Publicado em 06/04/2021

Bidding Processes and Contracts with the Public Administration – New legal framework approved

On April 1, 2021, Law No. 14,133 came into force. The new legislation provides general rules for bidding processes and contracts with governmental entities of the federal, state and municipal public administration, including the legislative and judicial branches, special funds and entities directly controlled by public administration. Law No. 14,133 shall replace Laws Nos. 8,666/93, 10,520/2002 and 12,462/2011.

Bidding processes and contracting by state-owned corporations, mixed-capital companies and their subsidiaries shall remain governed by Law No. 13,303/2016.

Law No. 14,133 provides that bidding processes and contracting involving funds from a loan or donation from an official foreign cooperation agency or financial organization of which Brazil is a party may be admitted, and they may include the following additional conditions:

  1. conditions resulting from international agreements approved by the National Congress and ratified by the Presidency of the Republic;
  2. conditions particular to the selection and contracting provided in norms and procedures of the agencies or organizations, provided that:

(a) they are required to obtain the loan or donation;

(b) do not conflict with the constitutional principles in force;

(c) are specified in the respective loan or donation contract and have been subject to a favourable opinion from the legal entity of the financing contractor prior to the conclusion of the contract.

Law No. 14,133 shall apply to government contracts related to:

(a) sale and concession of real rights (in rem rights) to use assets;

(b) purchase, including on demand purchases;

(c) lease;

(d) concession and authorisation to use public goods;

(e) provision of services, including work by specialist technical professionals;

(f) architectural and engineering works and services; and

(g) contracting of information and communication technology.

In addition to the modalities of public procurement provided in the previous legislation, such as bidding (concorrência), contest (concurso) and auction (leilão), Law No. 14.133 also introduced a new modality of procurement called competitive dialogue – a prior procedure that may be adopted with potential selected competitors before the actual bidding process. The previous modalities of price-taking and invitation have been discontinued.

The competitive dialogue shall be limited to contracts in which the public administration:

(a) pursues to procure an object with technological or technical innovation;

(b) is unable to identify the procurement object/contract without adapting the current available solutions in the market; and

(c) is unable to establish the technical specifications precisely.

Furthermore, the competitive dialogue shall allow identification of satisfactory means and alternatives for the public administration, with emphasis on aspects such as the most appropriate technical solution, the technical requirements capable of implementing the solution already defined and / or the legal or financial contractual structure. After the conclusion of the competitive dialogue, the administration must disclose the request for proposals with well identified objective criteria and start the competitive phase of the process.

Law No. 14.133 states that, as a general rule, only the qualification documents of the winning proposal must be analysed, and that this will occur after the judgment phase of the proposals and tiebreakers. However, the public administration may opt to reverse this system, due to evidenced particularities and sensitivities of the object to be procured.

Bidding sessions should take place online and be recorded by audio and video, but the public administration may use in-person sessions, provided that these sessions are recorded by audio and video. Additionally, the public administration must register the reasons why in-person sessions were used instead of online sessions.

Law No. 14,133 also instituted a centralized website where information, notices, calls to bid, minutes of price records, contracts and amendment terms must be disclosed. The website will be called the National Public Procurement Portal and should unify the information of the bidding processes and contracts of the Union, States, Federal District and Municipalities.

Works considered to be of great value (grande vulto), works exceeding an estimated amount of BRL 200,000,000.00 (two hundred million), shall include an obligation that the contractor implements an integrity program within 6 months (six) from the signature of the contract.

New contractual provisions to government contracts were introduced by Law No. 14,133, these include:

  • The introduction of the “supply and provision of associated service” allows the contractor to take responsibility – in addition to the implementation works – for the operation and maintenance of the facility for a stipulated period. This new modality is an alternative to the complex concession contracts and public-private partnerships;
  • The introduction of insurance policies (seguro garantia) as an option to the performance bond of the contractor, in the event the bidding documents require the delivery of guarantee for works, services and supplies. The percentage of the guaranteed amount vary in accordance with the object of the contract, and, for works of “great value” (grande vulto), the insurance must cover 30% (thirty) of the initial amount of the contract.
  • The public administration may require in bidding processes for engineering services that the insurance policy includes the step-in obligation of the insurer to undertake the execution of the object of the contract, in the event of default caused by the contractor;
  • Alternative means of preventing and resolving disputes, notably conciliation, mediation, as well as dispute resolution committee and arbitration may be adopted.

With respect to the application of the new law, contracts signed before the enactment of Law No. 14,133 (that is before April 1, 2021), as well as currently ongoing bidding procedures, will not be affected by the new rules and shall be governed by the previous legislation.

New bidding procedures and contracts with the public administration that occur after the enactment of Law No. 14,133, may or may not be subject to the new law. According to Law No. 14,133, during the 2 years (two) from April 1, 2021, the contracting entity of the public administration may decide whether to apply new Law No. 14,133 or the previous legislation. Whichever rule is adopted, it must be clearly noted in the bidding documents.

After April 1, 2023, all government contracts subject to Law No. 14,133 shall be exclusively governed by Law No. 14,133.

Dias Carneiro Advogados is entirely available to provide any clarifications and to assist with this matter.