New Brazilian Public Procurement Act

As a rule, contracts entered by and between Brazilian public authorities and private parties must be preceded by a public procurement and/or public tender proceedings. The public procurement and tender proceedings have been governed specially by Law # 8,666.

However, recently enacted Law # 14,133/21 (the New Public Procurement Act or “NPPA”) has altered the framework for Government procurement proceedings and contracts entered with public entities. Although it came into force on April 1st, 2021, the rules will only be effective as of April 1st, 2023, then revoking Law # 8,666. During the following two years public entities are expected to gradually adapt their proceedings.

NPPA has reinforced that the main objective of the public procurement is to award the most advantageous result – from a broader perspective – rather than merely securing the lowest price or selecting the most advantageous bid from either a technical or price and technique combination perspective. In the event of a tied bid, the Administration shall also consider the lifecycle of the object of the procurement process, the bidders’ workplace gender equality policies and internal compliance programs. Thus, the lowest price shall not be the only objective of a public procurement proceeding and several aspects relating to the bid shall be balanced, allowing the public entity to decide on broader cost-effectiveness grounds and make better and sustainable choices, while also securing a competitive price – as overpricing has been expressly forbidden under NPPA.

One important alteration of NPPA was the incorporation of principles that formerly were mere guidelines into the rules for public procurement procedures. For example, sustainable development, formerly referred to as a “principle to be observed”, has been elevated to one of the objectives of public procurement, in addition to its status of principle. Achieving innovation, which was formerly among specific and compelling criteria to support procurement preferences, has also been granted the status of objective of public procurement, which, alongside with sustainable development, is extremely in line with the global sustainability and climate change agendas.

Multilateral Development Banks

In Brazil, although the Brazilian Development Bank has been the main financial support instrument for infrastructure investments, it seems that old players such as the Multilateral Development Banks (“MDBs”) come into a new scenario.

NPPA brought a more straightforward wording for the public procurement with international funding, expressly allowing public tenders pursuant to MDBs’ norms, as long as they comply with specific statutory conditions, thus resolving conflicts of interpretation formerly ruled by the Federal Court of Accounts and easing the influx of international investments in the future.

In summary, NPPA has expressly provided that international public procurements will be subject to the Brazilian constitutional principles rather than to its own provisions, in a clear deference to the Brazilian Constitution and the international treaties to which Brazil has become a party.

Needless to say, such investments will play an essential role in the path to overcome a long and strenuous economic crisis, as aggravated by the COVID-19 outbreak. By funding innovative and technology-driven business models, MDBs will surely help to expand high-quality and affordable lending in Brazil.