In June 28th, 2019, the European Union and the Mercosur signed the EU-Mercosur Association Agreement regarding mutual trades and market access.

The agreement contains a specific chapter regulating Government Procurement and aims to facilitate foreign participation in public contracts. Some of the most relevant dispositions include: (i) prohibition of technical specifications prepared, adopted or applied with the purpose of limiting competition, creating unnecessary obstacles to international trade or discriminating between suppliers; (ii) possibility of awarding contracts by limited tendering under certain circumstances (e. g. absence of offers); (iii) guaranteed fairness and impartiality of the procurement process in addition to the confidentiality of tenders; (iv)  transparency of procurement information; and (v) establishment of timely, effective, transparent and non-discriminatory administrative or judicial review procedures.

In this regard, it should be noted that the Agreement establishes the possibility of European companies to compete in the Mercosur countries’ public procurement markets. The Mercosur countries should also adapt their sub-central entities (at state, province or municipal levels) to accord with the new dispositions within the span of two years after the agreement entered into force.

In addition, the Brazilian government has recently shown interest in joining WTO’s Government Procurement Agreement and submitted a checklist to the Supra-national Body. The country is still considered an ‘Observer’, a member of the WTO that is not a Party in the GPA. However, it is important to be mindful of possible conflicts between the GPA and national law, such as:

• Article IV of the GPA, in its §5th, I, alongside the Federal Decree No. 7,546/2011, establishes a “preference margin”, from which Brazilian product and service providers may be awarded public contracts despite being more expensive than foreign ones.
• The same article dictates that the Parties to the Agreement cannot give preferential treatment to domestic goods, services and suppliers at the expense of those provided by suppliers from any other Party. However, the Brazilian Federal Law No. 8,666/93 encourages awarding public contracts to national companies. Its 3rd article, §2nd, prescribes that in case of a tie, Brazilian companies, products and services will be favored. Regarding the article 3, from the Law No. 8,666/93, it is important to mention that there aren’t any dispute resolutions in which Brazil figures as the respondent and is accused of favoring Brazilian companies in public procurement.
• The Brazilian National Congress recently approved Law Project No. 4,253 / 20 which aims to revoke Law No. 8,666 / 93. The bill expects presidential sanction to become law. The law project does not fundamentally change the rules of preference for Brazilian companies, as established in articles 26 and 56, §1st.

As mentioned above, Brazil’s government structures as a federative system, comprised by the Federal Union, the States, the Federal District and the Municipalities. It is the Constitution that disciplines the way by which the power is exercised, as well as the respective division of material and legislative competences among the federated entities. According to article 22, XXVII, of Brazilian Constitution, the Union has the exclusive competence to legislate on general rules for bidding and public procurement, in all modalities, that shall be applicable by the other entities. Thus, although it is possible for States and Municipalities to issue local and regional public procurement regulations, the general contracting regime defined by the Union must be observed.

In this, sense, Brazilian public procurement may be divided into two main categories:

(a) administrative contracts, which comprise construction works, services, purchases, disposals and leases.

(b) complex contracts, which involve the delegation of public services (such as concessions and public-private partnerships).

Regarding the first ones, the main legislation concerning the public procurement is Federal Law 8.666/93 which establishes the general rules for public bidding and contracts. It is worth mentioning that recently the Brazilian Congress has voted and approved the Law Project No. 4,253 / 20 that shall replace the regime of Law No. 8,666/93 (“Public Bidding Law”), that is now awaiting for the presidential sanction in order to be published.

In addition to traditional bids (Law 8,666), there is also the provision for Prices’ Registration (a simplified contracting mode established by Law No. 10,520/2002) and the Differentiated Public Contracting Regime (“Regime Diferenciado de Contratações Públicas”), provided for Law No. 12.462/2011, a faster and more efficient contracting regime that was first designed for the World Cup and the Olympics and latter extended to the contracts in the infrastructure sector. All these bid models were consolidated by the aforementioned Law Project, which, as an innovation, brings the figure of competitive dialogue to Brazilian law (article 32).

On the other hand, although the general public procurement regime applies in a subsidiary manner, the complex contracts are governed by Law No. 8,987/1995 (in case of public service concessions, permissions and authorizations), Law No. 11,079/2004 (that sets forth the public-private partnership contracts) and other sparse laws, which greatly fragment the regulation of this type of contract.

Finally, the state-owned companies have their own public procurement framework, governed by Law No. 13,303/2016 as well as its internal procurement regulations, which also stablishes specifics type of contracts (such as the efficiency contract and the strategic partnerships), as well as the bidding procedures.

In relation to regulated services, the following public procurement regimes are applied:

(i) Basic Sanitation: The sector is currently governed by Law No. 11,445/2007 which stablished Brazilian legal framework regarding the four activities of basic sanitation (water distribution, sewage, solid waste management and drainage). With regard to solid waste, it is also applicable Law No. 12,305/2010, which regulates guidelines and instruments related to solid waste management and instituted the National Policy of Solid Waste. Recently Law No. 14,026/2020 brought relevant changes to the legal sanitation framework, determining, in line with ONU’s SDG, that universal access to water supply and sewage services should be universal by 2033.

