Peculiarities of IT procurement
Opportunities

During the past five years, the federal government has increased public procurement proceedings for goods and services in the IT sector by approximately 106%. Such growth represents 7% of all government expenditure, equal to approximately $2.3 billion.

Peculiarities of IT procurement

Government contracts are regulated by the federal Public Procurement Act (8,666/1993), in which some provisions relate specifically to IT procurement and contracts. IT procurement is also regulated by Federal Law 10,520/2002 and Federal Decree 5,450/2005 whenever the goods and services to be acquired by the government entities are considered to be ordinary or common.

According to the Public Procurement Act, all government contracts must be preceded by a public procurement proceeding in which both domestic and foreign companies can participate. However, the act states that in procurement relating to the implementation, maintenance and improvement of information and communication technology systems considered strategic to the federal government, government entities can state a preference for domestic IT goods and services.

Although most of the bidding for such goods and services occurs by electronic auction, in some cases (particularly those involving complex systems or solutions), the 'technique and price' type of bidding is adopted. Discussions about the type of bidding to be adopted have been resolved by a ruling of the Federal Court of Audits (Technical Note 02/2008) which set out definitive parameters on the matter.

Although the validity term of public contracts governed by the Public Procurement Act is limited to 12 months in most cases, IT contracts involving equipment rental and the use of computer programs may be valid for up to 48 months.

Opportunities

More than 40,000 suppliers have participated in public procurement proceedings with the federal government. The most widely used mechanism has been the electronic auction (set out by Law 10,520/2002 and Decree 5,450/2005 and applicable to the acquisition of ordinary goods and services by government entities). Such electronic auctions have raised approximately $390 million for the federal government.

The greatest volume of procurement related to the IT sector was carried out by the Ministries of Education, Treasury and Health. The chart below(1) demonstrates the levels of IT procurement for the most relevant government entities:

Click here to view the table.

At the state and federal district level, the states of Sao Paulo and Rio Grande do Sul, as well as the Federal District itself, were the most relevant government entities contracting IT goods and services. Together they represent 71% of all procurement in the country. Software programs were the most frequent acquisitions in 2013, resulting in expenditure of approximately $350 million. Government procurement carried out through electronic auctions increased by up to 30% between 2012 and 2013.

Further opportunities for existing suppliers, as well as any companies interested in entering this market in Brazil, are expected during 2014.

Claudia Elena Bonelli and Carolina Caiado

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.