The starting point for the brief analysis in this article arose from questioning the current understanding of the principle of legality, set out in art. 37, caput, of the Federal Constitution. In the classic conception[1], one of the aspects of this principle seeks to curb possible arbitrary acts by the public administration against individuals, such that we often repeat the (almost) popular saying “While in private administration it is lawful to do everything the law does not prohibit, in public administration it is only permitted to do what the law authorizes”.
And questions about the pure application of this principle to specific cases are nothing new; they are usually linked to the public administration’s need for flexibility to deal with events whose impacts were simply not foreseen by the legislator, exactly as is the case with the current covid-19 pandemic.
Setting aside the discussion of the legal nature of this situation for risk allocation purposes[2], for example, the fact is that the consequences of the almost complete shutdown of the Brazilian market create a scenario of uncertainty for private parties contracting with the government, to the point of making the provision of services or supply of goods conditional on advance payment, for fear of involuntary default on the financial obligation assumed by the public contracting party.
However, the response on the other side invokes the principle of legality (as opposed to serving the public interest) to prevent the private contractor from receiving amounts in advance, especially because of the general rules governing this condition, contained in Federal Laws 8,666/1993 and 4,320/1964, as will be seen below.
This is why, in times of crisis, the debate on the transformation of the principle of legality gains relevance, as well pointed out by Egon Bockmann Moreira in a recent article published on the legal portal Direito do Estado[3], which includes the following passage:
(…) The edifice of legality is therefore being hit. At least in its traditional understanding. This places us before new challenges, even more acute than merely writing articles, theses and dissertations on the principle of juridicity, regulatory capacity in changing circumstances and administrative consensuality. These issues have reached the real world. They are no longer Law in the books and have become Law in action. It is therefore time to take seriously the redefinition of the principle of legality and understand that the public administration must act “in accordance with the law and the Law” (Law 9,784/1999, art. 2, sole paragraph, item I), always taking into account “the real obstacles and difficulties faced by the manager and the demands of the public policies in their charge” (LINDB, art. 22). (…)
Convinced of the need to understand legality from a perspective more attentive to the practice of public management and contractual reality, the following comments seek to demonstrate the possibility of advance payment for the performance of services and the supply of goods, also based on the new Provisional Measure No. 961, when certain aspects of this legal relationship are observed.
General rules on advance payment in Federal Laws 8,666/1993 and 4,320/1964
In Federal Law 8,666/1993, the framework for advance payment begins with Art. 40, item XIV, “d” and its §3, which deals with the mandatory information in tender notices issued by the public administration, and it is important to note that “performance of the contractual obligation is deemed to be the provision of the service, the completion of the work, the delivery of the good or a portion thereof, as well as any other contractual event to which the issuance of a billing document is linked”.
Next, Arts. 55, item III, and 65, item II, “c”, deal with the contractual aspects of the payment owed to the private contractor, shaping the rules of Federal Law 8,666/1993 on the subject and, as a general rule, prohibiting advance payment in relation to the established schedule without the corresponding consideration in the form of supply of goods or performance of works or services.
An analysis of these provisions shows that payment is closely linked to the private party’s performance of its obligation, and it may be brought forward, under the specific terms of art. 40 mentioned above, when provided for in advance in the call for bids, in the form of financial discounts, and after performance of the contracted object.
On the other hand, Federal Law 4,320/1964, which sets out general rules of financial law for preparing and controlling the budgets and balance sheets of the Federal Government, states, municipalities and the Federal District, provides in its arts. 62 and 63, §2, item III, that payment will only be made after proper settlement, that is, upon verification of the right acquired by the creditor.
In principle, therefore, and as a general rule, advance payments would not be allowed in administrative contracts, with the exception of the provision of art. 40 of Federal Law 8,666/1993.
Nevertheless, it should be noted that part of legal scholarship argues that the public administration may make advance payments, even before performance of the contracted object, largely because there should be no gap between these contracts and those entered into by private parties in the private sphere, “at the risk of driving away potential parties interested in contracting with the administration”[4].
At the Federal Court of Accounts, case law has evolved regarding whether or not advance payment is possible, considering the general rules in the legal system.
In 2013, for example, the TCU’s 1st Chamber, in case TC 015.127/2009-0, stated that “TCU case law is also firm in allowing advance payment only under exceptional, contractually provided conditions, with guarantees also required to ensure full performance of the object”.
In 2017, in case TC 006.637/2012-4, the TCU Plenary discussed the three prerequisites that determine whether advance payment may take place, also stressing that it must occur exceptionally, namely: (i) prior demonstration by the public administration (direct or indirect) of the real need for the advance in order to ensure proper performance of the service; (ii) clauses in the call for bids providing for such advance payment; and (iii) the contractor providing guarantees in the amount of the advance payments. This is the current understanding prevailing at the Court of Accounts.
