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Legislative framework

Relevant legislation

What is the relevant legislation regulating the award of public contracts?

The main rules for public procurement and contracts are in the Public Procurement Law (Federal Law No. 8,666/93), and are applicable to federal, state and municipal entities.

Public procurement rules are set forth in:

  • the Reverse Auction Law (Federal Law No. 10,520/02);
  • the Electronic Reverse Auction Decree (Federal Decree No.5,450/05); and
  • the recently enacted State-owned Companies Law (Federal Law No. 13,303/16) and Decree (Federal Decree No.8,945/16).

Additionally, there is also the Differentiated Procurement Regime (RDC), created by Federal Law No. 12,462/11, which is applicable to a restricted type of procurement proceedings and is infrequently used in Brazil.

While the Public Procurement Law, the Reverse Auction Law and the Electronic Reverse Auction Decree are applicable to all government entities, special funds, autarchies and public foundations, the State-owned Companies Law and Decree are applicable to public companies, mixed-capital corporations and their subsidiaries. The latter regulations include specific public procurement rules applicable to such companies, since they are subject to a different law regime than those applicable to the entities subject to the Public Procurement Law, the Reverse Auction Law and the Electronic Reverse Auction Decree.

States and municipalities may also enact their own public procurement regulations, within the limits of the general rules set forth by the Public Procurement Law and, respectively, the State-owned Companies Law and Decree, as applicable.

Sector-specific legislation

Is there any sector-specific procurement legislation supplementing the general regime?

Yes. There are sector-specific regulations that supplement the general public procurement rules and apply to certain cases. Examples of these include:

  • Federal Law No. 9,427/96, applicable to the utilities sector;
  • Federal Law No. 8,987/95, applicable to concessions of public services;
  • Federal Law No. 11,079/04, applicable to Public-Private Partnerships; and
  • Federal Law No. 12,598/12, applicable to the acquisition of strategic defence products and systems.

International legislation

In which respect does the relevant legislation supplement the EU procurement directives or the GPA?

Not applicable. Brazil is not subject to the European Union procurement directives, nor is it a signatory of the World Trade Organization’s Agreement on Government Procurement (GPA).

Proposed amendments

Are there proposals to change the legislation?

Yes. Many proposals to change the Public Procurement Law have been submitted. There is a main bill currently being discussed by the House of Representatives (Bill No. 6814/2017) that will supposedly be approved by the end of 2018, and was approved by the Brazilian Senate in 2016 (formerly as Bill No. 559/2013). This Bill aims to change the Public Procurement Law, the Reverse Auction Law and the RDC Law. After analysis by the House of Representatives, the Bill is subject to sanction by the Brazilian president.

Applicability of procurement law

Contracting authorities

Which, or what kinds of, entities have been ruled not to constitute contracting authorities?

As mentioned in question 1, public entities became subject to different regulations on public procurement as of the enactment of the State-owned Companies Law. Before the Law was enacted, case law and legal writers understood that state-owned companies developing economic activities were already subject to different rules, since they compete with private companies and could not be subject to the restrictions of the public law regime, which would be detrimental to their activities. Therefore, core activities carried out by such companies were considered to not be subject to public tenders, while ancillary activities were still subject to such procedures.

Nevertheless, as mentioned above, the State-owned Companies Law brought new rules for public companies, mixed-capital corporations and their subsidiaries, aligned with the regime to which these companies are subject.

Therefore, as a rule, even if not all public entities are subject to the Public Procurement Law, there are certain regulations applicable that require tender procedures be carried out. In this sense, all such entities are deemed contracting authorities.

Contract value

Are contracts under a certain value excluded from the scope of procurement law? What are these threshold values?

Yes. Public tenders may be waived or unfeasible in certain situations.

Concerning the value of the contract, the Public Procurement Law foresees waiver of tender in the case of engineering works and services amounting up to 15,000reais, and, for other services and purchases, for contracts amounting up to 8,000reais.

In specific cases provided by the Public Procurement Law (when public consortia, autarchies or foundations qualified as executive agencies are contracting authorities), these thresholds are doubled.

