public procurement in brazil: overview · • 2013 fifa confederations cup; • 2014 fifa world...

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By in-house counsel, for in-house counsel.®

Association of Corporate Counsel 1025 Connecticut Avenue, NW, Suite 200

Washington, DC 20036 USA tel +1 202.293.4103, fax +1 202.293.4701

www.acc.com

InfoPAKSM

Public Procurement in Brazil: Overview Sponsored by:

Public Procurement in Brazil: Overview

Copyright © 2014 Association of Corporate Counsel

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August 2014

Provided by the Association of Corporate Counsel 1025 Connecticut Avenue, NW, Suite 200 Washington, DC 20036 tel +1 202.293.4103 fax +1 202.293.4107 www.acc.com

This InfoPAKSM provides practical analysis of topical cross-border issues and country-specific Q&A guides on public procurement law and practice worldwide. The Q&A guide aims to give a structured overview of the key practical issues including, for example, the applicable legislation, entities and contracts covered (and thresholds), procurement procedures, the regulation of concessions and PPPs and recent trends.

The country-specific Q&A gives a high level overview of applicable legislation, scope of rules, procurement procedures and enforcement, recent trends and proposals for reform. In particular, it examines entities and contracts covered, concessions, privatisations and PPPs, contract award criteria, alternative bids, and changes to an existing contract.

To compare answers across multiple jurisdictions, visit the Public Procurement Country Q&A tool at http://uk.practicallaw.com/0-521-3360 and the Public Procurement EU Country Q&A tool at http://uk.practicallaw.com/7-521-3187.

This Q&A is part of the Practical Law multi-jurisdictional guide to public procurement. For a full list of jurisdictional Q&As visit www.practicallaw.com/publicprocurement-mjg.

Contents

I. Legislative Framework ..................................................................................................................... 5

A. What Is the Principal Legislation that Regulates Public Procurement? What Regulatory Authorities Are Responsible for Public Procurement Enforcement? ......................................................................................................... 5

B. What Are the Overriding Principles of the Legislation Listed in Section I.A? ........................................................... 6

C. Regulation of Specific Industries ........................................................................................................................................... 7

II. Recent Trends ................................................................................................................................... 8

A. What Are the Recent Trends in the Public Procurement Sector? .............................................................................. 8

III. Scope of Rules ................................................................................................................................. 10

A. Entities Covered ..................................................................................................................................................................... 10

B. Contracts Covered ................................................................................................................................................................ 10

C. Concessions ............................................................................................................................................................................ 12

D. Privatisations and PPPs ......................................................................................................................................................... 13

E. Shared Services and "In-House" Arrangements .............................................................................................................. 14

IV. Procurement Procedures .............................................................................................................. 14

A. What Procedures Do Regulated Entities Use When Carrying out Procurements? Can Regulated Entities Freely Choose Between Procedures? When Is It Appropriate to Use Each Procedure? ..................................... 14

B. Key Features ........................................................................................................................................................................... 15

C. Technical Specifications ........................................................................................................................................................ 18

D. Alternative Bids ...................................................................................................................................................................... 18

E. Contract Award Criteria ..................................................................................................................................................... 18

F. Changes to an Existing Contract ........................................................................................................................................ 19

V. Enforcement .................................................................................................................................... 20

A. Who Can Bring a Claim for Non-Compliance with Procurement Legislation? What Are the Available Review Procedures? Are There Any Associated Statutes of Limitation? ................................................................. 20

VI. Reform ............................................................................................................................................. 22

A. Are There Any Proposals for Reform of the Procurement Legislation? If So, When Are They Likely to Be Implemented? .......................................................................................................................................................................... 22

VII. About the Authors ................................................................................................................................ 22

A. Lauro Celidonio Neto .......................................................................................................................................................... 22


Copyright © 2014 Practical Law Company (PLC) & Association of Corporate Counsel

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B. Rosoléa Miranda Folgosi ....................................................................................................................................................... 23

C. Paulo Eduardo Lilla ................................................................................................................................................................ 24

For more ACC InfoPAKs, please visit http://www.acc.com/infopaks

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I. Legislative Framework

A. What Is the Principal Legislation that Regulates Public Procurement? What Regulatory Authorities Are Responsible for Public Procurement Enforcement?