(ii) Electric Energy: The Brazilian electric energy sector is divided into 4 regulated segments: generation, transmission, distribution and commercialization. The regulatory framework is set up mainly in Laws No. 9,074/1995 and No. 10,848/2004; they combine regulation instruments and public contracts for the development of some activities of the sector. The generation through the exploitation of the hydraulic energy potential of a given public good (especially rivers courses) is exploited under concession agreements. There are also public power purchase agreements as part of the Regulated Procurement Environment (“Ambiente de Contratação Regulada – ACR”), in which distribution companies acquire the energy needed to serve their local markets.  The delegation of transmission and distribution public services to the private sector occurs under concession agreements. All concession agreements are granted through public auction (Laws No. 8,987/1995 and No. 9,074/1995). Finally, it is important to note the Free Procurement Environment (“Ambiente de Contratação Livre – ACL”), which comprise activities authorized by the national regulator (National Electricity Agency – “ANEEL”), without previous public procurement.

(iii) Oil and Gas: The Brazilian oil and gas sector is divided in upstream, midstream and downstream segments. The regulatory framework is set up mainly in Laws No. 9,478/1997, No. 11,909/2009 and No. 12,351/2010. Upstream activities (exploration and production) are granted through concession agreements and production sharing regime for pre-salt areas (respectively, Laws No. 8,987/1995 and No. 12,351/2010), both granted through public auction. Midstream and downstream oil activities are carried out under a free market regulatory regime. Gas transportation is exploited under concession agreement nowadays, however the modification of this regime to authorization is expected for the current year, with the enact of a new law regulating the gas market. On the other hand, the gas distribution public service occurs through a concession agreement signed with state governments (according to article 25, paragraph 2º, of the Federal Constitution).

(iv) Postal Services: It is privative competence of the Federal Union to legislate, as well as to explore the postal services, according to art. 21, X, of the Brazilian Constitution. In this sense, Federal Law No. 6,538/1978 established the rights and obligations concerning the postal service and the telegram service throughout the country. According to article 9, the following postal activities shall be explored, through a state-owned company, under a monopoly regime: (i) receipt, transport and delivery, in the national territory, and the dispatch, abroad, of letter and postcard; (ii) receipt, transport and delivery, in the national territory, and the dispatch, abroad, of grouped correspondence; (iii) manufacturing and/or issuing of stamps and of other postal franchise formulas. In addition, according to article 27, of the same law, the telegram service will also be operated by the Federal Union under a monopoly regime. Currently the company responsible for providing these services is a federal public company called Empresa Brasileira de Correios e Telégrafo. It is important to point out that the Claim of Non-Compliance with a Fundamental (Constitutional) Precept (ADPF) No. 46, which discusses the constitutionality of Law 6,538/78, mainly regarding the preservation of the “monopoly” of the post office in the exploitation of postal services.

(v) Telecommunications: The Federal Union has the privative competence to legislate, as well as to explore the telecommunication services, according to the articles 21, XI and 22, IV, of the Brazilian Constitution. The Federal Law 9,472/1997 regulates the organization of the telecommunication services and stablishes the National Agency of Telecommunications (Agência Nacional de Telecomunicações – Anatel), which is responsible for regulating the sector. Initially, the Commuted Fixed Telephone Service was considered a public service and could only be provided after a public bid, whereas other services, such as the multimedia communications service and mobile cellular services were private, depending only on authorizations as they are considered of public interest. After Law 13,879/2019, all telecommunication services can be provided in a private regime, provided that companies have a preliminary authorization issued by Anatel according to the ruling of each service.

(vi) Ports: The foundation of the Brazilian Port Sector Legal Framework is founded in the Brazilian Constitution of 1988. While its article 21, XII, ‘f’, establishes the right of Federal Government to explore, directly or through delegation, sea, lake and river ports, article 22, X, defines its private competence to legislate on the port sector legal framework. Based on its constitutional legislative competence, Law No. 12,815/2013 was enacted in order to fix some existing flaws in the previous legal framework, as well as to provide greater reliability and stability to the private investments in the port sector.

(vii) Airports: According to the article 21, XII, c, of the Brazilian Constitution, the Federal Union is responsible for enacting legislation governing aeronautic and has the right to explore airport infrastructure either directly or through a public contract. The Federal Law 11,182/2005 creates the National Agency of Civil Aviation (Agência Nacional de Aviação Civil – ANAC), which is responsible for regulating and inspecting civil aviation activities and airport infrastructure. The infrastructure can be explored by a private partner through a licence, an authorization or a concession model (concession or private public-partnership).

(viii) Military Procurement: The Federal Union is responsible for the organization of the military body and the Armed Forces, as determines the articles 20, II and 21, XIV of the Constitution. The Federal Law 12,598/2012 stablishes special rules for purchases, contracts, development of products and defense systems and the Federal Decree 7,970/2013 regulates the matter. These rules take into account the necessity of contracts that value innovation and the transfer of intellectual and industrial property. The Federal Law 8,666/1993 has a subsidiary application.

As a general rule, all public contracts must be preceded by a competitive procedure, in order to obtain the best proposal for the public interest, as well as to guarantee that the selection will be conducted under equal and fair conditions. As mentioned in item 2 above, public procurements are ruled by the Law No. 8,666/93 (Public Bidding Law), about to be succeeded by Law Project No. 4,253/20. The legal norm enacts several procedures and legal obligations that binds public agencies to hire engineering works, acquisition of goods and any kind of services through a public bidding process that entails the selection of the most advantageous proposal to the Public Administration.

According to the Public Bidding Law, the type of modality of the bidding procedure will vary according to the scope and value of the public procurement. Each modality has a specific procedure, with its own deadlines, publication formalities, rules regarding participation and different phases. The procedural differences portray, in short, the need to adapt the selection to the object of the public procurement. Thus, a process with ample competitiveness (as is the case with open competition), will have longer terms and more requirements regarding the disclosure of the bidding.