Amendment of concluded contracts

Does the legislation permit the amendment of a concluded contract without a new procurement procedure?

As a general rule, according to the Public Procurement Law, contracts may be amended up to the total term of 60months (including their original term). An amendment must be executed prior to termination of the contract. If a contract has expired beyond the allowed 60-month term, a new public procurement procedure must be conducted for the public entity to execute a contract with the same scope.

Has there been any case law clarifying the application of the legislation in relation to amendments to concluded contracts?

Although concluded contracts may not be amended, courts allow for new contracts to be executed with the same contractor in the event an emergency or a calamity based on waiver of tender, limited to a contractual term of 180days.

Privatisation

In which circumstances do privatisations require a procurement procedure?

Privatisations are subject to a public procurement procedure, as per the rules of Federal Law No. 9,491/97 (at the federal level) and specific state and municipal legislation, as applicable, for assets belonging to entities at these levels. The Public Procurement Law is also applicable to privatisations, complementing Federal Law No. 9,491/97. Privatisations must also be authorised by law and include the transfer of public assets into private ownership, sale of shares owned by the government in companies, and the transfer of public services to the private sector (such as concessions).

Public-private partnership

In which circumstances does the setting up of a public-private partnership (PPP) require a procurement procedure?

According to Federal Law No. 11,079/04 (the Public-Private Partnership Law), public procurement procedures are mandatory for conducting such projects.

Advertisement and selection

Publications

In which publications must regulated procurement contracts be advertised?

Summaries of procurement contracts and of those resulting from waiver or unfeasibility of tender must be published in the Official Gazette of the contracting public entity’s jurisdiction (federal, state or municipal), as per the Public Procurement Law.

Participation criteria

Are there limitations on the ability of contracting authorities to set criteria or other conditions to assess whether an interested party is qualified to participate in a tender procedure?

Yes. Contracting public entities must establish objective requirements for bidders to participate in public tenders. According to the Public Procurement Law, such requirements are limited to:

  • legal qualifications;
  • technical qualifications;
  • economic-financial qualifications; and
  • tax and labour regularity.

The documents to be submitted by bidders as evidence of such qualifications are also set forth in the Public Procurement Law.

Is it possible to limit the number of bidders that can participate in a tender procedure?

The rule of thumb is that public procurement procedures must be open to as many interested bidders as possible, and, therefore, there is no legal provision limiting the number of bidders in a procedure. The rules in the Public Procurement Law applicable to the invitation to bid - a specific type of public procurement procedure - hold that the public entity must send the invitation to at least three bidders, but does not set forth a limit to the number of bidders.

Regaining status following exclusion

How can a bidder that would have to be excluded from a tender procedure because of past irregularities regain the status of a suitable and reliable bidder? Is the concept of ‘self-cleaning’ an established and recognised way of regaining suitability and reliability?

The Public Procurement Law includes penalties of ‘blacklisting’ and suspension from participating in tender procedures and executing public contracts.

Regarding blacklisting, there is no specific time period provided in the Law, but the penalty remains in place until the company regains reliability with the same authority or for as long as the reason the penalty was imposed remains.

A suspension may last for up to two years.

These penalties are temporary, but ‘self-cleaning’ does not exist under Brazilian law; the ending of blacklisting by obtaining ‘reliability’ with the authority that imposed the penalty is the closest concept.

The procurement procedures

Fundamental principles

Does the relevant legislation specifically state or restate the fundamental principles for tender procedures: equal treatment, transparency and competition?

Yes. The Public Procurement Law specifically mentions that the principles applicable to tenders are the following:

  • equitable treatment;
  • selection of the most advantageous proposal;
  • promotion of sustainable national development;
  • legality;
  • impersonality;
  • morality;
  • equality;
  • transparency;
  • administrative probity;
  • connection to the tender notice; and
  • objective judgement.

Independence and impartiality

Does the relevant legislation or the case law require the contracting authority to be independent and impartial?

Yes. As per question 15, the principles applicable to public procurements include legality, impersonality and equality.

Conflicts of interest

How are conflicts of interest dealt with?