1. Regulatory Framework

In Brazil, public procurement and administrative contracts are regulated at the federal, state and local levels. The Federal Constitution (Constitution) sets out the general framework for public procurement procedures which are applicable at all levels of the public administration. These constitutional provisions are regulated by Federal Law No. 8,666/93 (Public Procurement Act) and cannot be overridden by state and local laws. Article 37 of the Constitution provides general rules and principles to be complied with by all public administration entities. Finally, Article 175 of the Constitution confirms that public tender procedures are mandatory prior to the grant of public service concessions (see Section III.C.1).

The Public Procurement Act regulates both public procurement proceedings and administrative agreements entered into by public administration entities for the acquisition of goods and services. It also regulates the procedures for the sale of publicly owned goods and establishes certain administrative and criminal sanctions, which may be imposed on bidders as a result of unlawful conduct.

Federal Law No. 12,462/2011 regulates the Special Regime for Public Procurements (also known as RDC), which was enacted to expedite public procurement procedures. It is applicable only in the following circumstances:

■ Procurements for the:

• 2016 Olympic and Paralympics Games;

• 2013 FIFA Confederations Cup;

• 2014 FIFA World Cup.

■ Infrastructure projects and the provision of services pertaining to airports located within 350 km of the cities hosting these sporting events.

■ Federal Law No. 10/2002 provides bidding rules for reverse auction bid procedures (pregão), which are mandatory for purchases of ordinary goods and services at the lowest price (see Section II.A).



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Federal Law No. 8,987/95 regulates public procurement for public service concessions and Federal Law No. 10,079/04 sets out general rules governing bidding and contracting in the context of public-private partnerships (PPPs).

Brazil is not a signatory to the World Trade Organization Agreement on Government Procurement (GPA). The only applicable supra-national regime for public procurement is the Mercosur Protocol of Governmental Procurement, entered into by Brazil, Argentina, Paraguay, Uruguay and Venezuela.

2. Regulatory Authorities

The Constitution grants exclusive authority to the federal government to regulate tenders and public contracting in general, which is binding on all other federative entities (that is, states, municipalities and the Federal District) (Article 22 (XXVII)). However, these federative entities can also enact their own public procurement laws, provided those laws do not conflict with the Public Procurement Act and related federal laws.

B. What Are the Overriding Principles of the Legislation Listed in Section I.A?

Under the Constitution, all public entities must comply with the principles of lawfulness, impersonality, morality, publicity, and efficiency (Article 37). Furthermore, except in certain cases, public works, services, purchases, and sales must be carried out by means of a public bid procedure that ensures equal conditions to all bidders, including provisions that establish payment obligations in accordance with conditions that were previously proposed by the bidder.

The purpose of the bid is to provide the government with the most advantageous agreement in compliance with the principles set out in Article 3 of the Public Procurement Act, namely:

■ Lawfulness.

■ Impersonality.

■ Morality.

■ Equality.

■ Publicity.

■ Administrative probity.

■ Adherence to the bid notice.

■ Sustainable national development.

■ Objective judgment.

■ Any related principles.


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Based on these core principles and the constitutional principle of equality in particular, the law expressly forbids invitations to bid containing provisions intended to frustrate the competitive bid process, including the imposition of any preferences or discrimination related to the place of birth or principal place of business of the bidders, or any other circumstance which is improper or irrelevant to the subject matter of the contracting.

Therefore, equality represents the most important principle of the bid process. Equality means free access of all interested parties seeking to contract with the public administration, thereby increasing competition among bidders. Equality is also related to the principle of impersonality, as the law forbids discrimination based on personal characteristics of the interested parties.

However, recent amendments to the Public Procurement Act have provided certain exceptions to the principle of equality in government purchases. Therefore, Complementary Law No. 123 of 14 December 2006 created preferential treatment for micro- and small-size companies in tenders. In addition, Federal Law No. 12,349/10 was enacted to amend the Public Procurement Act (see Section II.A).

The main purposes of these measures are to promote sustainable economic development and to strengthen production of Brazilian goods and services.

