By Camillo Giamundo

The new procurement law brings progress with shorter deadlines for termination due to administrative delay, but challenges in issuing invoices are a concern.

Default or late payment by the Public Administration under administrative contracts is a reality and an issue of great importance for private contractors, as it reflects the balance of the economic and financial relationship, the government’s obligations and the private party’s rights. The transition from the former Law 8,666/93 to Law 14,133/21 brought significant changes in this respect, both regarding deadlines and the milestones that define administrative delay and the resulting right to terminate.

Under Law 8,666/93, article 78, item XV, provided that a delay of more than 90 days in payments owed by the Public Administration for works, services or supplies was sufficient grounds for termination of the contract by the private party. This period was counted from the end of the performance period of each installment, as indicated in article 40, item XV, “a”. This interpretation was consolidated by case law, with performance being considered the moment the contractor completed its obligations, that is, upon delivery of the goods or performance of the service.

Although the counting of the 90-day period was clear, the regime under Law 8,666/93 was not without challenges. The Administration often used devices to postpone payments, such as delays in certification and settlement processes, which should precede the issuance of invoices. This practice left private parties in a vulnerable position, especially micro and small businesses that depend on regular cash flow.

With the new Procurement Law (Law 14,133/21), art. 137, §2, item IV reduced the delay required for the private contractor to consider the contract terminated from 90 days to 2 months. However, the starting point for counting the period is now the date the invoice or equivalent document is issued, and no longer the end of the performance period.

This change reflects an attempt by the legislator to give greater objectivity to the time milestone by linking it to a specific document. On the other hand, it raises concerns about legal certainty, since the issuance of the invoice often depends on intermediate steps under the Administration’s control, such as measurements or approvals.

In addition, article 92 of the new Procurement Law requires contracts to include clear clauses on the deadlines for measurement, settlement and payment. The wording also establishes criteria for monetary adjustment from the date of performance, reinforcing the idea that any delays by the Administration must be economically compensated.

While Law 8,666/93 prioritized the logic of performance as the time milestone, Law 14,133/21 shifts this milestone to the issuance of the invoice, which may benefit the Administration in terms of contractual flexibility. However, this change may create uncertainty for private parties, who depend on administrative speed in issuing the documents that trigger the counting of the delay period.

Moreover, reducing the period from 90 days to 2 months is, in theory, an advantage for contractors, as it shortens the tolerance period in the event of delays. In practice, however, the combination of provisions may create additional complexities, since the Administration is free to set measurement and settlement deadlines, directly affecting when the period begins to run.

The interpretation of art. 137, §2, item IV will be crucial in defining the limits of this new system. If case law holds that administrative delay only begins with the issuance of the invoice, private parties may face difficulties in exercising their right to terminate the contract, especially in contracts where the measurement process is slow.

Thus, the new system under Law 14,133/21 represents a significant change in the relationship between the Public Administration and contractors. Reducing the period to 2 months is an attempt to modernize administrative contracts and ensure faster payments. However, linking the period to the issuance of the invoice may undermine this goal, especially if the Administration does not adopt efficient practices to avoid delays in the preliminary stages.

It is therefore essential for private contractors to pay close attention to contract clauses and to seek clarifications and file challenges when necessary, especially during the bidding phase, when these provisions must be included in the draft contract attached to the tender notice that precedes the contract. Efficient contract management, combined with rigorous monitoring of administrative obligations, will be essential to ensure balance between the parties and protect the contractor’s rights in the event of delays.

The transition between the two laws marks progress in some respects, but also highlights the need for greater clarity in the regulation and interpretation of these provisions. The role of the Judiciary will be decisive in consolidating an understanding that ensures both the Administration’s efficiency and the protection of private parties.

Originally published by Migalhas (in Portuguese).