Regarding conflicts of interest in the course of a tender procedure, the tender notice usually prohibits the participation of bidders with any relation to the contracting public entity.

In the case of a conflict of interest involving a public official and an interested bidder arising, there are applicable penalties, based on the Public Procurement Law, the Administrative Improbity Law (Federal Law No. 8,429/92) and the Anti-corruption Law (Federal Law No.12,846/13).

These penalties range from fines to suspension and blacklisting from participating in public tenders and executing public contracts, and can be applied to companies benefiting from any illegal acts harming the public tender and the government, as applicable according to each law.

Bidder involvement in preparation

How is the involvement of a bidder in the preparation of a tender procedure dealt with?

As a general rule, bidders are not allowed to participate directly or indirectly in the preparation of a tender procedure. Companies or individuals participating in studies or projects involving the initial tender phase are not allowed to participate as bidders, as per the Public ProcurementLaw.

However, an exception to such prohibition is the Manifestation of Interest Proceeding (PMI), which allows companies to submit studies and projects to public entities in preparation for public tenders. The public entities usually publish a notice requesting projects to be submitted by private parties, and may use the studies received in full or partially, or even not at all. The parties submitting studies prior to the tender procedure are allowed to participate as bidders, and the parties that submit studies that have been used are reimbursed, as stated in the tender notice, by the successful bidder (unless the winning bidder carried out a study).

PMI is a useful structure that allows companies to submit well-grounded studies and projects to the government, helping to develop complex infrastructure projects.

Procedure

What is the prevailing type of procurement procedure used by contracting authorities?

The type of public procurement procedure depends on the purpose, scope and value involving in the tender. Types of public procurement procedures defined in the Brazilian legal framework are as follows:

  • competitive bids;
  • price quotations;
  • invitations to bid;
  • contests;
  • auctions; and
  • reverse auctions (regular or electronic).

Decisions rendered by the Federal Budget Oversight Board (TCU) tend to recommend that, whenever possible, public entities conduct reverse auctions, which apply for the acquisition of ordinary goods and services. In our experience, public entities tend to follow such guidance and conduct such reverse auctions, mostly in electronic form, probably due to it being more straightforward than other procedures.

Separate bids in one procedure

Can related bidders submit separate bids in one procurement procedure?

No. Tender notices usually contain express provisions prohibiting companies from submitting more than one bid, even if by means of related companies, or by means of participating in consortia.

Negotiations with bidders

Is the use of procedures involving negotiations with bidders subject to any special conditions?

Under the Brazilian legal framework, the reverse auction foresees the possibility of negotiation, as per the terms of the tender notice and restricted to negotiation of the price proposal with the winning bidder.

Moreover, as a rule, tender notices and public contracts have defined terms and conditions that are not subject to negotiation with the contracting public entity. Bidders are subject to those terms and must accept them upon submitting a proposal.

If the legislation provides for more than one procedure that permits negotiations with bidders, which one is used more regularly in practice and why?

Not applicable, as there is only one procedure, as per question 21.

Framework agreements

What are the requirements for the conclusion of a framework agreement?

The Brazilian equivalent of a framework agreement is a commitment to supply, called ‘price registry minutes’, which is valid for one year. The execution of this agreement is preceded by a public procurement procedure and, at the end, the winning bidder executes the price registry minutes, committing to supply a certain quantity of goods or services at a certain price.

The public entity is not obliged to request that the contracted company supply such products or services, but if it does, the company must fulfil such supply.

Based on the price registry minutes, the contracting public entity executes contracts with the company based on its demand for the good or service.

May a framework agreement with several suppliers be concluded?

No. The general rule is that the price registry minutes be executed with only one supplier.

Changing members of a bidding consortium

Under which conditions may the members of a bidding consortium be changed in the course of a procurement procedure?

The members of a consortium may not be changed during the course of a public procurement procedure.

If allowed by the tender notice and contract, the members of the consortium may be replaced under exceptional circumstances, usually requiring the contracting public entity’s prior consent, and provided that such companies demonstrate evidence that they also fulfil the qualification requirements.