C. Regulation of Specific Industries

1. Are Any Industries Subject to Specific Regulation?

The rules concerning local content applicable in the oil and gas industry in Brazil are notable. The ANP, the Brazilian oil and gas regulatory agency, establishes requirements by which the participants in the oil and gas exploration and production sector (E&P) must acquire materials, equipment, and services from local suppliers. As of the initial bidding rounds, local content requirements are becoming more restricted, including higher minimum local content percentages for the exploration phase and the development stage of the oil and gas blocks, which are verified by the ANP in audits. In case of non-compliance, the concessionaires are subject to significant fixed fines.

Minimum local content percentages applicable in the oil and gas industry may also apply to agreements with Brazil's National Development Bank (Banco Nacional de DesenvolvimentoEconômico e Sustentável) (BNDES).

There are no other industries subject to specific regulation.



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II. Recent Trends

A. What Are the Recent Trends in the Public Procurement Sector? Upcoming sporting events, and in particular, the 2014 World Cup and the 2016 Olympic Games, have led to important infrastructure projects in key sectors of the Brazilian economy. Investments are being made by the federal government for improvement of port terminals intended for tourism, as well expansion of airports, as determined by the "Matrix of Responsibility", a document that defines the responsibilities and deadlines for each federative entity (see Section I.A.2) in relation to projects for urban mobility, stadiums, and adjacent areas.

In view of the tight deadlines for the conclusion of important infrastructure projects, a number of tenders have been carried out by different branches of the public administration, thereby offering unprecedented opportunities to foreign companies, which generally participate in public procurement procedures in consortium with Brazilian partners. The recent auction for the concession of the three largest Brazilian airports – Guarulhos (São Paulo), Viracopos (Campinas), and Brasília – is a good example of the increasing participation of foreign companies in public procurement procedures in Brazil.

Considering the need to speed up public procurement proceedings, it is expected that the RDC, which is applicable only to procurements of works and infrastructure projects related to the upcoming sport events, will soon be extended to other sectors as part of the Growth Acceleration Program (PAC) promoted by the federal government to increase public and private investments in key infrastructure sectors. In this respect, both the federal government and the private sector have sought to reduce bureaucracy and formalism in public procurement procedures to keep pace with economic growth in Brazil, as well as to ensure more efficiency and speed in public contracting.

The need to simplify and speed up public procurement is visible in the increasing reliance of the public administration on reverse auction-type bid procedures, including electronic auctions (pregão eletrônico). These simplified public procurement procedures are mandatory for purchases of ordinary goods and services at the lowest price. Ordinary goods or services are defined as those that are widely available on the market and whose performance and quality standards can be objectively defined in the bid notice. However, the public administration has used electronic reverse auctions to acquire a variety of goods and services that cannot be deemed "ordinary". This trend is notable primarily in the information technology sectors, including hardware and software, as well as in the automation and pharmaceutical sectors. In any event, the reliance of the public administration on electronic auctions has improved transparency and competition, and reduced costs, in public procurement procedures.

A notable recent development is the enactment of Federal Law No. 12,349/10, which, among other things:


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Establishes a preference for Brazilian products and services in governmental purchases.

■ Creates a preferential margin for Brazilian products and services that cannot exceed 25% of the price of similar foreign products and services, and must be established by the federal government for different classes of products and services based on legally mandated research. (An additional preference margin can be established for Brazilian manufactured products and services resulting from technological developments and innovations occurring in Brazil.)

■ Provides that in tenders intended for implementation, maintenance, and improvement of information technology and communication systems, which are deemed strategic by the federal executive branch, the bidding process may be limited to goods and services with technology developed in Brazil and produced in accordance with the basic production process referred to in Law No. 10,176 of 11 January 2001.

The federal government must establish preference margins in relation to different classes of products and services based on previous research mandated by law. In this respect, the government issued Decree No. 7.546/2011 to regulate the provisions of Federal Law No. 12,349/10 and to create the Interministry Commission for Acquisitions (CI-CP). The CI-CP is responsible for proposing and monitoring the application of the preference margin for nationally manufactured products and services.

Although some scholars have questioned the constitutionality of such preference rules on the grounds that they may violate basic principles of equality and impersonality, the government takes the position that these provisions are supported by Article 3 of the Constitution, which provides for assurance of national development as one of the purposes of the Federative Republic of Brazil. Another argument often used is that these rules comply with Article 219 of the Constitution, which deals with incentives for the domestic market as a means of promoting cultural and socio-economic development, the welfare of the people, and Brazilian technological autonomy.

