Doing Business in Brazil

6. Bidding process and administrative contracts

08/10/20

6.1. Introduction

The bidding procedure is the procedure provided for in the 1988 Constitution of the Federative Republic of Brazil, which guarantees a fair competition between agents who intend to contract with the Public Administration.

The contracting may have as its object the provision of services or acquisition of goods, and all must observe the formal administrative procedure before the contract itself, conducted by a specific governmental body, responsible for all the development of the respective public contracting. The rigor and observance of these processes reflect a duty of the public Administration, embodied in Article 37, item XXI of our Federal Constitution, to ensure the preservation of the public interest in hiring.

Regarding the stages of a bidding process, it is essential to note that the bids have at least two major phases: one internal and one external. The internal period begins with the declaration of the need for the good or service and ends with the publication of the invitation to tender. The external phase of public knowledge starts with the release of the invitation to bid and ends with the signing of the administrative contract.

6.2. Regulation and Principles

Federal Law no. 8.666/1993 regulates the bidding procedure, as well as administrative contracts, Law no. 10,520/2002 regulates in a detailed way the bidding modality called auctions, and Law 13,303/2016, which deals with the legal status of the public company, the mixed capital company, and its subsidiaries, including the bidding provisions of these entities.

Law nÂș. 8.666/93 conferred objectivity and publicity to the procedure, in addition to bringing to the bidding contest the main principles that govern Public Administration, such as:

Legality: the public Administration is bound to act under the Law, within the legal limits established. Thus, in contrast to the freedom to contract inherent in Private Law, the Public Administration can only act within limits provided for by the Law.

Impersonality: determines that Public Administration decisions will be based on objective criteria, free from any personalities. The purpose of this principle is to guarantee the best hiring conditions for the Public Administration, always privileging the public interest to the detriment of any personal advantages of those involved in the hiring.

Administrative Morality and Probity: related to the principle of impersonality, its purpose is to prevent the public administrator from extrapolating the public interest to the benefit of personal, own, or other investments; since the primary objective of all bidding is to satisfy a public interest or need.

Equality: represents the obligation of the public administrator to grant the same treatment to all participants in the event, who must compete on equal terms.

Advertising: establishes the commitment of the public bidding entity to give knowledge and publicity of its acts to the community.

Binding to the Calling Instrument: it means the obligation of the Public Administration, as well as the bidder, to submit to the terms of the calling instrument. Thus, all rules applicable to the bidding in question must be contained in the public notice or letter of invitation.

Economics and efficiency: reflect the unavailability of public goods. Besides, economics is also a duty of efficiency, insofar as it imposes the choice of the best decision in the management of public resources.

Objective Judgment of Proposals: Public Administration, in choosing the most advantageous proposal, must necessarily adhere to the criteria set out in the invitation to bid.

6.3. Modalities and Types of bidding

The modalities2 are predetermined ways to conduct the bidding process. The general classification rule is related to the sum of the amounts involved in the contract. That is, the higher the value, the more complex the procedure will be. The only exception is the auction, which is not limited to the value of the contract, but to the object to be auctioned.

Bidding modalities are:

Competition: is the modality in which any individuals who fulfill the minimum requirements established by the public notice can participate.

Limitations and values:

For engineering works and services contracts: over BRL 1,500,000.00 (one million and five hundred thousand reais)

For other contracts, such as purchases, disposals, use concessions and services: over BRL 650,000.00 (six hundred and fifty thousand reais).

Price taking: It is the bidding method between duly registered candidates or who meet the conditions required for registration and, therefore, it is very similar to the competition.

Limitations and values:

For engineering works and services contracts: up to BRL 1,500,000.00 (one million and five hundred thousand reais)

For other contracts such as purchases, sales, use concessions and services: up to BRL 650,000.00 (six hundred and fifty thousand reais).

Invitation: it is the simplest modality, intended for small value contracts, which consists of a written request sent to at least three interested parties in the field of the object of the bidding. Such interested parties can be pre-registered, or not, and are chosen by the administrative body in a total of 03 (three) guests. However, this does not exclude the expression of interest of the others registered in the specialty of the object of the notice. 