Similarly, the Office of the Attorney General also recognized the possibility of advance payments on 12/13/2011, through Normative Guidance No. 37, provided the following requirements are met: (i) it is a condition without which it is not possible to obtain the good or ensure the provision of the service, or it results in significant savings; (ii) it is provided for in the tender notice or in the formal instruments of direct contracting; and (iii) indispensable guarantees are adopted, such as those of art. 56 of Federal Law 8,666/93, or precautions, such as provision for repayment of the advance if the object is not performed, proof of performance of part or a stage of the object and issuance of a credit instrument by the contractor, among others.
Thus, considering the legal treatment given to the provisions cited here, it can be concluded that advance payment in administrative contracts is possible in exceptional situations, duly justified by the administrator and preceded by the precautions defined by the TCU and AGU mentioned above.
Recognition of the possibility of advance payments in situations such as those caused by covid-19
A pending question is whether payments may be made in advance while the exceptional situation caused by covid-19 persists. Needless to say, the pandemic of recent months is a new fact with equally new implications for the public administration and for individuals, so that, until May 6, there was no playbook to follow. That is why dialogue between the administration and private parties was recommended, always taking into account the particularities of the contractual relationship, the exceptional nature of the situation and what would best serve the public interest.
The uncertainty regarding advance payment in times of covid-19 changed with the issuance of Provisional Measure No. 961, which authorizes advance payments in tenders and administrative contracts within the public administration of all federative entities, in addition to broadening the use of the Differentiated Public Procurement Regime, provided that it (i) is an indispensable condition for obtaining the good or ensuring the provision of the service or (ii) results in significant savings (art. 1, item II).
In this case, the administration must (i) provide for advance payment in the tender notice or formal instrument of direct award and (ii) require full repayment of the advance if the object is not performed (art. 1, §1). In addition, in line with the position previously held by the TCU and AGU for exceptional situations, the rule provides that the public administration may establish precautions to reduce the risk of contractual default, such as guarantees in the forms set out in art. 56 of Federal Law 8,666/1993, proof that the contractor has performed part or an initial stage of the object for the advance payment of the remaining amount, issuance of a credit instrument by the contractor, among others (art. 1, §2).
It should be noted that there is a provision prohibiting advance payment for services with dedicated labor (art. 1, §3), as well as the temporal application of MP 961, which concerns acts performed until 12/31/2020, under Legislative Decree No. 06/2020, regardless of their term or the term of their extensions.
In practice, and in addition to MP 961, comfort for the administrator’s decision should also come from the precepts of Federal Decree No. 9,830/2019[5], which regulates important amendments to the Law of Introduction to the Norms of Brazilian Law, primarily from the perspective of the effective exercise of public management, so as to be guided by practical consequences, the context of the facts, the real difficulties faced by public officials and the policy demands in their charge, legitimately giving greater fluidity to principles dear to administrative law, such as legality.
The measure comes at a good time, when it is necessary to offer public managers new tools to deal with the state of calamity caused by covid-19 and the shortage of products and services resulting from the quarantine period — an international problem, in fact. The principles applicable to the specific case are weighed — mainly legality versus public interest — overcoming existing dogmas in favor of contracting efficiency, provided that certain requirements set by the rule, which are legitimate where public affairs are concerned, are met.
Indeed, the consequences of the covid-19 pandemic will contribute to the transformation of several hitherto unquestionable precepts of administrative law, which needed a new look to restore efficiency in public action. It is hoped that measures such as those proposed by MP 961 will bear fruit in the ever-present legal relationship between the administration and private parties, so that highly valued principles are overcome for the benefit of improving the quality of public managers’ decisions.
*Gabriela Soeltl, associate in the Public Law practice at Giamundo Neto Advogados
NOTES
[1] MEIRELLES, Hely Lopes. Direito Administrativo Brasileiro. 30th ed. São Paulo: Malheiros, 2005.
[2] The discussion on the legal nature of the impacts caused by COVID-19 was the subject of OPINION No. 261/2020/CONJUR-MINFRA/CGU/AG, issued by the Office of the Attorney General (AGU) in response to a consultation by the Ministry of Infrastructure’s Department of Development, Planning and Partnerships. On that occasion, it was concluded that the pandemic is a traditional case of “force majeure” and “act of God”, allocated to the Public Administration and therefore giving rise to economic and financial rebalancing of the administrative contract.
[3] MOREIRA, Egon Bockmann. Princípio da legalidade em tempos de crise: destroçado ou ressignificado?. Direito do Estado, n. 447, 2020. Available at: http://www.direitodoestado.com.br/colunistas/egon-bockmann-moreira/principio-da-legalidade-emtempos-de-crise-destrocado-ou-ressignificado. Accessed on 04/29/2020.
[4] GASPARINI, Diogenes. Pagamento antecipado nos contratos administrativos. Revista da Faculdade de Direito de São Bernardo do Campo: Volume 2, 1992, p. 10/14.
[5] Arts. 2, 3 and 8, without prejudice to other applicable provisions.
Article originally published in Estadão, in the column of Fausto Macedo (in Portuguese), on 05.08.2020.