The Law Project No. 4,253/20 amends Law 8.666 on this point and establishes the following types of bidding: (1) reverse auction for purchases (pregão); (2) open competition (concorrência); (3) selection contest for technical or artistic works (concurso); (4) auction for disposals (leilão) and (5) competitive dialogue. In addition to using these procedures, the Government may use the auxiliary procedures provided for in article 77 of this Law Project.

The most complex contracts (such as concessions and public-private partnerships) will be submitted to open competition mode, and, in situations not yet perfectly determined (considering the fact that this is a new rule) through competitive dialogue.

Finally, it is worth noting that there are contracts that, due to their value or subject, are exempt from the need for a competitive procedure. Please see item 4 below for further information.

The bidding process can be dismissed due to a contract’s low value, as long as this cost do not represent parts of the same service or the division of services that could be provided together. The specific values are defined by law and depends on the object and the contracting party. It is important to consider that the public administrator should not make a direct purchase based on lower values repeatedly, because it may be considered as an abusive discretion. The Federal Accounts Tribunal (“Tribunal de Contas da União – TCU”) has many decisions against that practice, as can be seen, for instance, from the following Court Decisions: n. 4748/2009-First Chamber, 1/9/2009; n. 1604/2011-First Chamber, 15/3/2011; n. 2636/2008-First Chamber, 20/8/2008.

The article 24, I, II and XXI of the Law 8,666/1993 (“Public Bidding Law”) stablishes the following limits of amounts, which were updated by the Decree 9,412/2018. Based on the text of the Law Project No. 4,253/20 the limits are as follows: (i) for work projects and engineering services the cap is R$ 100.000,00, (ii) for purchases and other services the limit is R$ 50.000,00 and, finally (iii) for research or the development of a product the limit is R$ 300.000,00.

The bidding process of all public contract must observe the principle of publicity (Brazilian Constitution, article 37). In this sense, the rule is that all bidding notices, public invitations, as well as request for proposals must be published in advance, but the deadline in advance depends on the type of bid chosen. Under the rules of the Law Project No. 4,253/20 the minimum notice period varies from 8 to 60 days (article 54).

Article 53 of the bill determines the publicity of the bidding announcement will be made through disclosure and maintenance of the entire content of the bidding document and its annexes available to the public on an official website (National Public Procurement Portal – PNCP – and additionally on the official website of the federative entity of the body or entity responsible for bidding process or, in the case of a public consortium, the highest level entity among them), with direct disclosure provided to interested parties duly registered for this purpose.

In the case of complex contracts, in addition to the aforementioned publication, depending on the amount of and/or the type of contract, it also could be required the previous publication of the bidding documents for purposes of public audience and consultation, as a result of the publicity and public participation principles.

Regarding the deadlines, the bidding documents must be published at least 30 days in advance of the date of receipt of proposals and 45 days for those contracts which the judgment involves technical or the combination of technical and price criteria, based on the text of Law No. 8,666/93. Based on the text of the Law Project No. 4,253/20 the deadlines are as follows:

• 8 working day for the acquisition of goods when the judgment involves lowest price or highest discount criteria;
• 15 working days for the acquisition of goods when the judgment involves other criteria;
• 10 working days for common services when the judgment involves lowest price or highest discount criteria;
• 25 working days for special services when the judgment involves lowest price or highest discount criteria;
• 60 working days for EPC turn-key contracts with the basic engineering project included; 35 working days for EPC turn-key contracts without the basic engineering project included;
• 15 working days or those contracts which the judgment involves highest bid criteria;
• 35 working days for those contracts which the judgment involves technical or the combination of technical and price criteria.

For state-owned enterprises, there is no requirement to publish notices in the press. So, as a general practice, they disclose their bidding processes mainly through the internet.

For the procurement of complex contracts, Brazilian legal framework authorizes a previous step prior to the structuring of the public project called PMI – Procedure of Private Interest Expression (Procedimento de Manifestação de Interesse Privado) or, in global language, unsolicited proposal (USP). Although it is not a selection stage, it provides an opportunity to the private actors to contribute in the design of the public contracting. In this sense, the PMI is an instrument used by Public Administration for the obtainment of viability studies, data and technical information regarding a public project. The documents grant permission to the private sector to conduct engineer, legal, environmental, economic and technical studies for the development of projects with relevant public interest. The companies that provide studies pursuant to the PMI do not have any assurance that the project will be carried out by the Government, however it helps to settle a long-term relationship between the public and the private partners.

Besides that, Law No. 8,666/93 (Public Bidding Law), and so Law Project No. 4,253/20, provides that a pre-qualification phase, prior to the bidding procedure, can be established whenever the object requires closer analysis of the technical qualification of the interested parties. This stage should not be mistaken with the pre-qualification of proposals, since the bidders will not yet present their commercial proposals but only the technical documentation. Thus, this is a process in which will only occur the prior verification of the compliance of the bidder’s technical, economic and legal conditions.

The supplier’s record is also a management tool provided for article 34, of Public Bidding Law (and article 86, of Law Project No. 4,253/20), that allows Public Administration bodies and entities that frequently carry out bids to streamline the qualification phase of bidding procedures through the prior registration of interested suppliers. Such system is also used in assisting the Public Administration in the management of contracts, since it allows the monitoring of payment conditions and good standing of the contracted company.

