New federal procurement law benefits companies that adopt integrity programs
The new law provides that the adoption of integrity programs is now a tie-breaking factor in public procurements
On April 1, 2021, the Brazilian President signed Law No. 14,133/2021, which replaces Law No. 8,666/1993 and other statutes governing public procurements and contracts in Brazil. Although the so-called New Procurement Law is already in effect, Law No. 8,666/1993 and other public procurement laws will only be revoked in two years. During such a period, both legal frameworks are going to coexist, and the Public Administration will have the possibility to opt between them. The only exception is the section regarding crimes involving public bidding processes, where the old provisions have been immediately revoked.
Concerning compliance, the New Procurement Law contains provisions that encourage companies and other organizations engaged in business with the Public Administration to implement and develop integrity programs. Brazilian law and regulations define an integrity program as “a set of internal mechanisms and procedures on integrity, auditing, and incentives for reporting of irregularities, as well as the effective application of a code of ethics and conduct, policies, and guidelines aimed at detecting and correcting deviations, fraud, irregularities, and illicit acts against the national or foreign public administration” (section 41 of Decree No. 8,420/2015, which regulates Law No. 12,846/2013, known as the Brazilian Anti-Corruption Law).
The New Procurement Law sets forth that tender notices for bids of large-scale projects, services, and supplies — those with an estimated value exceeding BRL 200 million — must require the “implementation of an integrity program by the winning bidder, within six (6) months from the execution of the contract, according to regulations that establish the measures to be adopted, the form proving their adoption, and the penalties for violation”.
Another innovation of the New Procurement Law is that the development of an integrity program by the bidder following guidelines issued by oversight bodies is one of the tie-breaking criteria when deciding between two or more proposals (section 60, item IV).
Investigations into violations and connections with the Brazilian Anti-Corruption Law
Acts defined as administrative violations by the New Procurement Law or by other public procurement laws, and which are also violations of the Anti-Corruption Law, must be investigated and judged jointly in the same proceeding, respecting the proper procedure and the authority of the competent jurisdiction as defined in the Anti-Corruption Law (section 159).
Under the Anti-Corruption Law, integrity mechanisms and procedures must be considered in the application of administrative sanctions. The New Procurement Law adopts a similar approach when it provides that authorities must consider the “implementation or enhancement of the integrity program, following the rules and guidelines of the oversight bodies” in the application of sanctions arising therefrom (section 156, paragraph 1, item V).
Considering the above, the New Procurement Law, the Anti-Corruption Law, and other laws on public procurement passed by some Brazilian states have recognized the adoption of integrity programs as a differentiating factor and benefit for companies and organizations that participate in bidding processes and contracts with the Public Administration, especially those competing for large contracts.
For more information, please contact Mattos Filho’s Compliance and Corporate Ethics practice area.