In 2003, the government introduced the Programme of Mobilisation of the National Oil and Gas Industry (Programa de Mobilização da Indústria Nacional de Petróleo e Gás Natural) (Prominp) to maximise the use of national goods and services in projects in Brazil and abroad. Since the creation of the programme, the participation of the national industry in the sector increased from 57% to about 75% in 2011, according to indicators issued by the ANP (see Section I.C.1).



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III. Scope of Rules

A. Entities Covered

1. Which Entities Must Comply with the Procurement Rules? Are There Any Exemptions?

a. Entities Covered

The procurement legislation discussed in Section I.A applies to all public administration entities of the government, states, municipalities, and the Federal District. This covers:

■ All governmental bodies subordinated to the executive branch, such as state secretariats and ministries (direct public administration).

■ Autonomous governmental agencies, regulatory agencies, public foundations, and other public entities such as state-owned companies and companies that are partly state-owned (indirect public administration).

b. Exemptions

Although there are no general exceptions, some state-owned and party state-owned companies benefit from special rules (see Section I.B).

B. Contracts Covered

1. What Contracts Do Procurement Rules Cover? Are There Any Exemptions?

a. Contracts Covered

Public procurement procedures are mandatory when contracting with the public administration. Therefore, the following is subject to regulation:

■ All administrative agreements for the sale of goods or the rendering of services to the public administration.

■ Agreements for the concession of public services.

■ The sale of public assets to private parties.


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b. Exemptions

Exemption from public procurement procedures is possible in the following two circumstances:

■ Waiver of the bid procedures.

■ Inapplicability of public procurement.

The law may waive bid procedures for public interest reasons. The Public Procurement Act provides a long list of circumstances in which bid procedures can be waived at the discretion of the public administration, such as, for example:

■ The low value of the contract, in which case the cost of holding a bid cannot be recouped.

■ Exceptional circumstances, such as war, riot, emergency, or public calamity.

■ Purchases of products or services supplied by a department or entity of the public administration that was specifically created to provide such products or services.

■ Circumstances involving threats to national security.

Public procurement is also inapplicable in the absence of competitive conditions. This may occur, for example, as a result of the unique characteristics of the product, goods or technologies protected by intellectual property and other exclusive rights, the acknowledged expertise of a service provider, and any other situation that renders competition among bidders unfeasible.

2. Are There Specific Thresholds to Determine If a Contract Is Subject to the Public Procurement Regime? Are There Any Aggregation/Anti-Avoidance Rules?

a. Thresholds

Bid procedures are required if the following thresholds are met (Public Procurement Act):

■ Engineering services: BRL15,000.

■ Other goods and services: BRL8,000.

These limits are increased to BRL30,000 for engineering services and to BRL16,000 for other goods and services in case of procurements carried out by the following public entities (indirect public administration):

■ State-owned companies.

■ Mixed-capital companies.



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■ Regulatory agencies.

■ Foundations.

■ Other governmental entities.

In addition, there are threshold values to define the procurement procedure that the Public Administration must employ (see Section IV.A).

b. Aggregation/Anti-Avoidance Rules

There are no aggregation or anti-avoidance rules in the Public Procurement Act. However, any attempts to circumvent the Public Procurement Act and related federal law, as well as fraud or acts of corruption, are subject to control by the Accounting Court and also by the Federal Prosecutor's Office.

C. Concessions

1. Does the Procurement Regime Apply to Concession Contracts? If Not, How Is the Award of Concession Contracts Regulated?

Public service concessions are subject to public procurement proceedings provided under Federal Law No. 8,987/95. This law applies to all government concessions and sets out general rules that should be followed by states, municipalities, and the Federal District, even though these federative entities are authorised to enact their own concessions laws.

Public service concessions are defined as the operation of any public facilities or services at the private party's (concessionaire) risk for a definite period. The remuneration of the concessionaire is the rate charged to users of the services. A concessionaire must fulfil conditions of regularity, continuity, efficiency and moderate rates in the rendering of public services. Concession contracts can involve the rendering of public services only, or can also include construction of public works.

The following criteria for awarding a concession can be used:

■ Economic, such as lower rates to be charged to end users, higher payments payable by the state, or a combination of both.

■ Technical.

■ A mix of the economic and technical criteria.

