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Provisional Measure (MP) 495 and changes in public biddings law Enacted on July 19, 2010, provisional measure no. 495 has changed deeply
the regulation of public biddings by providing for a new purpose for the
bidding procedures. In addition to seeking the most advantageous offer and
ensuring equality, biddings must advance national development. The new
legislation is briefly examined here by Cesar
A. Guimarães Pereira. The text is part of his chapter in the book Infrastructure Law of Brazil, to be
launched in Brazil by editora Fórum
next October. MP 495 AND RELATED CHANGES TO THE PUBLIC BIDDINGS REGULATION Ph.D.
(Public Law), PUC/SP Partner
of Justen, Pereira, Oliveira e Talamini 1.
Introduction Brazil has just enacted new legislation creating "buy
national" preferences. Many aspects are still subject to further executive
regulation, but there is a legal limit of 25% for the advantage that may be
granted to companies that are established in Brazil or comply with certain
minimum nationalization requirements. The issue is relevant especially due to
the massive amount of government investments foreseen for the near future in
Brazil, also due to the FIFA 2014 World Cup and the 2016 Olympics in Rio. The new legislation (Provisional Measure [MP] 495, of July 19, 2010) alters
the traditional approach of Brazilian procurement regulation, which was based
on a rigorous equality between foreign and domestic
bidders. Together with other new rules (MPs 488 and 489) recently enacted to
govern the public procurement for those international sports events, MP 495
promises to draw the attention of foreign companies interested in the Brazilian
public procurement market to the advantages of a certain level of direct
investment in Brazil. It should be clarified that “Provisional Measure” is a form of statute
issued by the Executive Branch with immediate legal force but which requires
ratification by Congress within a maximum of 60 days, extendable for an
additional delay of 60 days. 2.
Background Brazil already has legislation favoring small
companies ("Lei Complementar 123/2010"), but it is based on the
assumption that they are located in Brazil. MP 495 favors national development
and products and services made in Brazil, but it does not rule out possible
joint ventures or partnerships between foreign and Brazilian companies. In addition, similarly to the recent US stimulus
package, MP 495 provides that any advantage to Brazilian firms will be extended
to the signatories of public procurement international treaties signed by
Brazil. So far, that means only the Mercosur treaty, since Brazil is not a
signatory to WTO's GPA. 3. Specific
changes MP 495 amends the current Brazilian public procurement
law (Law 8.666 of 1993) in several topics. Article 3 of Law 8.666 now provides that the purposes
of the bidding process “are to ensure compliance with the constitutional
principle of equality, to select the bid that is the most advantageous for the
Administration and to advance the national development”. This rule is
complemented by § 1, I, of article 3, which rules out “preferences or
distinctions based on the place of birth, principal business office or
residence of the bidders or any other circumstance that is impertinent or
irrelevant to the specific object of the contract”. The rule expressly admits
the preferences provided for in §§ 5 through 12 of article 3 of Law 8.666 and
in article 3 of Law 8.248 of 1991. Article
3, § 2, of Law 8.666 has been changed to include new criteria for breaking
ties. Preference in case of a tie will be given to products and services (i) made in Brazil, (ii) made or provided by Brazilian
companies, or (iii) made or provided by companies that invest in research and
technology development in Brazil, in this order. If that does not solve the
tie, there will be drawing of lots (article 45, § 2, of Law 8.666). MP 495 inserted §§ 5 through 12 in article 3 of Law
8.666. In § 5, MP 495 provides that “a margin of preference may be determined
for national manufactured products and services that comply with Brazilian
technical standards”. The specific margin will be defined in a presidential
decree, but there is already a provision defining that it is “limited to up to
twenty-five percent above the price of the foreign manufactured products and
services”. The margin of preference must be determined after studies that
establish criteria based on “job creation and income generation”, “effect on
the collection of taxes” and “development and technological innovation made in
Brazil”. However, § 9 enables the government to disregard such preferences when
“there is no output of manufactured goods
or capacity to provide the services in Brazil”. Another topic in which MP 495 departs from traditional
Brazilian public procurement law is § 11. Law 8.666 has long provided that it
is “forbidden to include
in the scope of a bidding process the obligation to obtain financial resources
for the execution of the works or services, regardless of the source of such
funds, except in the case of projects executed and exploited under a concession
system, in accordance with specific legislation”. Now, § 11 of
article 3 provides for the opposite and includes the possibility of the
invitations for bids to require the contractor to “carry out or obtain, in favor of the government or (…), measures of
trade, industrial or technological offset or access to advantageous conditions
of financing, together or not”. Article
3, § 12, provides for the existence of certain biddings in which the
competition “may be restricted to goods and
services using technology developed in Brazil and produced according to the
basic productive process referred to in Law 10.176, of January 11, 2001”. Article 6
of Law 8.666 contains definitions. MP 495 has included some new definitions:
national manufactured products (article 6, item XVII), national services
(article 6, item XVIII) and information technology and strategic communication systems. The new
item XXXI of article 24 provides for a waiver of bidding (direct award) in the
acquisitions for compliance with articles 3, 4, 5 and 20 of Law
10.973, of December 2, 2004. This law contains a series of measures to advance
Brazilian development by means of a stimulus to highly technological processes.
