Category: Brazil
Brazil’s Responses to the Covid-19 Pandemic in Procurement Law
By José Guilherme Giacomuzzi – Assistant Professor of Law, The Federal University of Rio Grande do Sul, Porto Alegre, RS, Brazil; S.J.D., George Washington University Law School, Washington, D.C., USA (2007)
Brazil has been enacting many legal norms to tackle the Covid-19 pandemic since the Secretary of Health decreed Administrative Rule 188 on February 3rd, 2020, which officially declared an “emergency in public health.” (For all Brazilian legal norms on Covid-19, see the official site here.)
In what follows, I will briefly refer to and review a few norms that deal with government procurement law.
The most critical norm is Law 13,979, promulgated on February 6th, 2020, which has been modified by successive provisional measures as the pandemic evolves and requires normative guidance. According to the Brazilian Constitution, article 62, “provisional measures with the force of law” may be adopted by the President in “important and urgent cases” and shall be submitted to the National Congress immediately; if not converted into law within 120 days, the provisional measures “shall lose effectiveness from the day of their issuance,” under paragraph 3 of article 62. (An English version of the Brazilian constitution, though not updated, is available here.)
Law 13,979 addresses the problem of government contracts in article 4. It temporarily derogates the Federal Law # 8,666, from June 23rd, 1993, known as the General Law of Bids and Administrative Contracts (GLBAC), which contains the basic general norms for bidding and procurements dealing with public works, services, purchases, and disposals (for an overview of government procurement in Brazil in English, though again not updated, see here).
Legal academics and lawyers in practice have been considering the GLBAC ineffective and too costly to private contractors and the government. Notwithstanding the more than one hundred bills proposed since 1993 to partially or wholly alter it, the GLBAC is still in force.
The main purpose of Law 13,979 is to make public bidding and contracts more flexible during the pandemic. I shall mention what I see as the essential norms contained in Article 4 of Law 13,979.
Article 22, Subsection XXXI, of the Brazilian Constitution states that, “except for the cases specified in the law, public works, services, purchases, and disposals shall be contracted by public bidding proceedings.”
Article 24 of GLBAC lists 35 circumstances which are exempt from the public bidding proceedings. Two of them involve caps in estimated prices: Subsection I exempts from bidding all purchases of engineering goods and services up to BRL 33,000 (around USD 6,000). Subsection II exempts from bidding all purchases of goods and services other than engineering up to BRL 17.600 (around USD 3,300).
However, article 4 of Law 13,979 creates an unlimited exemption to the rule of mandatory public bidding for all purchases of goods, services, including engineering, and inputs, provided that they are intended to address Covid-19 health necessities. Therefore, during the pandemic, no caps apply at all.
The idea is to allow the government to buy medicine, equipment, and other goods and services without public bidding. The burdensome requirements of the Law 8,666 were altered, but not eliminated.
Moreover, auctions to purchase goods for combating Covid-19 will have their durations cut in half, with public audiences excluded.
Finally, purchases of goods and services are not restricted to new equipment (as in the GLBAC), provided suppliers hold responsibility for the goods’ use and functioning. The norm’s primary goal is to permit purchases of used respirators.
As one can see on the news, some Brazilian mayors and governors face investigations and charges for buying super-overpriced respirators or even misappropriation of public funds.
During the Senate debates over Provisional Measure 926, senators called attention to the importance of the many external controlling institutions (such as the Controlling Office and Prosecution system, which in Brazil is independent of any authority) in supervising the application of the Law 13,979.
Government Procurement Review (8th edition, 2020) – available online
The Government Procurement Review, one of the leading compilations of procurement laws from around the world, is now available in its 8th edition. Congratulations to the editors, Jonathan Davey and Amy Gatenby of the law firm of Addleshaw Goddard.
The volume, published annually, covers procurement law from fourteen countries and the European Union, including reviews by leading procurement practitioners from Australia, Austria, Belgium, Brazil, Canada, the Dominican Republic, Germany, Greece, Italy, Mexico, Russia, Switzerland, the United Kingdom and the United States.
For further information on foreign and international sources on public procurement law, please see the research guide prepared by GW Law’s government procurement research librarian, Mary Kate Hunter.
Brazil Update: Government Will Seek to Exclude Health and Defense Sectors from GPA
BY RICARDO CAMPELLO – Guest Author
A major Brazilian newspaper has reported that the Brazilian Federal Government wants to exclude from Brazil’s commitments under the WTO Government Procurement Agreement (GPA) Brazilian procurements for defense and health-related goods and services (link to the article in Portuguese). It is also said that, for now, Brazil`s accession proposal contemplates only procurements by the federal government. State and local governments’ procurements would not be included.
Compared to other procurement defense markets, Brazil`s is not that big. In 2019, the budget of the Federal Government`s Ministry of Defense was approximately USD 25 billion, but more than half of this was used to pay personnel expenses (according to the Federal Government`s website: http://www.portaltransparencia.gov.br/funcoes/05-defesa-nacional?ano=2019). The money spent with goods and services (not necessarily weapons or defense-specific) was around USD 3 billion.