Before the public procurement proceeding, the federative entity responsible for the public service in question must justify, by means of a written report, why the concession is in the public interest.


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D. Privatisations and PPPs

1. Are Privatisations and PPPs Subject to the Procurement Regime? If Not, What Are the Relevant Legal Rules?

a. Privatisations

Federal Law No. 9,491/97 sets out rules regarding the privatisation of companies directly or indirectly controlled by the government, states, municipalities and the Federal District. Privatisation must be previously approved by law and is generally subject to a public procurement proceeding. Methods of privatisation include, among others (Federal Law No. 9,491/97):

■ Transfer of corporate control.

■ Sale, lease, rental, or assignment of public goods and facilities.

b. PPPs

Federal Law No. 11,079/04 sets out rules regarding public procurement and contracting with PPPs. This law defines PPPs as two types of concessions for public services:

■ The sponsored concession.

■ The administrative concession.

The sponsored concession is the same as the conventional public service concession under Law No. 8,987/95 (see Section III.C.1), as the remuneration of the concessionaire consists of payments by end users and also a subsidy granted by the public administration. The administrative concession is not an actual concession for public services, as the public administration pays the private party for the services rendered.

Brazilian PPPs must create a special purpose vehicle (SPV) to provide the services as a concessionaire and to receive payments. The public administration entity may guarantee the payment obligations of the PPP, such as, for example, through segregation of revenues, use of special funds and the taking out of a performance bond.

The minimum value of a PPP contract is BRL20 million and its duration must be between five and 35 years. Finally, a PPP contract cannot have as its sole purpose the provision of workers, the execution of public works, or the installation and supply of equipment.



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E. Shared Services and "In-House" Arrangements

1. Do Shared Services Projects and "In-House" Arrangements Trigger the Application of the Public Procurement Requirements? Are There Any Exemptions?

The rules provided by the Public Procurement Act are applicable to co-operative agreements entered into by public entities with private parties. Procurement procedures are required where a co-operative arrangement is granted on an exclusive basis (that is, when a single private entity is chosen by the public administration to the detriment of third parties that possibly could be interested in entering into the arrangement). The co-operative arrangements among entities of the public administration not involving private parties do not require procurement procedures.

IV. Procurement Procedures

A. What Procedures Do Regulated Entities Use When Carrying out Procurements? Can Regulated Entities Freely Choose Between Procedures? When Is It Appropriate to Use Each Procedure?

1. Available Procedures

The following procurement procedures are available:

■ Competitive bidding (concorrência).

■ Request for quotation (tomada de preços).

■ Invitation to bid (convite).

■ Bidding contest (concurso).

■ Auction (leilão).

■ Live or electronic reverse auction (pregão).

These procedures are governed by the Public Procurement Law and Law No. 10,520/02.


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2. Freedom of Choice

Regulated entities cannot freely choose between the procurement procedures available. The choice depends on the nature and value of the contract, as follows:

■ Competitive bidding:

• engineering projects and services valued in excess of BRL1.5 million;

• purchases of goods and services valued in excess of BRL650,000

■ Request for quotation:

• engineering projects and services valued up to BRL1.5 million;

• purchases of goods and services valued up to BRL650,000.

■ Invitation to bid:

• engineering projects and services worth up to BRL150,000;

• purchases of goods and services worth up to BRL80,000.

■ Bidding contest. This procedure is used when the public administration entity invites parties to submit technical, scientific, or artistic works. The winners receive prizes or remuneration.

■ Auction must be used when the public entity decides to sell public goods, including assets that are no longer of any use to it, and confiscated goods.

■ Live or electronic reverse auction must be used for purchases of ordinary goods and services, particularly those that are widely available on the market and whose performance and quality standards can be objectively defined in the bid notice.

3. Suitability

See Section IV.A.2.

B. Key Features

1. What Are the Key Features of Each Procedure? What Are the Applicable Time Limits?

As a general rule, the procurement procedure is divided into the following stages:

■ The procedure starts with the publication of the bid notice, which contains the requirement for participation, the description of the object of the bid, and the contractual terms and conditions.



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■ Following publication of the bid notice, interested parties must submit qualification documents and proposals within the term established by law. After this term expires, the bidding committee reviews the qualification documents and determines whether interested parties are eligible to participate in the bid procedures. Any decision concerning qualification is subject to administrative appeal (see Section V.A).