Such provision was also replied by Law No. 13,303/2016, in regard of the public procurement of state-owned companies. In such case, state-owned companies may establish a permanent pre-qualification stage, in order to identify: (i) suppliers that meet the qualification conditions required for the supply of goods or the execution of services or works within the terms, locations and conditions previously established or (ii) products that meet the technical and quality requirements of the public administration. This pre-qualification may be partial or total in relation to the requirements of the contract and will be valid for a maximum period of 1 (one) year. Please note, that Law No. 13,303/2016 permits that state-owned enterprises may also create others previous stages that are not expressly defined in the Law, according to their needs.

Finally, it is possible that regulated sectors set forth specific selection’s stages previous to the bidding procedure.

The Public Bidding Law restricted the participation of three specific figures to the bidding procedures (art. 9): (i) the author of the basic or executive project related to the public procurement, whether an individual or a legal entity; (ii) the company, individually or in a consortium, responsible for the preparation of the basic or executive project related to the public procurement or of which the author of the project is a director, manager, shareholder or owner of more than 5% (five percent) of the voting capital stocks or controller, technician or subcontractor; (iii) a public employee or manager of the contracting or bidding body or entity of the Public Administration.

The Law Project No. 4,253/20 expanded this last hypothesis to reach relatives and anyone with technical, commercial, economical, financial, labor or civil relation with manager of the contracting entity and created three additional figures: (i) individual or legal entity who is, currently bidding time, unable to participate in the bidding as a result of a sanction imposed on it; (ii) controlling, controlled or associated companies, pursuant to Law No. 6,404/76, competing with each other; (iii) individual or legal entity who, in the 5 (five) years preceding the announcement of the notice, has been judicially condemned, with res judicata, for exploiting child labor, for submitting workers to conditions analogous to slavery or for hiring teenagers in the cases prohibited by labor law.

Please note that there are two main purposes of such legal restrictions imposed on bidders’ participation. They either cover situations in which the bidding company has acted, directly or indirectly, in the preparation of the documents that underlines the terms and conditions of the public procurement, or those in which there is a link between the bidder and the contracting or bidding body or entity of the Public Administration.

This is because, on one hand, the authors of basic and executive designs hold quite privileged information about the specifics of the object of the bidding, precisely because they had to look into all the elements of the future project, knowing in advance what and how the will be performed. Therefore, admitting the participation of these professionals (individuals or legal entities, the Act includes both) would incur in the following risks: either (a) corroborate unequal competition, in which bidders compete on favorable terms with bidders standing in worse positions, or (b) accept the possibility that the author of such projects would prepare them in a way that is only favorable to themselves.

On the other hand, article 9 of Public Bidding Law (alongside with article 14 of Law Project 4,253/20), as a result of the above mentioned, aims at safeguarding neutrality, and, consequently, the government interest in the development of the project. If the author of the basic or executive design could be later hired to perform the object, they could be tempted to add unnecessary works or induce specifications to design, considering their future position as a party to the contract.

Both situations in which, if the company or the person participated in the bidding, would find themselves in more favorable conditions than the other potential bidders, representing an unlawful advantage. Thus, it could damage the isonomy, the morality and the impersonality principles that are guaranteed by Brazilian Constitution and based the whole idea of a bidding procedure.

Besides those legal restrictions, Public Bidding Law also grants to the bidding entity the power to discretionarily set forth additional participation’ conditions and restrictions, according to the public procurement specific needs (item VI, article 40). Brazilian Constitution, however, imposes that all bidding procedures must privilege both isonomy and competition principles. By consequence, such discretionary power cannot comprise bidding requirements that are not related to the procurement’s object or that are not indispensable for its fulfillment.

Finally, it is important to mention that Public Bidding Law provides for two kinds of sanctions: administrative penalties and crimes. These legal sanctions set out conducts considered contrary to good administrative performance relating to government contracts – either because they prevent the government from choosing the best proposal due to the infringement of isonomic competition bases or by bringing harm (actual or potential) to the state treasury under a bidding procedure. The idea is that only the more severe sanctions to public interest have criminal liability. This does not mean, however, that the administrative penalties are not severe: for private entities, for instance, delays and partial or total non-performance of the contract may result in the imposition of a sanction of prohibition from entering into a contract with the government for a certain period (ïnidoneidade”) and – as a consequence – from participating in public biddings. The same may occur with the sanction of the suspension of such right.

The bidding procedure according to Brazilian legal framework may be divided into two main phases: an internal and an external procedure.

The first one (internal phase) comprises decision-making and choices, and therefore, is not subject, in principle, to private’s participation (the Law Project No. 4,253/20, however, provides for the possibility of a public hearing in the this phase). That happens precisely because it involves activities related to the preparation of the procedure, such as the precise definition of the object of the project considering the needs of the government, assessments and cost estimates relative to the available budget, appointment of officials or agents responsible for the development of procedures, preparation of documents necessary for the bidding, technical requirements and criteria for qualification of the competitors, certification to be solicited etc

The external phase, by the other hand, which begins with the publication of the invitation to bid (RFP), marks the disclosure of the government intent to enter into a contract and involves activities such as conducting public hearings and consultations, adjustments or changes to the RFP, the development of bidding process itself, the evaluation of bids by the bidding committee to finally hold up to contract award.

