allow the conclusion that a competitive bidding proceeding is unfeasible or incompatible with the purpose of the contract award process.

For more information on direct hiring, see 5.2 Direct Contract Awards.

Minimum Value Thresholds

With regard to minimum value thresholds, 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 amount of up to BRL33,000 and any other service or purchase with a total amount of up to BRL17,600.

Conversely, Law No 13,303/2016 provides minimum value thresholds applicable to government-owned companies, which are not required to launch a competitive public bidding process for contracting engineering works or services with a total amount of up to BRL100,000 and any other service or purchase with a total amount of up to BRL50,000.

These are typical scenarios of waiver of the public procurement regulation, in which the government and the 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 isonomic treatment among 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 to admit, plan, include or tolerate in public tender documents clauses or conditions 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 inappropriate 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 a discriminatory treatment of commercial, legal or labour nature among the bidders or to give priority or privileges to Brazilian or foreign companies in view of the applicable currency, modality, and local for payment, except for specific situations  when financing from international agencies and multilateral entities are involved.

Nonetheless, the PPL allows the government to apply margin of preference for manufactured products and services to be rendered by Brazilian companies or in the national territory as a criterion to settle any tie. In this sense, priority to Brazilian companies and national services and goods shall be given if:

  • manufactured or rendered by Brazilian companies of domestic capital;
  • manufactured in the country; and
  • manufactured or rendered by Brazilian companies.

Conditions Provided in Tender Documents

Another relevant feature on the openness of the public procurement processes is about the conditions provided within the tender documents for the participation of foreign companies. Depending on the scope of the procurement process, the government contracting authority may establish that foreign companies can only participate in the tender through a subsidiary duly incorporated in accordance with Brazilian law, which are known as cases of “domestic tender”. On the other hand, when foreign bidders can directly participate in the tender, they are required to prepare sworn translation to Portuguese of any document in foreign language.

On top of that, the PPL requires that in the case of a consortium formed between Brazilian and foreign players, the leadership shall always be given to the Brazilian party.

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

The PPL provides special powers to the government with the purpose of preserving the public interest underlying the public contracts. Among such powers, two are of ordinarily application toward private contractors:

  • the right of the government to unilaterally terminate the contract due to “reasons of public interest”; and
  • 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 (see 5.1 Modification of Contracts Post-award).

Termination of Public Contracts

As a rule of thumb, the termination of public contracts shall only be determined after an administrative procedure carried out by the government, ensuring to the contractor the rights to full defense and to the 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 been already performed; and
  • immediately step in to perform the object of the agreements, which does not require court authorisation.

Furthermore, the PPL requires the private contractor to maintain, during the whole term of the contract, and in compliance with the obligations undertaken therein, all the qualification conditions required in the tender documents.

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 (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 process in view of the particularities of the intended contract, whereby the contracting company send a request for proposal (RFP) directly to a limited number of pre-selected players without 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, engineering works or services, as well as concession of public services, the government awarding authority usually hire 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 award of contracts:

  • competitive tender;
  • price quotation;
  • invitation;
  • contest; and
  • auction.

Competitive Tender

This is the most relevant and commonly used tender procedure modality. The competitive tender encompasses the following phases:

  • preliminary phase: where the awarding authority shall verify if the interested party does not have any impediment to contract with the government, such as a debarment or any conflict of interest;
  • qualification phase, where awarding authority asses the interested party financial and technical conditions and capacity; and
  • competitive phase, where the proposal submitted by the bidders shall be 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 to the end of the tender procedure, a scenario where the awarding authority asses the qualification documents only of the winning bidder.

Price Quote

The government awarding authority analyses only the price offer among interested parties pre-registered or who have met all the conditions required for register up to the third day before the deadline for submission of the proposals.

Invitation

This is a type of tender procedure limited to interested parties of certain sector connected with the scope of the contract, either pre-registered or not before the government awarding authority, which are chosen and invited, in a minimum number of three.