GWU Law LLM Candidate
The budget of the Brazilian Ministry of Health is bigger — around USD 35 billion in 2019 (according to the Federal Government`s website: http://www.portaltransparencia.gov.br/funcoes/10-saude?ano=2019). This is due mainly to Brazil`s public healthcare system, called “SUS,” under which citizens are entitled to receive almost any treatment for free (including drugs, medical devices and medical procedures). A substantial portion of these funds goes to pay for healthcare-related goods and services. It is a huge procurement market.
The official reason for the exclusion of these sectors is that they are too strategic. But strategic how? The newspaper piece does not clarify. Is it a question of national security strategy? Or are these sectors strategic for industrial policy purposes? And is this true for absolutely all procurements of these departments of the Federal government? Also, why would enhancing competition and, consequently, reducing corruption and the government`s procurement costs – all potential outcomes from Brazil`s accession to GPA – not be desired in these strategic sectors? The GPA has flexibilities for developing countries to protect their industrial bases by making the transition to the GPA’s free markets smoother. Why not use these tools instead of excluding entire procurement sectors from coverage?
Finally, the newspaper piece also noted that discussions regarding GPA coverage between the Federal Government and GPA members is just part of the necessary negotiations. Brazil’s Congress will have to approve Brazil`s accession to the agreement as well. As one can see, the Brazilian government’s announcement that it will seek to join the GPA is just the beginning of a long and complex negotiation process, both internationally and nationally. There is a lot more to come.
Editor’s Note: For the United States, trade with its allies in defense items – materiel, services and research/development – is normally opened (and opened comprehensively) through separate reciprocal defense procurement agreements. Thus, while the United States may resist Brazil’s efforts to protect its public health markets under the GPA, the United States may prove willing to reserve defense issues to negotiation of a separate Brazil–U.S. reciprocal defense procurement agreement, which has been raised as a possibility by industry.
In Startling Reversal, Brazil Announces It Will Seek to Join WTO Government Procurement Agreement
In a surprising break from decades of protectionism regarding its public procurement markets, Brazil has announced that it will seek to join the World Trade Organization (WTO) Government Procurement Agreement (GPA). Accession to the GPA (see J. Heilman Grier, The WTO Government Procurement Agreement (Djaghe 2020)) could open Brazil’s public procurement markets, which have been estimated to total over US$150 billion annually, to competition from other GPA members; it would also give Brazilian exporters access to the public markets in other GPA members, including the United States. If it overcomes concerns in Brazilian industry and succeeds in acceding (China’s accession has been pending for over a decade), Brazil would be one of the first major low-cost producers to join the GPA, which could cause shifts in public procurement markets worldwide.
George Washington University Law School LLM candidate and Brazilian attorney Ricardo Campello commented:
The Brazilian Minister of Economy, Mr. Paulo Guedes, announced yesterday (January 21, 2020) during the World Economic Forum in Davos that Brazil will formally request to join the GPA as a full member (since 2017, Brazil has had an “observer” status). The announcement was reported in Brazil`s biggest newspaper for corporate matters, called “Valor Econômico” (link to the article in Portuguese). As reported, the request is being prepared and can be submitted soon, maybe even before the end of the Forum. Joining the GPA will help Brazil to incorporate best procurement practices and will also be a full attack against corruption, said Mr. Guedes. When asked about the possible impact to local companies, Mr. Guedes answered that Brazil can no longer have this type of mentality which only contributes to the exploitation of Brazilian consumers and taxpayer funds by local companies. In this regard, it`s mentioned that the fact that Brazil will soon no longer be able to have price preferences in favor of local suppliers against European companies, due to the free-trade agreement signed between Mercosur and the European Union, contributed to the decision to join the GPA. This is the first time Brazil`s government officials have expressed the country`s intention to join the GPA as a full member. As Brazil`s Senate is currently discussing the country`s new procurement system, it would not hurt to consider the GPA’s requirements in such discussions.
Robert Anderson, formerly Senior Counsellor and Team Leader for Government Procurement at the World Trade Organization and now Honorary Professor at the School of Law of the University of Nottingham (UK), commented as follows:
The announcement yesterday by the Brazilian Minister of the Economy, Mr. Paulo Guedes, during the World Economic Forum in Davos, that Brazil will seek to join the WTO Agreement on Government Procurement (GPA) represents a huge step forward for Brazil. Joining the GPA will align Brazil’s procurement system with best practices internationally, provide Brazilian suppliers with unfettered access to huge markets for goods and services in the US, Europe and elsewhere, and send a powerful signal to the global community regarding Brazil’s determination to grapple successfully with past corruption and supplier collusion problems in its procurement system. It will establish Brazil as an important thought and practice leader in this area across Latin America and the developing world. The announcement also shows the continuing vitality of the GPA itself, which was modernized in 2012 and continues to gain new members, year by year. Minister Guedes’ announcement will be enthusiastically welcomed by advocates of good governance and procurement reforms across the globe.