The activities to be performed by the government when starting a bidding process are currently determined by Law No.8666/93 (“Public Bidding Law”), but will be soon ruled by the Law Project No. 4,253/20, which changed the order of some phases of the procedure, so the judgment phase occurs before the qualification phase. This aims to reduce the spent of time and public resources, since there will only be one phase of appeals and since the qualification documents of only the best classified company will be analyzed. The structure of the bidding process according to the Bill is:

a) Disclosure phase: designed to give notice to third parties of the existence of the RFP (not only to inform those who are interested in enrolling in the bidding, but also to allow its social control);

b) Proposition phase: in which occurs the preparation of proposals by any interested party in the bidding. During such phase, the bidders may ask the Public Administration to clarify or, even, may challenge the bidding conditions, requirements and/or documents. The period between the proposition and the qualification phase may vary according to the object, the price and the judgment criteria of the public procurement. For more information about the deadlines, check item 5 above.

c) Judgment phase: aimed at selecting the most advantageous proposal submitted by the bidders. The proposals will be opened and classified according to the bidding judgment criteria. Such decisions regarding the classification of the proposals can also be challenged by third parties.

d) Qualification phase: for the government to check if bidders meet all the technical, economical and legal qualification requirements provided for in the RFP. This phase aims to ensure that the best-classified bidder have the capacity to perform the services or works they intend to undertake. If the bidder do not meet with such requirements, the Public Administration will declassify it. The decisions regarding the qualification or the disqualification of any bidders can be challenged by third parties.

e) Deliberation phase: for reviewing the actions taken in the process and assessing the suitability and legality of the result. Once the procedure is approved by the competent authority, the best classified bidder is notified to enter into the public procurement.

The duration of such procedures shall vary according to the agility and capacity of the public body or entity responsible for the bidding procedure. Also, it may take longer in cases the bidding involves a greater amount of appeals regarding the government’s decisions.

The public procurement of administrative contracts is very similar to the procedure mentioned above. Please see item 8 above in order to consult more detailed information regarding the phases of Brazilian bidding procedures.

In recent decades, Brazilian administrative processes, in general, (and therefore encompassing bidding processes) have been gradually modified, based on a succession of normative diplomas, with the purpose of reinforcing their legal security, as well as incorporating more transparent practices and a duty of accountability on the part of managers.

In this sense, the transparency duty is no longer an element to be observed only in the external phase of the bidding, after the publication of the bidding documents and the respective decisions by the Public Administration, but it is now also incorporated in its internal phase, in the sense to publicize the elements that motivated and supported the structuring of the contract. The Access to Information Law (Law No. 12.527, of November 18, 2011) reinforced the application of this principle by treating confidentiality as an exception, guaranteeing access by the general population to documents and information produced within the scope of the public service.

In addition to the duty of transparency, a demand for greater densification of the motivation of public decisions has also entered the agenda of the Brazilian Public Administration. Along the same lines of bringing greater concreteness to the principle of motivation and reinforcing legal security resulting from well-founded decisions, Decree-Law No. 4.657 / 1942, which instituted the law introducing the rules of Brazilian Law (“LINDB”), sets forth the duty that the decision of judging bodies (in the administrative, controlling and judicial spheres) considers the possible impacts of its edition.

A third factor is the expansion of popular participation, especially in regulated sectors. Instruments such as public hearings (now provided also by article 21, of the Law Project No. 4,253/20) and consultations to assist in the formulation of public projects not only encourage the incorporation of know-how of the private sector and the reduction of information gaps, but also contribute to the compliance of sectoral practices with the legal system.

Finally, an improvement in regulatory structures should be highlighted. I The incorporation of consolidated regulatory practices at the international level such as regulatory impact assessment and regulatory result assessment, , as well as the mechanisms that aims to ensure decision-making independence and agency autonomy are only a small part of the Brazilian legal system review in order to improve the quality of regulatory process.

In addition to these best practices, there has recently been a process of legislative renewal with a view to reinforcing ethical conduct on the part of the Administration and those who contract with it and mitigating cases of corruption and administrative impropriety. In this sense, it is worth mentioning (i) the Anticorruption Law (Law 12.846 / 2013), its regulatory decree (Decree 8.420 / 2015), (ii) the General Bidding Law (Law 8.666 / 1993) and the Law Project No. 4,253/20, (iii) the Administrative Improbity Law (Law No. 8.429 / 1992) and (iv) the Conflict of Interest Law (Law No. 13.813 / 2013) – as well as the best practices recommended in the Office of the General Comptroller (Controladoria-Geral da União – CGU) reports.

In Brazil, public procurements are ruled by the Law n. 8.666/1993 (Public Bidding Law). The legal norm enacts several procedures and legal obligations that binds public agencies to hire engineering works, acquisition of goods and any kind of services through a public bidding process, that entails the selection of the most advantageous proposal to the public administration.

The content of what may be considered the best proposal can vary in each process, depending on what is being hired or on the kind of public necessity that must be satisfied by the bidding process. The Public Bidding Law sets a specific range of criteria that may be used by the Public Administration to select the most advantageous bid.

These criteria are set forth in the article 45 of the Public Bidding Law, which authorizes the selection of proposals by the lowest price, by the best technical solution, by the highest bid or by the merge of both criteria. The article 33 of the Law Project No. 4,253/20 also fixed as possible criteria the highest discount, which is another type of lowest price, and the greater economic return.

In the case of lowest price or highest discount, the selection of the lowest bid is the criteria of selection of the best proposal. It is ruled by the item I, of the first paragraph, of the article 45 of the referred law and the article 34 of the Law Project No. 4,253/20. The public process ruled under this parameter translates the quest for the most advantageous proposal in an economic rationale. The best advantage will be provided by the lowest cost procurement.

The best technical solution will be adopted when the bidding is related to a contract whose scope is predominantly intellectual. Thus, the better the technical quality, the more likely the proposal will win. It differs from situations in which the Public Administration delimits only minimum levels of technical quality that must be observed by the bidders. In this second case, complying with the minimum acceptable quality standards, is enough to qualify the bidder to the next phase (judgment phase, as described in item 8 above).