Contest

The government awarding authority launches a competition opened to all interested party intended 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, equal or higher than the appraisal value.

Additional Laws and Regulations

In addition, Law No 10,520/2002 provides an additional modality of procurement used for the acquisition of common goods and services that the government is used to contract on regular basis.

As a rule of thumb, public tender procedures do not have room for negotiations between the government awarding authority and the private party awarded with a contract. Parties must strictly adhere to the terms and conditions provided in the public tender documents. However, Law No 13,303/2016 established a positive innovation pursuant to which government-owned companies have more flexibility to negotiate with the awarded party price and other conditions related to the performance of the scope before the contract execution.

Besides, Bill No 4,253/2020 provide for a new modality of tender procedure in which the government awarding authority may engage in discussions with interested parties to collect information required to define not only the price of the contract, but also specific details of the contract scope that could not have been defined by the government itself.

As referred in 2.3 Tender Procedure for the Award of a Contract, the public procurement legislation establishes more than one tender procedure. The choice of which tender procedure shall be adopted for each case depends on particularities of the scope and the corresponding estimated amount involved. The government awarding authority cannot choose the tender procedure at his 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 price as the evaluation criteria. Conversely, for contracting a more complex scope or when the tender refers to the concession of public services, the awarding authority shall use the open competitive procedure, which encompasses phases mentioned in 2.3 Tender Procedure for the Award of a Contract.

In addition to the legal criteria regarding the scope (see 2.3 Tender Procedure for the Award of a Contract), the PPL provides for the following values for defining the applicable tender procedure.

  • For engineering works and services:
    1. invitation – tenders up to BRL330,000.00;
    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 BRL176,000.00;
    2. price quotation – tenders up to BRL1.43 million; and
    3. competitive tender – tenders higher than BRL1.43 million.

The legislation provided a minimum timing between the release of the tender notice and the tender procedure, which varies depending on the type of tender, as follows:

  • 45 days or more for competitive tenders;
  • 15 days for price quotations;
  • five days for invitations; and
  • eight days for auctions.

In case of any change in the public tender documents, the government awarding authority shall publish a new tender notice and observe the minimum timing between the publication and the tender procedure. In addition, for those tender procedures with a substantial amount involved, the government awarding authority shall promote a public hearing to receive contributions from the interested parties.

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

The legislation establishes eligibility requirements that shall 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 foreign law in case of international contract award procedure;
  • has non-impediment to contract with the government;
  • has no debt with Federal, State or Municipal tax authority; and
  • has no debt with its employees.

Depending on the features of the tender, the awarding authority may establish financial requirements, such as minimum net equity or specific financial rations, and technical requirements, which consists basically in prior experience through attestation or the demonstration of having qualified employees in its workforce.

The public procurement legislation allows the government awarding authority to restrict the competition in specific and exceptional situations. For instance, in tenders aimed at small purchases, where the awarding authority may reduce the competition to three providers, which 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 to companies preregistered in the government provider list. However, any company may request its inclusion in this list until three days before the tender auction day. Once on the list, the interested party can take part in the tender.

The legislation set forth the following evaluation criteria:

  • lowest price;
  • best technical expertise;
  • higher purchase offer when the government is selling something; and, for those tender aiming to transfer to the private sector the provision of public utilities;
  • lowest fee paid by the user; and
  • higher offer for the concession award.

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

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 from the beginning of the tender procedure what is necessary to take part in the competition and how the offers shall be evaluated.

The government awarding authority must select the bidders apt 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 decision issued by the government awarding authority with the reasons for the exclusion. In this scenario, the excluded party can request a reconsideration of such a decision to the awarding authority, which may review the decision or confirm it. With the confirmation for the exclusion, the party cannot take part in the contract award procedure anymore and can challenge the administrative decision in courts.

The government awarding authority is not obligated 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 page 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. The official statement shall encompass the criteria that was used to evaluate the offers and the identification of the winner bidder.

