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Brazil: New Bidding Bill of Law and impacts on Compliance

13/01/2021

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

The new legislation, after long waited 27 years, provides for relevant updates from a Compliance perspective, such as: (i) reinforcing internal and external control of public procurement; (ii) strengthening 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 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 makes its structure and expertise available to its 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 so-called “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 is 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 that shall be published regarding the measures to be adopted in a Compliance  / Integrity Program (we do not expect 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, required by Decree No. 8,420 / 2015, should also be revised to adapt to the new legislation. Special care in the policies to cover the new type of bidding called “Competitive Dialogue” that will allow greater interaction and negotiation with the Public Administration when compared the old law, generating 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, (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 be included in integrity due diligence and audits.

Increase in sanctions 

In addition, sanctions related to the violation of the new Bidding Law were also increased: (i) the declaration of unfitness to bid and enter into contracts with the Public Administration may be up to 6 years; (ii) there is 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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