■ On completion of the qualification stage, the bidding committee evaluates technical and/or commercial proposals and classifies them according to the objective criteria described in the bid notice. This decision is also subject to administrative appeal.

■ The last stage comprises ratification of bid procedures by an authority superior to the bidding committee, followed by the award of the contract to the winning bidder.

The order of the stages for qualification and review of proposals is inverted in live and electronic reverse auction proceedings, as well as in the bid procedures carried out in accordance with the RDC rules. This may also apply in public procurement proceedings for concessions and PPP projects. In this case, commercial proposals are assessed in advance by the bidding committee. The bidding committee assesses only the technical proposal, if applicable, and qualification documents of the participant that has submitted the best commercial proposal. Therefore, if this participant fails to fulfil qualification requirements, the bidding committee will evaluate the remaining proposals in descending order until a winner is declared.

Key features and applicable time limits of the different types of bid procedures are as follows:

a. Competitive Bidding

Key features. This procedure applies to public procurements involving large sums of money and/or complex projects and services. It is mandatory for:

■ The purchase or sale of real estate.

■ Concessions.

■ International bids.

For complex procurements that require the procuring entity to engage in careful assessment of technical qualification of bidders, a pre-qualification stage may be included in the procedure. At the pre-qualification stage, the procuring entity evaluates technical qualification documents upfront. As a consequence, proposals submitted by non-qualified bidders will be disregarded.

Time limits. The bid notice must be published no less than 45 days before the date scheduled for the submission of qualification documents and proposals.


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b. Request for Quotation

Key features. Companies previously registered with the public administration entities as suppliers of certain products or services are called to participate in the bid procedures.

Time limits. Bid notices must be published at least 30 days before the date scheduled for the submission of proposals. Suppliers must register with the public administration at least three days before the date scheduled for the submission of bids.

c. Invitation to Bid

Key features. The procuring entity must invite at least three participants, irrespective of their registration. Companies that were not invited can also participate as long as they are previously registered and formally express their intention to participate at least 24 hours before the submission of proposals.

Time limits. Bid notices must be published at least five business days before the date scheduled for the submission of proposals.

d. Bidding Contest

Key features. Although it is classified as a type of procurement procedure, the contest has special features that make it different from the others.

Time limits. Bid notices must be published at least 45 days before the date scheduled for the submission of proposals.

e. Auction

Key features. The winner of the auction is selected on the basis of the highest bid. All procedures are carried out by auctioneers.

Time limits. The bid notices must be published at least 15 days before the date scheduled for the submission of qualification documents and proposals.

f. Live or Electronic Reverse Auction

Key features. The order of the stages for qualification and review of proposals are inverted in order to expedite the procedures (see above).

Time limits. The bid notices must be published at least eight business days before the date scheduled for the submission of proposals.



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C. Technical Specifications

1. Are There Any Requirements Concerning Technical Specifications of Tenders?

Technical specifications are permissible, provided that they do not unreasonably reduce the competitiveness of the tender. The Public Procurement Law expressly forbids the procuring entity to require evidence as to activities or capabilities valid for specific times and periods or at specific locations, or any other evidence not provided for by law which may impede participation in procurement procedures. Technical proposals are usually required for more complex procurements, and they are not applicable for the procurement of ordinary goods and services. Technical specifications are therefore not used in live or electronic auctions.

D. Alternative Bids

1. Are There Specific Rules in Relation to Alternative Bids?

There are no rules on alternative bids under Brazilian law.

E. Contract Award Criteria

1. What Are the Requirements Relating to Contract Award Criteria?

Contracts must be awarded on the basis of objective and clearly described criteria. The criteria include the:

■ Best price.

■ Best technique.

■ Best technique and price.

For auctions, the higher bid is the prevailing criteria. In reverse auctions the award criterion is the lowest price. Moreover, the RDC provides for an additional criterion based on the highest discount or highest economic return for the procuring entity. Finally, preference margins for Brazilian products and services may be taken into account in the review of proposals in certain circumstances (see Section II.A).


