Contracts | How to Mitigate Risks in the Brazilian Public Bidding Process

In force since 2024, the new Brazilian Public Bidding Law (Law n. 14,133/21) consolidated all previous legislative provisions regarding public bidding in Brazil and brought relevant issues that shall be observed by bidding companies, such as the reversal of the procedural order of the traditional bidding process, deadlines for appeals and important adjustments to be applied in the agreements to protect the bidders.

Therefore, we listed 03 main topics that demand the attention of bidding companies, not only to meet the requirements set out in the new Brazilian Bidding Law, as well as for the bidding companies’ own protection, in regards of the insecurities brought by the innovations of the referred legislation.

1. Term of the Agreements: The minimum term of the agreements has been adjusted to 5 years, however, the public entities can unilaterally terminate the contracts without penalty upon completion of the contract’s first anniversary. It is important that contracts adequately protect the bidder, as the impacts arising from an early unilateral termination by the public administration may be commercially irremediable.

2. Competitive Dialogue and Competition: The new Brazilian Bidding Law brought the Competitive Dialogue a new form of bidding in the Brazilian system, in which the public administration proposes to bidding companies their needs and the companies suggest solutions, and the public administration can start a new bidding process based on the solution presented.

The aforementioned process model may imply risks regarding competition, intellectual property and disclosure of sensitive data, especially for companies that are not well-prepared and protected in these aspects. The structuring of a protective commercial proposal will be essential in these cases. 

3. Subcontracting: Sharper, rules were established for subcontracting in agreements signed by the bidder with the public administration, including (i) limiting the volume of subcontracting; (ii) the need for prior authorization from the administration; (iii) the contractor’s obligation to be jointly liable for its subcontractors; (iv) the possibility for the public administration to control and supervise the service developed by subcontractors; and (v) the contractor’s obligation to provide the public administration with information, at any time, about subcontractors.

The referred obligations must be reflected in the contracts between the bidder and its subcontractors, which demonstrates that the attention demanded by the bidding companies is not limited to the bidding process or the contract with the public administration. 

The issues presented above demonstrate that bidding companies in Brazil must pay close attention to the impacts brought by the modernization of the new Brazilian Bidding Law, not only in the operational aspect of bidding processes, but also in the implementation of contractual measurements to mitigate the risks associated with the innovations presented.


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