The Brazilian public procurement regulation does not provide 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. Besides, the tender documents may provide precedent conditions to the execution of the contract that should be met by the winner 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 case of concessions of public services to the private sector.

Any interested party can request to the government awarding authority the reconsideration of any decision issued during the tender procedure. There is no appeal to a higher authority or a different body: the awarding authority is responsible to review its own decision. After the decision on the reconsideration request, the decision is considered final within 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 analysis of the merits of the dispute.

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 do not monitor and/or conduct audits over the private contractor, but only regarding the execution of a contract entered with a government entity under its jurisdiction. Each government level in Brazil is audited by a Court of Accounts: the Federal Government and all of federal entities shall respond to the Federal Court of Accounts (TCU), while the State and Local Governments – as well as their entities – shall respond to the State Court of Accounts (TCE, in the Brazilian acronym) 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 (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 accounting, financial, budgetary, operational and equity control of the corresponding Government. Despite of the denomination, the Courts of Accounts are not part of the Judiciary branch. In fact, they are 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 on the public resources spent and the results obtained by the government.

In case of breach of the procurement legislation, the interested party may claim proper remedies in courts to declare null and void the tender procedure or to cure the breach of the procurement legislation (eg, declaration of annulment of the interested party wrongful exclusion from the contract award procedure). Remedies available in the Judiciary Branch are comprised (not exhaustively) of the following: 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 courts if plaintiffs establish the following three elements:

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

The popular action is an appropriate remedy to void administrative acts or contracts causing damages to the public (federal, state, or local) assets. The plaintiff thereby does not defend his own right, but certain collective right associated with a public interest. Any citizen (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 in case of breach of procurement legislation. The suspension would last until the awarding authority remedy the irregularity identified or until a final decision was taken by the courts.

The awarding authority issued the following decision under the contract award procedure:

  • decide if the bidder complied with the legal, technical and financial requirement provided in the tender invitation; and
  • decide which offer best attends the government expectation under the evaluation criteria provided in for the tender invitation.

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

The awarding authority’s decision may be challenged under the contract award procedure within five working days since its release. Under the judiciary, 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 tends to preserve the contract and convict the persons involved in the wrongdoing. The Court of Accounts tends to take a similar approach.

Pursuant to the PPL, the government awarding authority have five business days to respond claims/appeals within a public tender procedure. Brazilian law does not provide for a specific time length for administrative proceedings before 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, the place of the dispute, among other factors.

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

  • government’s failure to comply with the public procurement regulation and with 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 government’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 lawyer (although participation of lawyers at this stage is a common market practice).

Conversely, judicial challenge of an awarding government’s decision requires a licensed lawyer and the payment of 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 for a better technical adequacy of the scope. In this situation, the contract may be amended up to a maximum of 25% of the adjusted initial amount of the contract, or up to a maximum of 50% in the case of building or equipment refurbishing that require 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 original contract terms are 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. for rebalance of the economic conditions of the contract.

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

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 direct contract awards. 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 allow the conclusion that a competitive bidding proceeding is unfeasible or incompatible with the purpose of the contracting, which could be named as of exemption to the bidding proceeding requirement. The demonstration of such unfeasibility or incompatibility depends on the verification of the following requirements: technical service; notorious expertise of the contractor and singular nature of the services.

In both scenarios – waiver or unfeasibility of a public bidding process – the government is allowed to directly hiring a third party to acquire goods and services. The direct hiring is a much more flexible process in which the government is not obliged to observe all 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:

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

On October, 2020, the Federal Court of Accounts (TCU) judged an injunction (decision on the merits is still pending) related to the first case involving a friendly handover of a concession of public services governed by Law No 13,448/2017. The TCU had previously suspended the handover of the road concession operated by the concessionaire Via040 to the National Agency for Land Transportation (ANTT) in view of alleged irregularities identified by the auditing staff. Afterwards, the Court authorised ANTT to move forward with the proceeding. The judges of the Court emphasised the benefits of the friendly handover processes as an alternative for the federal government to unlock relevant investments in infrastructure projects, especially those provided within concession agreements impacted by some sort of financial crisis in the last years.