Limitations and values:

For engineering works and services contracts: up to BRL 150,000.00 (one hundred and fifty thousand reais)

For other contracts, such as purchases, disposals, use concessions and services up to BRL 80,000.00 (eighty thousand reais).

Competition: is the procedure that seeks the selection of technical, scientific or artistic works. Thus, payment is made through prizes and remuneration to the winners.

Auction: modality reserved for the sale of assets that are not being used by the public Administration, legally seized or pledged, and obtained as a result of judicial procedures or donation in payment. The goods to be sold at auction must be previously evaluated so that the minimum price is stated in the public notice, from which the offers will be considered. In the auction, no prior qualification of the bidders is necessary, due to the sale being made in cash or the short term.

Auction: modality provided for in Law 10.520/2002 and intended for the acquisition of “common” goods and services, that is, whose standards and specifications are common in the market and can be easily found, being supplied by several companies. The notice objectively defines performance and quality standards. This modality ensured greater efficiency and agility to the bidding procedure, expanding the competition, considering the possibility of verbal bidding and direct negotiation by the auctioneer.

It should be noted that for all bidding modalities, they must be conducted by a bidding commission, whether permanent or special, except for the auction, which is held by the official auctioneer or designated server and the sale, which is held by an auctioneer. That is, for every bidding, there will be a public administration entity responsible for conducting the legal dictates. However, every public bidding entity, in turn, designates an internal body to develop the bidding procedure, which is also called a judging body.

There are also different criteria in tenders, according to the needs of the public entity, different standards will be adopted to determine how the proposals will be judged by the Public Administration, as follows:

Lowest price: criterion used when the selection criterion of the most advantageous proposal for the Administration determines that the winner will be the participant who presents the bid following the specifications of the public notice and offers the lowest price. The classification among the qualified participants will be in the ascending order of the proposed rates. It is essential to highlight that this is the only criterion that can be adopted in the trading session.

Best technique: criterion used for contracting services of a predominantly intellectual nature, especially in the elaboration of projects, calculations, inspection, supervision and management and consultative engineering in general, and in particular for the preparation of preliminary technical studies, basic and executive plans, computer equipment and contracting services. The procedure for judging the proposals must be demonstrated in detail in the bidding instrument, which will set the maximum price that the public Administration proposes to pay.

Technique and price: criterion used for contracting services of a predominantly intellectual nature, as described above, whose method is essential, coupled also with the determining factor of the lowest price. The same procedures established for the criterion of best technique will be adopted; however, the classification of the participants must be made based on the weighted average of the valuations of the technical proposals and price, according to the weights to be established in the notice.

Highest bid or Offer: criterion used only in the case of the sale of assets or the granting of real use rights. The judgment of the bids is the act by which the bids are compared, the bids are classified, and the winner is chosen, to whom the object of the bid must be awarded.

6.4. release and bidding unenforceability

The bidding duty, provided for in the Federal Constitution, is the general rule for contracting with the Public Administration. Notwithstanding, Law 8.666/93 provides for exceptions to this legal duty, so that the Government may, in some cases, carry out direct contracting, without bidding.

As a rule, bidding waiver cases would be subject to competition. However, the competitive dispute may remain suppressed, at the discretion of the Public Administrator, to serve the public interest better.

The situations that require an exemption from bidding are provided for in Article 24, of Law 8.666/93, and the Public Administration may not, for its own convenience, waive bidding in other cases not listed in this provision.

In the case of unenforceable bidding, the duty to bid does not apply. It is removed for the convenience of the Administration, as in instances of a waiver under the terms of article 25, of Law 8,666/93. Let’s see:

I – for the acquisition of materials, equipment, or types that can only be supplied by a producer, company, or exclusive commercial representative, the preference of the brand is forbidden, and proof of exclusivity must be made through a certificate provided by the local trade registry. Where the bidding or the work or service would be carried out, by the Union, Federation or Employer Confederation, or even by the equivalent entities;

II – for the contracting of technical services listed in art. 13 of Law 8.666/93, of a singular nature, with professionals or companies with a notorious specialization, prohibited the unenforceability for advertising and dissemination services;

III – to hire a professional from any artistic sector, directly or through an exclusive entrepreneur, as long as it is recognized by specialized critics or public opinion.

