by Christian Fernandes Gomes da Rosa
The new Public Procurement and Administrative Contracts Law, Law 14,133 of April 1, 2021, refers to Integrity Programs, a legal institution whose structure was established in Decree No. 8,420/2015, which regulated the Brazilian Anti-Corruption Law – Law 12,846/2013. According to that regulation, under its article 41:
[…] an integrity program consists, within a legal entity, of the set of internal mechanisms and procedures for integrity, auditing and encouraging the reporting of irregularities, and the effective application of codes of ethics and conduct, policies and guidelines with the aim of detecting and remedying misconduct, fraud, irregularities and unlawful acts committed against the public administration, national or foreign.
Conceptually, Brazilian law thus incorporated a private organizational practice aimed at controlling fraud and corruption risks, creating incentives for legal entities subject to the Anti-Corruption Law to adopt risk mitigation and internal monitoring mechanisms capable of preventing and addressing undesirable events in contracts with the government. In this way, legal entities able to demonstrate the implementation of an Integrity Program already found benefits in Law 12,846/2013, such as a reduction in the fine imposed for any breach of the law’s provisions, as provided for in its article 7, item VIII and sole paragraph.
Although regulated since 2015, the Integrity Program gained some notoriety and great strategic relevance for large Brazilian corporations in the course of major leniency agreements, especially from 2018 onwards. Indeed, implementing an Integrity Program became a mandatory requirement for legal entities that, having committed acts harmful to the public administration, wished to cooperate with investigations and settle with the competent authorities in order to close administrative liability proceedings (“PAR”), whose sanctions can reach up to 20% of the legal entity’s gross revenue, or BRL 60 million when revenue cannot be determined.
Given this context, it is no surprise that the new Procurement Law has drawn on this institution, already relatively well established in the Brazilian legal landscape, to seek to improve the business environment between the public administration and the private sector.
References to the Integrity Program can be found in article 25, §4, as a requirement for the winning bidder in large-scale contracts exceeding BRL 200 million; in article 60, item IV, as one of the tiebreaker criteria for bids in tenders; in article 156, §1, item V, as a criterion to be considered when imposing sanctions for breaches of Law 14,133/2021; and in article 163 as a requirement for the rehabilitation of sanctioned parties, very similar to the requirement imposed on legal entities that sign leniency agreements.
The legislator’s use of this institution in the new procurement law broadens its relevance in Brazilian public law and seems to clearly signal the understanding that an Integrity Program, implemented in accordance with regulatory requirements and the instructions of oversight bodies, is a useful governance and good practice tool, capable of promoting regularity in public-private relations.
Its structuring and operation within private legal entities must comply with the requirements set out in article 41, sole paragraph, and the items of article 42, both of Decree No. 8,420/2015.
The Integrity Program must necessarily be established as a set of controls for risks specifically identified in the legal entity’s operations. Its practical effectiveness and validity, also for compliance with the new Procurement Law, require a demonstration of relevance and reasonableness between the fraud or bribery risks identified in the private entity’s operations and the internal rules and procedures adopted to mitigate the frequency or the magnitude of the impact of the events prohibited by Brazilian law.
In this effort to comply with the guidance and requirements now also set out in the new Public Procurement and Administrative Contracts Law, legal entities must also pay attention to the guidelines and requirements published by oversight bodies which, together with international technical standards on the subject, are key tools for private organizations to implement and operate an adequate Integrity Program, established as an effective system for managing the risks of harm to the public administration.
Article originally published in the Licitações e Contratos column on Portal da Infra (in Portuguese), on 09.15.2021.