Article 57 deals with duration of contracts. The
new duration may be of up to 120 months (increasing from the original 60
months) in specific cases: defense contracts (article 24, items IX, XIX and
XXVIII) and the technology contracts (article 24, item XXXI). MP 495 expressly applies to reverse auctions
(procurement auctions), pursuant to article 2. 4. Recent
comments The new legislation has been widely discussed by
international specialists. TOM BUSCHMAN, a UK practitioner, has voiced an
interesting opinion about the effects of MP 495:
The same
website features the opinion of TIM MCGRATH, who believes that this new
legislation will “penalize smaller foreign companies (who cannot afford offices in Brazil)
when participating in public tenders. It seems more of a barrier than an
incentive. As these smaller organizations tend to offer more innovative
solutions it may not be in Brazil's best interest either”. As mentioned above, the solution for this concern could be the creation
of joint ventures or partnerships between foreign small firms and local
companies. In addition, this new regulation does introduce clearer rules on
local preferences, as indicated by BUSCHMAN. Article 42, § 4, of Law 8.666
already states that, “For the purpose of
judgment of the bidding, the bids submitted by foreign bidders shall be
increased of the amount corresponding to the taxes that burden exclusively the
Brazilian bidders with regard to the sale operation”. This rule was much
criticized and considered inapplicable for the lack of a general rule
establishing that the bidding procedure could be used as a means to advance
national development, even if that caused the procuring agency to enter into a
contract at a higher financial cost (see MARÇAL JUSTEN FILHO, Comentários à Lei de Licitações e
Contratos Administrativos
[Comments on the Biddings and Government Contracts Law], 14th ed., Dialética :
São Paulo. 2010, notes on article 42, §§ 3 and 4. Available
in Portuguese). This difficulty is now solved with the enactment of MP
495. The
effects of MP 495 with regard to the purposes of public bidding procedures are
also examined by MARÇAL JUSTEN FILHO in item 8.7.1.5 of his Curso de Direito Administrativo
[Administrative Law], 6th edition, upcoming in 2011, ed. Fórum, Belo
Horizonte – available in Portuguese. 5.
Closing remarks MP 495
still requires great supplementary regulation by means of a presidential decree
to be shortly issued. However, it is already a bold step toward the creation of
national preferences in public procurement, a feature that Brazilian law had
eliminated in the mid-1990 by means of constitutional and statutory amendments.
An
interesting characteristic of the new legislation is its concern not to affect
international commitments undertaken by Brazil with regard to public
procurement. The stipulation of national preferences and this clear statement
in favor of international undertakings are expected to cause greater debate in
Brazil. Many will view this as an adequate time to push forward the agenda
toward the ratification of the Mercosur government purchases agreement and the
signature and ratification of WTO’s GPA. Reference information for citation: PEREIRA,
Cesar A. Guimarães. MP 495 and related changes to the public biddings regulation.
Informativo Justen, Pereira, Oliveira e Talamini, Curitiba, no. 42, August
2010, available at http://www.justen.com.br/informativo,
access on [date]. |