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F. Changes to an Existing Contract

1. Does an Extension or Amendment of an Existing Contract Require a New Procurement Procedure?

a. Extension of Contract

Contracts that have indefinite terms are forbidden under the Public Procurement Law. Extensions to the initial term of a contract are permitted, provided that they are specified in the bid notice and duly justified. Contracts for continuing services can be extended for equal and successive periods, limited to a total of 60 months. In addition, contracts for the rental of equipment and software licensing can be extended up to 48 months.

Finally, contracts for the concession of public services and PPPs can be extended to enable the return of the investments made by the concessionaire. However, the overall duration of a PPP contract must not exceed 35 years, including any extensions.

b. Amendment of Contract

A contract can be amended subject to proper justification in the following circumstances (Public Procurement Law):

■ Unilaterally by the Administration:

• when the plan or specifications are modified to better meet objectives from a technical point of view;

• when it is necessary to modify the value of the contract as a result of an increase or reduction in the quantities established in the agreements, within the limits permitted by law.

■ By mutual agreement of the parties:

• when replacement of the performance bond is advisable;

• when the strategy for execution of the works or services, as well as the manner of supply, must be changed following a determination that the original contractual terms are inapplicable;

• when the payment method must be changed due to supervening circumstances, provided that the initial amount is kept updated; and

• when it is necessary to restore the initial economic and financial balance of the contract:

■ in the event of supervening and unforeseen facts, or predictable but non- calculable facts, that frustrate execution of the contract, or



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■ as a result of acts of god, force majeure, or other extraordinary circumstances that prevent the contract from being properly performed.

In addition, the contractor must accept, subject to the same contractual conditions, increases or decreases that are introduced in the works, services, or purchases of up to 25% of the original value, with monetary adjustment (that is, adjustment for inflation). This limit can be raised up to 50% where the restoration of buildings or equipment is involved.

V. Enforcement

A. Who Can Bring a Claim for Non-Compliance with Procurement Legislation? What Are the Available Review Procedures? Are There Any Associated Statutes of Limitation?

1. Right to Bring a Claim

There are several remedies available to bidders and third parties to challenge non-compliance with procurement laws. These remedies are ensured by the Constitution and can be pursued both on the administrative and judicial levels.

Under the Public Procurement Act, any person has the right to challenge the bid notice up to five business days prior to review of the qualification documents. Bidders have the right to challenge the bid notice up to two business days before review commences. The challenge must be addressed to the bid committee in charge of the procurement procedure.

For live reverse auctions, any person can challenge the bid notice or request clarifications with regard to the procurement procedure up to two business days prior to the submission of bids. In case of electronic reverse auctions, challenges to bid notices and requests for clarification must be sent to the auctioneer by e-mail up to three days before the date of the reversed auction.

Bidders can file administrative appeals to challenge decisions undertaken by the bid committee with regard to:

■ Bidder qualifications or disqualifications.

■ Review of technical or commercial proposals.

■ Annulment or revocation of procurement proceedings.


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■ Denial of the request for the applicant's registration with the government as supplier, amendment thereto, or the cancellation thereof.

■ Unilateral termination of contract.

■ Administrative sanctions such as warnings, temporary suspension from participating in procurement proceedings, or fines.

The appeal must be filed with the bid committee within five business days as of the notification of the decision or the publication of the minutes (or three business days in case of reverse auction).

In addition to administrative remedies, bidders have the constitutional right to file appeals with the courts to challenge any decision undertaken by the Public Administration during the public procurement proceeding. Federal courts have jurisdiction for public procurements carried out by public entities at the federal level, while state courts have jurisdiction for public procurements carried out by public entities at the state and municipal levels. Public administration bodies are bound by any court decision.

2. Enforcement Procedures

Administrative appeals are decided by superior authorities (such as ministries, state secretaries and presidents of state-owned companies), in circumstances where the bid committee or other competent authority chooses not to reconsider its decision. Moreover, a request for reconsideration of a decision by superior authorities can be made in cases where the procuring entity declares that the private party lacks standing to enter into agreements with public entities. Requests must be filed within ten business days of notification of the decision.

It is not possible to estimate how long either administrative or judicial review would take, as the amount of time required usually depends on the particularities of each case. In any case, procurement procedures will not be concluded until a final administrative decision is issued.

3. Statutes of Limitation

Law No 9,784/99 regulating the federal administrative process, authorises public administration entities to nullify any governmental contract illegally issued. However, when a private party is a beneficiary of this contract, the contract can only be nullified within five years following the execution of the contract, unless the public administration entity can prove that the beneficiary party has acted in bad faith to obtain irregular benefits (for example, when a private party acts in concert with the public agent to issue an irregular renewal of an agreement).



