The bidding process for public contracts in Brazil
All the questions
The bidding process
The tender notice is the most essential instrument of a tender procedure in Brazilian public procurement. It sets:
- the subject of the contract;
- the period and conditions for the performance of the contract;
- the penalties applicable in the event of breach;
- background project information;
- Conditions of participation;
- how the proposals will be presented;
- the criteria for analyzing the proposals;
- award eligibility criteria;
- price adjustment criteria;
- Payment Terms; and
- the rules and instructions for contesting the rewards.
The notice of announcement is the law applicable to the procedure and must be strictly observed by the administration and by the interested parties.
The 2021 law requires that a preparation phase take place before the publication of the notice of announcement. This phase may include the performance of a preliminary technical study to assess the economic and technical feasibility of the contract, a call to a public hearing to collect the suggestions and comments of interested parties on the subject of the contract, and the definition of the risk matrix of the contract.
The notice of announcement must be published in advance on the National Public Procurement Portal via the official communication channels of each federal entity and via a widely circulated daily newspaper. The documents attached to the notice of announcement must also be available on the National Public Procurement Portal.
The 2021 Statute defines five models of public auctions: reverse auctions; tender; competition; auction; and competitive dialogue. The reverse auction and bidding models follow the standard procedure, while the other models follow different procedures.
With the aim of simplifying the rules for public procurement, the 2021 law unified the tendering and reverse auction procedures which, according to previous law, followed different procedures.
The reverse auction is used to acquire common goods and services whose quality standards can be objectively defined. Contracting for construction and engineering or specialized technical services generally follows the tendering model. This difference is no longer relevant nowadays, as both follow the standard procedure.
The standard procedure provided for in Article 17 of the 2021 Statute is divided into seven phases:
- preparatory, with the drafting of a preliminary technical study;
- disclosure of the announcement notice, with specifications of the subject of the offer;
- filing of proposals or offers by interested parties, or both, depending on the litigation model chosen;
- a decision on the proposals, according to the criteria set by the notice of announcement;
- the qualification, with the evaluation of the documents demonstrating the legal, technical, fiscal, social, social and economic capacity of the tenderer to comply with the contract;
- appeal, with the possibility for interested parties to appeal against the decisions taken by the agent in charge of the call for tenders; and
- ratification, attribution of the object in the name of the successful bidder.
The notice of announcement must contain the model of dispute chosen by the public administration. In the open litigation model, bidders file their proposals through successive public bids. In the closed model, proposals will be submitted all at once and will remain secret until the date and time set for their disclosure. There are limits to the choice of model applicable to the dispute. The closed model cannot be used when the criteria for judging proposals is based on lowest price or highest discount. The open model, on the other hand, cannot be used when the decision criterion is based on technique and price.
As a general rule, the qualification phase will always take place after the decision on the proposals, unless the notice of announcement states otherwise, in which case it must indicate the reasons for the reversal of the phases and the advantages resulting therefrom.
Competitions are tendering procedures for choosing technical, scientific or artistic work, with the awarding of prizes or remuneration to the successful tenderers. The notice of announcement must contain the required qualification of the participants, the directives and the form of presentation of the work, as well as the conditions of execution and the price or the remuneration to be granted to the winner. In the case of competitions aimed at the development of projects, the winner must grant the public administration the rights to the project and authorize its execution.
Auction is the bidding model used to sell real estate, property not needed by the public administration, or seized or pledged products. The decision criterion is the highest bid and the auction may be conducted by an official auctioneer.
The competitive dialogue is a new procedure introduced by the 2021 law and is intended to allow the public administration to search the market for suggestions and solutions to better and more precisely define the object of the contract that will tend to its needs. This model, inspired by European law, can only be used in the event of technological or technical innovation, the impossibility for the public administration to meet its needs without adapting the solutions available on the market and the impossibility , for the public administration, to define the technical specifications with precision.
The competitive dialogue has three stages. The first is a pre-selection phase, in which the public administration admits all interested parties who meet the requirements set out in the announcement notice. The second is a phase of dialogue, in which the public administration will discuss with all interested parties, simultaneously and separately, the proposals and solutions that each party presents. The third is a competition phase, in which the public administration publishes a new announcement notice with the specific description of the solution that meets its needs (defined according to the suggestions made by the interested parties in the dialogue phase) . In the end, the public administration will choose the most advantageous proposal according to the criteria defined by the notice of announcement published at the end of the dialogue phase.
iii Modification of offers
As a general rule, bidders cannot modify their bids once they have been submitted. The exception to this rule occurs when the public administration chooses to negotiate more favorable conditions that benefit the administration itself, in accordance with article 61 of the law of 2021. This negotiation can therefore only succeed to a proposal of a lower value than that initially submitted by the tenderer, never higher.