The best bid or bid value applies, within the scope of the Public Bidding Law, to situations involving the disposal of public assets or the granting of the right of exploitation of public assets. The logic inherent of such criteria is the opposite of the best price: the bidder who offers the highest value for the acquisition or exploitation of that public asset will win the bid.

Finally, the greater economic return, which applies exclusively for contract whose object includes the provision of savings to the contractor, will consider the biggest savings for the Administration, and the remuneration must be fixed in a percentage of the savings actually obtained in the contract execution.

Other judgment criteria are provided for in specific bidding rules of the Brazilian system. This is the case, for example, of the Concession Law (Law No. 8,987/95) and the PPP Law (Law No. 11,079/2004), which regulate specific types of price criteria, such as the lowest value of the public service tariff, the greater offer for the concession grant and lower amount of payment by the Public Administration as a counterpart for the contracted services.

The Public Administration responsible for the bidding is required to publish all decisions regarding the bidding procedure, especially the ones that define which bidders are successful or unsuccessful. This obligation derives from the article 37 of the Brazilian Constitution, that requires all members of the Public Administration to respect publicity principles in all decisions, acts or rulings enacted.

The Law 9,784/1999, that regulates administrative procedures for the federal administration, also determines that all administrative decisions or acts should be properly and clearly motivated. Moreover, the grounds must be explicit in a report or in the act itself and must be published (articles 2 and 50).

The procuring bodies are also required to provide reasons for the decision after the qualification documents and commercial proposals are analyzed (article 43, Law 8,666/1993) and before closing the contract. This order is important to allow time and opportunity for the participants to take legal measures in case of disagreement.

The article 109 of the Law 8,666/1993 (Public Bidding Law) and the articles 163 and 164 of Law Project No. 4,253/20 set forth the possibility of administrative appeal against all the decisions made by the Public Administration during the bidding process. It is possible to challenge decisions regarding qualification documents, commercial proposals, registrations, or the decision to revoke a bidding.

Although the Law 9,784/1999 does not apply specifically for bidding procedures, it regulates administrative process in general, recognizing that every person has the right to present claims against the public administration. This right is based on the article 5, XXXIV, a, of the Brazilian Constitution.

In case the administrative measures do not attend the expected outcomes, or remains an irregularity, the unsuccessful bidder can initiate a judicial proceeding. There are some specific legal measures that can be used, such as Writ of Mandamus, that intends to compel a public authority to execute a legal duty, regulated by the Law 12,016/2009 or ordinary lawsuit to challenge the public decision or to require the annulment of the bidding process, as stablished by the Code of Civil Procedure (Law 13,105/2015, articles 276 to 283). Other legal measures may be applicable depending on the actual case.

Yes, public procurement challenges are common in Brazilian jurisdiction. The Federal Constitution establishes, as a fundamental right, that no injury or threat to rights shall be excluded from the Judiciary’s assessment. This means that judicial control is not subsumed, nor it is restricted to the judgment promoted by the Public Administration, in the context of administrative appeal, nor to the decisions of the Courts of Accounts. The principle of non-obviation of Judiciary jurisdiction is applied not only in protecting interests that may not be covered by the control exercised by Public Administration’s bodies, but also in exercising it when such bodies did it in a deficient, unsatisfactory or insufficient manner.

In general, there is no reputational damage for companies that make challenges against the Public Administration, as long as they act in good faith and based on legal or factual grounds for doing so. In this sense, the Civil Procedure Code defines as duties to be observed in jurisdiction as acts of good faith (art. 77):

I – to expose the facts in court according to the truth;

II – to prevent from making a claim or presenting a defense when aware that they don’t have foundation;

III – to prevent from producing evidence and performing useless or unnecessary acts to declare or defend the right;

IV – to accurately comply with jurisdictional decisions, whether provisional or final, and do not create any obstacles to their effectiveness;

[…]

The failure to comply with the duties described above can be considered as litigation in bad faith. In which case, sanctions may be applied to the litigant.

Regarding the costs of litigation, it tends to vary according to the complexity of the issues discussed. The main legal firms usually charge the clients by hours (timesheet), with or without cap and setting success fees.

Assuming that the dispute involves (i) a complex contract; and (ii) a complex lawsuit (which would comprise the hearing of experts or the production of more than one technical evidence), it is possible to estimate, in average, that it could take five years to obtain a sentence in the first instance and about another 6 (six) months to 1 (one) year for judgment by the Court regarding a procurement dispute. Please also note that this estimation may vary according to the region and the city where the dispute takes place.

A dispute in Brazilian jurisdiction may engage the following key stages: (i) the filing of the lawsuit concerning the conflict about the public procurement, (ii) the summons of the opposing party to present its defense and the respective presentation (about 4-6 months); (iii) submission, by the plaintiff, of a reply to the defense (3 months); (iv) interlocutory decision, defining the production of the evidence and, if applicable, the appointment of experts (6 months); (v) production of evidence (1 to 3 years depending on the type of evidence required, as well as on the complexity of the facts); (vi) once the evidence’s phase is completed, it takes about 6 months to have a sentence; (xi) appeals and judgement by the Court  (6 months to 1 year). It is important to emphasize that whenever there is a pecuniary condemnation of the Public Administration, there is a mandatory double degree of jurisdiction, which means that even though the parties do not appeal, the dispute will be referred to the judgement of the Court.

