Brazil: New Bidding Bill of Law and impacts on compliance

In brief

The new Bidding Bill of Law provides for integrity programs as well as greater control and transparency in public tenders.

The Brazilian Bidding Law (Law 8,666/93) and other laws related to public procurement (Law 10,520/2002 and articles 1 to 47 of Law 12,462/2011) are about to be replaced by Bill of Law No. 4,253/2020, which was recently approved by the Federal Senate and is pending presidential sanction.

The new legislation, which is 27 years in the making, provides relevant updates from a compliance perspective, such as: (i) the reinforcement of internal and external controls for public procurement; (ii) the strengthening of the relevance of a compliance program for companies willing to do business with the government; and (iii) increased sanctions for irregularities in public procurement.

Key takeaways

  1. Understand the relevance of the compliance program as a business enabler.
  2. Consider revising the compliance program to meet the regulator’s standards so it can be accepted in public procurement (and monitor potential updates on future regulations).
  3. Review internal policies (especially those that involve participation in public procurement) to adapt to the new legislation.
  4. Be aware of reinforced internal and external control on public procurement.
  5. Remember the possibility of using internal and external control as a tool to defend ethics and integrity in the event of facing a public procurement with indications of fraud.
  6. Use additional transparency tools (National Public Procurement Portal) as strategy for business decisions.
  7. Adjust/enhance compliance due diligence protocols to include analysis of new transparency tools.

Our Firm's structure and expertise are available to our clients and partners seeking assistance in understanding the impacts of the new legislation and how to better adapt to it.

We highlight below the four main innovations related to integrity.

Strengthening the control of public tenders and contracts

Reinforced implementation of internal and external controls by the Public Administration: subjecting public contracts to continuous and permanent practices of risk management and preventive control; subjecting the procedure to the “three defense lines”; reinforcing the role of enforcement bodies and the already existing possibility of informing the Courts of Accounts against irregularities

Integrity program as a differential for contracting with the government

Compliance/integrity program even more relevant as a differential for entering into contracts with the government: mandatory for large-scale works, services and supplies – tenders with values above BRL 200 million; tiebreaker criterion; factor to be considered in the imposition of sanctions; and condition for the rehabilitation of a bidder or contractor.

Be aware of future regulation regarding the measures to be adopted in a compliance/integrity program (we do not expect it to differ much from the existing regulation, Decree 8,420/2015).

The internal policies or procedures of companies to prevent fraud in bids and contracts, as required by Decree No. 8,420 / 2015, should also be revised to adapt to the new legislation. We recommend special attention in the policies to cover the new type of bidding called “Competitive Dialogue” since it will allow greater interaction and negotiation with the Public Administration when compared to the old law. This may cause greater risks of fraud and corruption.

Development of a National Public Procurement Portal

A National Public Procurement Portal will be developed to bring greater transparency to the bidding process. This portal will contain information for public consultation, such as: (i) request for proposals; (ii) contracts; (iii) electronic invoices; (iv) panel for price consultations; and (v) access to the National Register of Unlawful and Suspended Companies (CEIS) and the National Register of Sanctioned Companies (CNEP).

Access to such data will be very relevant to include during integrity due diligence and audits.

Increase in sanctions

In addition, sanctions related to violations of the new Bidding Law were also increased, with the more salient points as follows: (i) the declaration of unfitness to bid and enter into contracts with the Public Administration may be up to six years; (ii) there is a provision for disregarding the company’s legal personality when used with abuse of rights or with equity confusion, which may reach administrators and partners, successor legal entities, and even related companies operating in the same industry; and (iii) bidding crimes had their penalties increased.

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*In cooperation with Trench Rossi Watanabe, a Brazilian law firm.

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