Participation of small and medium-sized enterprises

Are there specific mechanisms to further the participation of small and medium-sized enterprises in the procurement procedure? Are there any rules on the division of a contract into lots? Are there rules or is there case law limiting the number of lots single bidders can be awarded?

Yes. There are several preferences granted to small and medium-sized enterprises (SMEs), foreseen in Complementary Law No. 123/06, such as preference in the event of a tie with another company that does not fall into such categories and public procurement procedures directed exclusively at SMEs.

Regarding the division of a contract into lots, the tender notice itself shall divide the object of the tender into lots whenever possible, aiming to cover as many bidders as possible and to stimulate the competitive nature of the procedure. There is no provision set forth in law limiting the number of lots that single bidders may be awarded. However, the tender notice itself may foresee such limitation on a case-by-case basis, and if such restriction is duly justified (ie, if it is not possible or feasible for one bidder to be awarded more than one lot in a certaintender).

Variant bids

What are the requirements for the admissibility of variant bids?

Variant bids are not allowed.

Must a contracting authority take variant bids into account?

Not applicable.

Changes to tender specifications

What are the consequences if bidders change the tender specifications or submit their own standard terms of business?

The contracting entity shall only take into consideration bidder proposals that comply with tender specifications. Therefore, proposals that are not in accordance with such requirements will result in the bidder’s disqualification. The same applies for bidders who submit their own standard terms of business.

Award criteria

What are the award criteria provided for in the relevant legislation?

The Public Procurement Law sets forth that the tender notice must establish the award criteria, which can be one of the following, as per such law:

  • lowest price;
  • best technique;
  • best technique and price; or
  • highest offer (applicable to rights-of-use concessions and sale ofassets).

Abnormally low bids

What constitutes an ‘abnormally low’ bid?

According to Brazilian legislation, ‘abnormally low’ bids are those considered to be unfeasible, which, as per the Public Procurement Law, are bids with prices lower than input costs or the estimated price for the product or service as researched by the public entity during preparation of the public procurement procedure.

What is the required process for dealing with abnormally low bids?

The contracting public entity shall request that the bidder provide evidence that the bid is feasible.

If the evidence presented is satisfactory, the bid shall be accepted. If not, the bidder may be subject to penalties imposed by the public entity due to submission of a bid that it would not be able to carry out and comply with.

Review proceedings

Relevant authorities

Which authorities may rule on review applications? Is it possible to appeal against review decisions and, if so, how?

Decisions in public procurement procedures are subject to review applications. These may be filed by means of administrative proceedings, judicial proceedings or proceedings before Budget OversightBoards.

Administrative proceedings are filed before the contracting public entity that conducts the public procurement procedure.

Judicial measures may be filed in the form of writs of mandamus (in specific cases) or regular lawsuits requesting injunctions from the court with jurisdiction over the case. Challenges before the Budget Oversight Boards may also request injunctive relief due to irregularities in tender procedures. Injunctions are subject to evidence that the effectiveness of the proceeding would be jeopardised should the party wait for a decision on the merits of the case.

If more than one authority may rule on a review application, do these authorities have the power to grant different remedies?

Yes. The authorities have different attributions and overlapping jurisdictions over public procurement procedures. Remedies could include injunctions, orders to declare procedures null and void or the imposition of penalties.

Also, even if an administrative proceeding results in a ruling against the contracted party, a judicial proceeding or one before the Budget Oversight Board with jurisdiction over the case could result in a contradictory ruling.

Timeframe and admissibility requirements

How long do administrative or judicial proceedings for the review of procurement decisions generally take?

There is no fixed term set out in law for the duration of such proceedings. Administrative proceedings usually take up to one year to be concluded, whereas judicial proceedings may take up to 10years before a lower court decision on the merits is rendered.

What are the admissibility requirements?

The admissibility requirements depend on the specific case and on the authority to which the review application is addressed (see question33). Also, the party applying for review must have an interest in the proceeding.

The requirements also depend on the stage of the case and measure being filed. For instance, if a party is requesting injunctive relief before a contract is signed, it must be evidenced that there is a probable chance that the party’s rights are confirmed regarding the merits of the case and that the delay in conclusion of the proceeding would hinder the party’s right, so the execution of the contract should be suspended.