In the light of our legal system, foreign companies can participate both in national and international bidding procedures promoted by Brazilian Government. Nonetheless, only foreign companies operating in Brazil can participate in national biddings, while in international ones there is no restrictions, which allow companies that are not based in Brazil to make offers.

Also, it is important to mention that competition between foreign and Brazilian companies must take place in biddings under isonomic conditions. Thus, any type of discrimination or special treatment based on the location of the bidder is prohibited by the article 3, §1º, I, Law 8,666/1993 and article 9, I, b), of the Law Project No. 4,253/20.

In order to promote such isonomic conditions, international companies are required to present equivalent documents to the ones that are demanded for national companies, translated to the portuguese language, unless there are proof of the non-suitability of the foreign issuing entity (article 66, §4°, of the Law Project No. 4,253/20). It is not necessary to have a company (headquarters or subsidiary) located in national territory, as long as the documents are adapted to the law and the public notice (article 69, sole paragraph, of Law Project No. 4,253/20). There are also no restrictions to legal measures or appeals, administrative or judicial, and the international company can take all the actions mentioned in the answer to item 13.

Any values, prices and costs presented by the companies should be made in the national currency (article 5 of Law No. 8,666/76 and article 12, II, of Law Project No. 4,253/20). However, in international biddings the tender must be adjusted to international monetary guidelines. If the foreign bidder is allowed to give prices in a foreign currency, this opportunity should be extended to all bidders, national or international (article 42 of Law No. 8,666/76 and article 51, §1° of Law Project No. 4,253/20).

Considering the rules mentioned above, legislation assures foreign bidders the same rights and remedies as those based in Brazilian jurisdiction during the bidding process, regardless of their association to any international or national organization.

It is important to notice that some sectors may have specific requirements to sign the contract and to operate in Brazil. For instance, companies that intend to explore telecommunication services are required to have a head office located in national territory, created under Brazilian rules and with most of its shares owned by person or company located in Brazil (Federal Decree 2,617/1998). Another example is the limitation imposed by Federal Law 5,709/1971, that limits the size of rural properties owned by foreign companies.

A subsidiary located in Brazil can participate in both national and international biddings. The demands for equivalent documents authenticated by the consulate and translated by a sworn licensed translator stablished in article 32, §4, Law 8,666/1993 are only for companies that do not have an operation in national territory.

If the subsidiary is located in Brazilian territory, this company will be able to provide the national documents required from national companies, such as charter registered in Brazil, National Registry of Legal Entities (Cadastro Nacional de Pessoa Jurídica – CNPJ) and documents demonstrating regular payment of taxes or technical experiences executed in national territory.

A subsidiary is guaranteed the same rights and remedies as a nationally owned company and the bid made by a subsidiary would have the same value as any other offer. This is due to the prohibition of discrimination or special treatment based on the location of the bidder determined by the article 3, §1º, I, Law 8,666/1993 and article 9, I, b), of the Law Project No. 4,253/20.

Some of the restrictions mentioned in question 16 may also be applicable to the subsidiary, depending on its constitution and ownership of shares.

Brazilian jurisdiction is a unified system. Consequently, all disputes, including those related to the Public Administration, are judged by the Judiciary. There is no court or tribunal specialized in the judgment of public disputes, as occurs, for example, with the Council of State, in France. Thus, as a general rule all the disputes shall be submitted to the ordinary jurisdiction.

Within the ordinary justice, however, it is possible that due to an internal division of competences there may be a court designed to judge disputes under Public Law. Such division will depend on the internal rule of each court.

During the performance of the contract, the winner of the bidding process must act in accordance with the stipulations contained in the bidding notice (“RFP”) and in the signed contract.

Nevertheless, amendments are possible according to legal and contractual grounds established by Brazilian legal framework.

According to article 65, of Law No. 8,666/93 (“Public Bidding Law”) and article 123 of the Law Project No. 4,253/20, contracts can be amended unilaterally by the government or upon agreement of both parties. If Government has the prerogative to amend the contract unilaterally, on the other hand, it is also possible to change the contract upon agreement of the parties. This possibility enhances the chances of dialogue between private partner and public officials, but the limits to such amendments can only occur in situations dictated by the legislation, as can be seen below:

“Article 123. The contracts governed by this Law may be modified, with proper justification, in the following cases: (…)

II – by mutual agreement of the parties:

a) when it is convenient to replace the performance bond;

b) when there needs to be a change in the execution system of works or services, as well as in the form of supply, due to technical verification of the inadequacy of the original contract terms;

c) when it is necessary to change the form of payment, due to supervening circumstances, provided that the initial value is kept, adjusted to inflation, being that the advancing of payment in regards to the established financial schedule, without the correspondent consideration in the supply of goods or execution of work or services is forbidden;

d) to reestablish the initial economic-financial balance of the contract in case of force majeure, acts of God or acts of authority or as a result of unpredictable circumstances or circumstances that were predictable but of incalculable consequences, which make the execution of the contract as agreed impossible, respected, in any case, the distribution of risks established in the contract

The same applies to ordinary and extraordinary revision of the contract. Ordinary revisions may occur as stated in contract, in established time frames. Extraordinary revisions are common when the economic and financial balance of the contract is altered, as described in item ‘d’ of the abovementioned article.

Please note that, the amendment of the concession contracts and public-private partnerships is also permitted, as long as it is preserved the economic-financial balance of the concession.

Also, Public Bidding Law establishes the obligation of the contracting party to maintain, during the whole implementation of the contract, the qualification requirements that were met in the bidding procedure. The loss of any of the technical, legal or fiscal qualification conditions provided for in the bidding procedure may result in the termination of the signed contract.