6.5. Bidding stages

As mentioned earlier, bidding is a unified procedure that is divided into two different phases for organizational purposes—the internal phase and the external phase of public knowledge, which ends with the hiring.

Considering that the internal phase deals with regulations specific to the public Administration, we will deal with the external period in more detail below, as it is of more interest to bidders. This consists of some stages of greater or lesser complexity, depending on the chosen modality.

Competition is the most complex modality, with the following steps:

  • Publication of the notice – art. 21 of Law 8.666/93;
  • Qualification (legal qualification, fiscal regularity, technical and economic qualification) – art. 27 to 31 of Law 8.666/93;
  • Opening and classification of proposals – art. 45 et seq. Of Law 8.666/93
  • Homologation – art. 43, VI, of Law 8.666/93; and
  • Award and contract signature by the winner – art. 43, VI and art. 64, paragraph 2, of Law 8.666/93

6.6. Administrative Contracts

Unlike private contracts, the administrative contract is the mandatory adjustment document that the public Administration, in this capacity, signs with the private individual or with other entities of the Administration, in order to achieve public interest objectives. The peculiarity of this contract is the fact that it is the Administration, observing the limits of the Law, that imposes the terms of the contract, thus it is up to the individual to express his interest in contracting, only, if he agrees to adhere to the conditions imposed by that .

Thus, when contracting with the Public Administration, there is no room for negotiating the terms of the contract or the legal business itself. This is because the Administration, due to the interest it protects – public interest – is imbued with certain legally guaranteed prerogatives.

As a rule, the administrative contract succeeds the bidding procedure, that is, it occurs after the evaluation of the competitors and the conditions presented by them, and is concluded with the winner.

A draft of the administrative contract is part of the bidding notice, which allows bidders to become aware of its terms even before they start participating in the bidding.

6.7. Recommendations to take part in public biddings

Anyone interested in contracting with the Public Administration in Brazil, whether national or foreign, must pay attention to the provisions of the invitation to bid, and, prepare in advance to complete and deliver their records, public registrations, in addition to training agents who may well represent you during bidding procedures.

Another valuable recommendation is the periodic obtaining of certificates that prove its legal and fiscal regularity, issued by the public bodies to which it is submitted (jurisdiction).

In case of doubts regarding the interpretation of the public notice or eventual omission, it is possible and also recommended that interested parties send questions, in accordance with the terms of the public notice regarding the means of communication, before the documents protocol, so that those responsible for the bidding can settle the subject. 

6.8. Conclusion

The bidding process and all the procedures inherent to it, guarantee that the contracts made by the public power prioritize the interest of the community. The various types of dictates, embodied in laws no. 8.666/1993, no. 10,520/2002 and No. 13,303/2016, were created to cover each of the needs of public entities in the acquisition of goods or services.

Strict attention must be paid to compliance with laws and administrative contracts entered into, with the Court of Auditors being responsible for verifying irregularities.

 


(1) In JosĂ© dos Santos Carvalho Filho’s definition: “the linked administrative procedure whereby the entities of the Public Administration and those by subsidiaries select the best proposal among those offered by the various interested parties, with two objectives – the signing of a contract, or obtaining the best technical, artistic or scientific work” in CARVALHO FILHO, JosĂ© dos Santos – “Manual de Direito Administrativo” Ed. LĂșmen JĂșris, Rio de Janeiro, 2009, p. 226.

(2) The bidding modalities are set out in article 22 of Law 8.666/1993.


Authors: Ana Tereza Marques Parente, Vanessa Cristina Santiago e MarĂ­lia de Aguiar Monteiro.

Update: Marina Martinez Prazeres Sant’ Anna

Gaia, Silva, Gaede & Associados

Rua da Quitanda, 126
01012-010 SĂŁo Paulo – SP
Phone: +55 (11) 3797 7400
Fax: +55 (11) 3101 2226
E-mail: [email protected]
Internet: www.gsga.com.br