What are the time limits in which applications for review of a procurement decision must be made?

According to the general rule in the Public Procurement Law, applications for review may be filed up to five business days before the date scheduled for the opening of proposals, while the deadline applicable to bidders is up to two business days before such date.

Suspensive effect

Does an application for review have an automatic suspensive effect blocking the continuation of the procurement procedure or the conclusion of the contract?

Administrative review proceedings challenging decisions involving qualification of bidders or judgement of proposals have staying effects, as per the Public Procurement Law.

Judicial challenges filed will have staying effects upon due justification of public interest in the measure. The contracting party may seek an order to lift the suspension when it presents its response to the challenge. The review authority will lift the suspension if there are reasons of public interest justifying this action.

Approximately what percentage of applications for the lifting of an automatic suspension are successful in a typical year?

It is difficult to assess the percentage of successful applications for the lifting of automatic suspensions. This would depend on the supposed violation involved in the tender, the public entity and the relevance of the tender itself. Administrative challenges to decisions issued by the public entity may have automatic suspensions, but, in our experience, such suspensions are usually lifted when analysed by the public entity.

We believe that the public entity’s analysis depends on the stage of the public tender. Our impression is that a suspension is more likely to be lifted as the tender moves towards its conclusion than at the beginning of the procedure. This may be due to the fact that suspending a tender close to conclusion would cause greater damage to public interest than those at an early stage.

Notification of unsuccessful bidders

Must unsuccessful bidders be notified before the contract with the successful bidder is concluded and, if so, when?

The session held by the contracting entity to analyse and judge proposals shall be public and all participating bidders shall be present. In electronic reverse auctions, the public entity’s decision is disclosed online and to all participating bidders. Therefore, unsuccessful bidders will be notified of the selection and announcement of the successful bidder. In any case, results of public procurement procedures must be published in the respective Official Gazette.

Access to procurement file

Is access to the procurement file granted to an applicant?

Yes. The case records of the formal public procurement proceeding are available to the general public, upon request, from the contracting public entity.

Disadvantaged bidders

Is it customary for disadvantaged bidders to file review applications?

Yes. Disadvantaged bidders usually challenge decisions in public procurement procedures, either by means of administrative or judicial measures. Such challenges may be filed against the proposals submitted by other bidders or the conduct of the tender procedure itself. The number of review applications dealt with by a contracting public entity depends on the entity and the number of procedures opened by such an entity in a year. The number of review applications involving public procurement procedures cannot be estimated.

Violations of procurement law

If a violation of procurement law is established in review proceedings, can disadvantaged bidders claim damages?

Disadvantaged bidders may claim and be entitled to damages in cases where they can show a link between the violation and the damages incurred.

May a concluded contract be cancelled or terminated following a review application of an unsuccessful bidder if the procurement procedure that led to its conclusion violated procurement law?

Yes. By means of a review application, a contract may be declared null and void if any violation of the Public Procurement Law is found to have occurred during the procedure or during performance of the contract. However, case law shows that granting of such a remedy shall depend on the extent to which the contract has been performed and whether the maintenance of the contract would be more beneficial for public interest than declaring it null and void. In any case, any services rendered under the contract must be effectively paid by the contracting entity, and any damages suffered by the contracted party shall also be due, if such party did not give rise to the legal violation.

Legal protection

Is legal protection available to parties interested in the contract in case of an award without any procurement procedure?

Parties may file administrative or judicial proceedings in such cases to challenge the illegal direct award.

Typical costs

What are the typical costs of making an application for the review of a procurement decision?

Submitting a request for review of a public procurement procedure does not require a payment.

Update and trends

Update and trends

Are there any emerging trends or hot topics in public procurement regulation in your country? In particular, has the scope of applicability of public procurement law been broadened into areas not covered before (eg, sale of land) or on the contrary been restricted?

The 24-month adaptation period foreseen in the State-owned Companies Law (see question 1) expires on 30June 2018. As of this date, state-owned companies subject to this law that have not yet adapted their internal regulations as per its rules will be required to conduct tenders and execute contracts pursuant to the rules set forth in it.