As per the modifications in the form or the structure of the contracted company, Public Bidding Law admits its possibility, as long as it does not prejudice the performance of the contract. Otherwise, the Public Administration has the right to terminate it.

Such subject is more detailed in the legal framework of concessions and public-private partnerships. According to Law No. 8,987/95 (Concessions Law) and Law No. 11,079/2004 (PPPs Law) the transfer of the concession or of the corporate control of the concessionaire shall be subjected to prior consent by the Granting Authority, which will comprise the analysis: (i) if the applicant meets the requirements of technical capacity, financial suitability and legal and fiscal regularity necessary to the service assumption; and (ii) if the applicant undertakes to comply with all clauses of the current contract. There is also a provision that allows the assumption of temporary control or administration of the concession by the financiers and / or guarantors, in order to promote its financial restructuring and to guarantee the continuity of the provision of services (called step-in-rights).

Both Law No. 8.666 / 93 (“Public Bidding Law”), the Law Project No. 4,253/20 and Law No. 13.303 / 2016 (“Statute of State-Owned Companies”) defined two main types of direct contracting, namely: (i) exemption from bidding, in which, although competition is, in theory, possible, the legislator opted for expressly exempting the Public Administration from the general duty to bid; (ii) unenforceable bidding, comprising the situations in which the competition proves unfeasible.

The difference between the figures is widely accepted in the doctrine. The unenforceability contemplates the cases in which the competition itself is not viable, which removes an essential element from the bidding, since the absence of competitors makes the dispute to be fought in a given event unfeasible. According to the Law Project no. 4,253/20, the unfeasibility of competition will occur, at least, in three situations: (i) when there is a singularity of the party (that is, when only one company can execute the object – this is the case of the exclusive supplier provided for in article 73, I); (ii) when hiring a certain professional in the artistic sector; (iii) when hiring specific specialized services of intellectual nature with companies of notorious specialty; (iv) when the object of the contract can or must be hired through accreditation; or (v) when acquihiring or renting real estate properties whose installations and location makes him a necessary choice.

On the other hand, in the exemption from bidding, competition is, in principle, viable, however, other public interests, considered equally relevant by the legislator, authorize the removal of the duty to bid. In this case, although theoretically feasible, the bidding would result in an unfavorable result, being preferable, therefore, not to promote it.

It is precisely because of such conceptual difference between exemption from bidding (faculty of not bidding) and unenforceability (impossibility of bidding) that the list of  hypotheses regarding the first category does not admit a discretionary expansion. On the contrary, the list of unenforceability hypotheses is merely exemplary, and all factual hypotheses that concretely represent an unfeasibility of competition can be considered in the general rule of unenforceability hypothesis.

As per the formalities, the Public Bidding Law requires that there is adequate motivation, indicating the reasons for choosing the contracted company, as well as proofs that the prices  in the intended public procurement are in line with those practiced in the respective market (article 26 of Law  No. 8,666/76 and article 71 of Law Project No. 4,253/20).

Finally, the direct contracting of complex scopes can occur, as long as it fits into one of the hypotheses described above, although it is unusual. Within the scope of the State-Owned Companies Law, it is also possible to consider direct contracting, additionally, in cases that comprise a core activity of the state-owned company (article 28, §3, I, of Law No. 13,303/2016) or, when the public procurement is characterized as a strategic contracting (article. 28, §3, II, of Law No. 13,303/2016).

The public procurement rules establish measures to adapt the contracts according to special circumstances, especially with risk distribution defined by law and detailed in the contracts. The COVID-19 pandemic can be qualified as an exceptional or unpredictable event with unpredictable consequences. These events authorize the modification of the contracts in order to maintain its economic balance. The changes can be the extension of deadlines (article 57, §1º, Law 8,666/1993) or changes in obligations of the parts (article 65, II, c, Law 8,666/1993). Please consult item 19 in order to obtain further details on amendments in the public procurement.

As per the complex contracts, both Law No. 8,987/92 (Concessions Law) and Law No. 11,097/2004 (PPPs Law) rule that contracts must predict a straightforward division of risks (articles 4, VI and 5, III, VIII). Considering this definition and that the best concession practices recommend elaborating a risk assessment, many public contracts already addressed the liability in such unexpected situations or, at least, the means by which the parties may negotiate the terms of the public procurement after its occurrence.

However, COVID-19 has caused deep and severe impacts in the businesses and society, demanding other measures to mitigate damages to the object of the public procurement and to the parties. This triggered an intense debate on how to allocate the costs derived from the pandemic and several measures were taken specially in regulated sectors.

In the airport sector, the public administration was allowed to postpone the payment of air navigation tariffs so that the companies in the sector could reorganize their finances (Decree 10,284/2020).

The home office practices and the indoor behavior during the pandemic caused a great increase of use in all telecommunication services. The companies were able to assist the population but not without difficulties: they requested that the payment of service fees were extended. Only in April, the federal government authorized the payment to be reestablished later in August (Provisional Measure 952/2020).

New rules on the possibility of making emergency agreements were also made. The Law 14,035/2020 permitted a direct contract (without bidding) to purchase any goods or services necessary to address the pandemic.

Despite, however, the measures and amendments already adopted until this moment, probably the impacts on public contracts are still in progress, which will demand not only from the parties of public procurements (private sector and public administrator), but also from the regulatory bodies an effort in order to implement mechanisms that make it possible to provide greater legal certainty and return stability to the contractual instruments.