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VI. Reform

A. Are There Any Proposals for Reform of the Procurement Legislation? If So, When Are They Likely to Be Implemented?

There are two important bills currently pending before the Brazilian Congress:

■ Bill No. 77,709/07, which was proposed by the executive branch to amend the Public Procurement Act. The main proposed change is to permit all types of bids to be carried out electronically, similar to the reverse auction proceeding.

■ Bill No. 6,826/2010, which proposes rules to prevent corruption and fraud in public procurement proceedings and governmental contracts. Although the Public Procurement Act contains administrative and criminal sanctions to deal with corruption and fraud in procurement procedures, this bill proposes a stricter approach to companies and individuals involved in such unlawful acts.

VII. About the Authors

A. Lauro Celidonio Neto Mattos Filho, Veiga Filho, Marrey Jr. & Quiroga Advogados

T +55 11 3147 7669 F +55 11 3147 7770 E [email protected] W www.mattosfilho.com.br

Qualified. Brazilian Bar, São Paulo Chapter, 1983

Areas of practice. Regulation (including administrative contracts and public procurement procedures); infrastructure; anti-trust law.

Recent transactions

■ Advised a consortium consisting of Construtora Queiroz Galvão, BTG Pactual and Ferrovial Aeropuertos in the procurement procedures carried out by the Brazilian Civil Aviation Authority (ANAC) for concessions pertaining to Brazil's three major international airports: Guarulhos (São Paulo), Campinas, and Brasilia.


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■ Advised Oi Telecommunications - Telemar Norte Leste S.A. in the procurement procedures by which the Brazilian Telecommunication Authority (ANATEL) auctioned authorisations for using radiofrequencies of 451 MHz to 458 MHz (rural band) and 2500 MHZ to 2690 MHZ (4G band), in one of the most important technological developments in Brazil of the decade.

■ Advising Fiat Automóveis S.A in procurement procedures by drafting defences, claims, and legal opinions on administrative and constitutional matters.

■ Advised Construtora Andrade Gutierrez S.A. and Construtora Camargo Correa in connection with administrative proceedings brought before the São Paulo Public Prosecutor (Ministério Público do Estado de São Paulo) and Metro's Internal Affairs regarding procurement procedures conducted for the award of a public works contract for the extension of Line 5 of the São Paulo subway system.

B. Rosoléa Miranda Folgosi Mattos Filho, Veiga Filho, Marrey Jr. & Quiroga Advogados


Qualified. Brazilian Bar, São Paulo Chapter, 1980; former state attorney

Areas of practice. Regulation (including administrative contracts and public procurement procedures) and infrastructure.

Recent transactions




■ Advised Construtora Andrade Gutierrez S.A. and Construtora Camargo Correa in connection with administrative proceedings brought before the São Paulo



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Public Prosecutor (Ministério Público do Estado de São Paulo) and Metro's Internal Affairs regarding procurement procedures conducted for the award of a public works contract for the extension of Line 5 of the São Paulo subway system.

C. Paulo Eduardo Lilla

Mattos Filho, Veiga Filho, Marrey Jr. & Quiroga Advogados


Qualified. Brazilian Bar, São Paulo Chapter, 2004

Areas of practice. Regulation (including administrative contracts and public procurement procedures) and infrastructure.

Recent transactions




■ Advised Construtora Andrade Gutierrez S.A. and Construtora Camargo Correa in connection with administrative proceedings brought before the São Paulo Public Prosecutor (Ministério Público do Estado de São Paulo) and Metro's Internal Affairs regarding procurement procedures conducted for the award of a public works contract for the extension of Line 5 of the São Paulo subway system.

■ Advised NCR Corporation in a procurement procedure conducted by Caixa Economica Federal by preparing defences and administrative claims and providing a legal opinion on administrative and constitutional matters.

■ Represented European Aeronautic Defence and Space Company (EADS)/Dornier GmbH in relation to contractual issues arising from the implementation of the projects Pro-Amazônia and PROAMATEC.

public procurement in brazil: overview · • 2013 fifa confederations cup; • 2014 fifa world...

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