The friendly handover process avoids the declaration of forfeiture of the concession agreements and the application of penalties to the shareholders of the concessionaire, such as the prohibition of participating in new public tender procedures.

In addition, the Brazilian Supreme Court ratified the right of concessionaires to be compensated by the government in cases of takeover of the concession. The Supreme Court judged on 5 March 2021 a case involving LAMSA, the operator of a local road system in the City of Rio de Janeiro, which was compelled by the local government to hand over its concession before the contractual term without any compensation.

Pursuant to the Brazilian Federal Constitution, all levels of government have the power to create legislation on public procurement matters. The Brazilian National Congress has power to create new general rules on public procurement for the federal level, which are applicable to the state and local governments. States and local governments can also create their own public procurement regulation, provided that the general rules contained in the federal legislation are duly respected.

Bills under Consideration

Currently, there are several bills under consideration in the Brazilian National Congress, as well as in the state and local legislative bodies that can modify the public procurement regulation. As mentioned in 1.1 Legislation Regulating the Procurement of Government Contracts, the Brazilian Federal Senate approved on 10 December 2020 the Bill No 4,253/2020 that will replace the PPL, Law No 10,520/2002, and Law No 12,462/2011 with a new federal framework for public procurement. Except for the criminal section, this new piece of legislation shall not impact the public procurement regime for government-owned companies, which continue to be governed by their own statute provided in Law No 13,303/2016.

Recent Amendments

Bill No 4,253/2020 is the most relevant legislative amendment to the public procurement regulation in the country in the last 20 years, insofar as most stakeholders in the market consider the PPL an outdated legal framework. Only presidential sanction is pending for the bill to become law. If the President decides to veto any part of the text, then the Brazilian National Congress shall analyse the veto and decide whether to keep it or to reject it before sending back the final text to the President for promulgation of the new law.

Once turned into law, the new legal framework shall establish relevant innovations and improvements on public procurement. For instance, the regulation provides for a new form of procurement called “competitive dialogue”, in which the government will be able to interact and develop different alternatives to attend public needs after selecting a pool of interested parties based on certain technical and objective criteria. After the phase discussions, the selected bidders will have to submit their final proposals. This form of procurement tends to be extremely useful for the government in situations where either the intended solution depend on adapting the options available on the market or the public authority responsible for the procurement process does not know how to define the specifications that will sufficiently meet the public needs.

Other Innovations

Other relevant innovations within the new public procurement framework are, among others, as follows:

  • analysis of the qualification requirements of only the winning bidder after the phase of price judgment;
  • a risk matrix between the parties will become a mandatory clause in all public contracts;
  • contracts for continuous services and periodic supply of goods can be extended for a maximum contractual term of ten years; and
  • arbitration shall be an option for dispute resolution in public contracts.
Machado, Meyer, Sendacz e Opice

Ed. Seculum II
Rua José Gonçalves de Oliveira
No 116, 5º andar
Itaim Bibi
São Paulo, SP
Brazil, 01453-050

+55 11 3150 7000

+55 11 3150 7071

machadomeyer@machadomeyer.com www.machadomeyer.com
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Machado, Meyer, Sendacz e Opice has been building its history since 1972, inspired by sound ethical principles, highly technical skills of its professionals, accumulated synergy among the practices, and close relationships with clients. This full-service law firm has a pioneering history in public and regulatory law matters with active participation in privatisation of government-owned companies, concessions, public-private partnerships (PPPs), complex infrastructure projects, mergers and acquisitions in regulated sectors, and settlements with authorities. The dedicated team has more than 40 lawyers, all of them with an extensive experience serving clients from different industries, including Patria Investimentos, Accenture, Arteris, Maersk, BNDES, IFC, Vale, B3 – Brasil, CCR, Ecorodovias Oracle, Ford, Braskem, Viasat, Santander, JP Morgan and Barclays.

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