HSE University Anti-Corruption Portal
Brazil to Change Regulations on Public Contracts

An updated law regulating the procedure for carrying out public procurement and concluding public contracts has entered into force in Brazil. 

Relevant Law of 1 April 2021 No. 14.133 “On Public Procurement and Public Contracts” (Lei de Licitações e Contratos Administrativos, hereinafter referred to as the Law) replaces previous Law of 21 June 1993 No. 8.666 and is aimed, in particular, at strengthening anti-corruption measures in public procurement and other contractual relationships with the State.

Its provisions apply to the federal public bodies, public bodies of the territorial entities and local government bodies, as well as to the public funds and other structures regulated directly or indirectly by public administration and acting as procuring entities; however, the public corporations, mixed companies and their subsidiaries are exempt from these provisions. 

The Law imposes the obligation to develop and introduce a set of corruption prevention measures on the corporate winners of the bids whose value exceeds 200 million BRL (roughly 27 million USD) within six months since the public contract is concluded. The content of this compliance programme along with the provisions regarding the confirmation that relevant measures are adopted and penalties for the failure to comply with the relevant obligation are included in the contract.

The Law also stipulates that if a company has a compliance programme developed “in line with the guiding principles of the oversight bodies” in place when it bids for a tender, it will constitute a decisive factor in favour of this company during the selection procedure provided that it has equal total point scores to those of other bidders. The requirements for such compliance programmes are set down by Law of 2 February 2018 No.6.112 and Decree of 18 March 2015 No.8.420 (in Russian).

In addition, according to the Law, the existence of a set of corruption prevention measures at the corporate level will be a mitigating factor in the event that the organisation is held administratively liable, while its subsequent introduction (improvement) will constitute an exonerating ground for admitting the organisation to procurement procedures if it was previously prohibited from tendering as a penalty for:

  • filing false information and/or false documentation when launching a bid, concluding a contract and providing contracted services;
  • committing crimes against public administration as provided for by Law of 1 August 2013 No. 12.846 “On a Clean Company” (the Clean Company Law).

The Law also contains provisions on enhanced transparency of public procurement, providing for the establishment of the National Portal of Public Procurement (Portal Nacional de Contratações Públicas), where the National register of disqualified and suspended companies (Cadastro Nacional de Empresas Inidôneas e Suspensas) and the National register of punished companies (Cadastro Nacional de Empresas Punidas) will be published, which will allow procuring public entities to conduct prior due diligence procedures with respect to suppliers.

In spite of the fact that the updated Law opens up new opportunities for combating corruption, some experts believe that its adoption does not address certain persisting problems.

Firstly, the Law does not provide for the obligation to introduce compliance programmes for “minor” procurements, which means that there are still no incentives for SMEs to adopt corruption prevention measures.

Secondly, if corruption crimes are detected in public procurement procedures, the most severe criminal penalties are still imposed only on culpable natural persons, whereas the legal persons that considerably benefit from illicit activities remain “out of business”.

Thirdly, the procurement legislation stipulates that an administrative penalty can be imposed on a company only if it infringes the terms of the contract, while the maximum fine is determined in the respective public contract or is limited to the value of the contract; such an approach means that the fines for the breach of the Law on procurement are much less substantial than the sanctions that can be imposed on an organisation under the Clean Company Law and are estimated on the basis of the profit margins of the offending organisation. 

Corruption in public procurement

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