The new Public Procurement and Administrative Contracts Law was signed into law last week. With almost 200 articles, Law 14,133 of April 1 consolidates practices from specific procurement statutes (reverse auction and RDC), codifies the understandings of oversight bodies and introduces some innovations, such as the National Public Procurement Portal and competitive dialogue as a tender modality, among others.
In tenders for engineering works and services, one of the changes concerns the rule on the feasibility of bids. The statute provides that bids whose amounts are less than 75% of the amount budgeted by the Administration will be considered unfeasible — and therefore disqualified (article 59, §4). In addition, an additional guarantee will be required from the winning bidder whose bid is less than 85% of the reference budget. In this case, in addition to the customary guarantees, a guarantee corresponding to the difference between the Administration’s budget and the bid offered must be provided (article 59, §5).
The new rule replaces that of Law 8,666/93, which considers unfeasible bids for amounts less than 70% of the lower of two amounts: a) the amount budgeted by the Administration; or b) the arithmetic mean of the amounts of bids above 50% of the amount budgeted by the Administration.
In practice, a bid rarely became unfeasible under the Law 8,666/93 system. Even if it was below 70%, the existence of other bids and their arithmetic mean often brought the feasibility threshold close to 50%. Considering that the Administration’s budgeting must be based on market prices, it seemed reckless to require it to contract a company willing to carry out a given work or service for almost half that amount.
However, this scenario became recurrent in recent years. The economic crisis and the lack of projects due to governments’ fiscal tightening increased competition in the sector. Aggressive discount offers became common in a risky attempt by companies to stay in business. In this context, the advantage for the Administration was merely illusory. The risk of the work being halted or left unfinished was extremely high. On the other hand, for engineering companies, competition on these terms was equally neither healthy nor sustainable.
The elimination of the arithmetic mean system for assessing the feasibility of bids, as well as the increase from 70% to 75% of the budget amount as the threshold for a bid to be considered feasible, therefore comes at a good time.
Given this new reality, and taking into account the existing practice of significant discounts in tenders for engineering works and services, the following question arises: if more than one bidder offers the legal minimum (75% of the amount budgeted by the Administration) and there is a tie, who wins the tender?
The answer lies in article 60 of Law 14,133/21, which sets out tiebreaker criteria. They are, in this order: 1) a final round, in which the tied bidders may submit a new bid immediately after the ranking; 2) assessment of the bidders’ previous contractual performance; 3) the development of gender equity actions in the workplace; and 4) the development of an integrity program, in accordance with the guidance of oversight bodies.
Since a final round will not take place in a scenario of tied bids at the feasibility threshold — as the maximum possible discount has already been reached — the remaining tiebreaker criteria apply.
The first will be the assessment of the companies’ previous contractual performance. For this purpose, the Administration should preferably use the bidders’ registration records. These records, also a new feature of Law 14,133/21, will be part of the National Public Procurement Portal (PNCP), whose system is yet to be regulated. However, the statute provides that, at the end of performance, the contracting party must assess the contractor’s performance, issuing a document indicating its performance (based on objective parameters) and any penalties imposed. Serious companies that fulfill their obligations therefore tend to benefit from this provision.
The second criterion will be whether the bidder promotes gender equity actions in the workplace. The matter is still to be regulated, but it signals the importance of engineering and construction companies paying attention to the issue. It is an important boost to a culture of gender equity.
The third criterion assesses the bidder’s development of an integrity program, which must follow the guidelines of oversight bodies. This follows a trend started by Law 12,846/13 (Anti-Corruption Law), which requires effective compliance mechanisms in companies for the purpose of mitigating sanctions.
Next, if the tie persists after assessing the above criteria, the law establishes a preference for companies, successively: 1) established in the territory of the federative entity holding the tender; 2) Brazilian; 3) that invest in research and technology development in the country; and 4) that prove they adopt measures to reduce greenhouse gas emissions (mitigation).
As can be seen, if the current practice of discounts seen in engineering and construction tenders continues, price ties may become commonplace. Indeed, tiebreaker criteria will determine the winner. This reality will require companies to take greater care in fulfilling their contractual obligations, since a good performance history in their registration record will be essential. There will also tend to be a strong push to implement and develop gender equity and integrity programs. Those who have not yet done so will need to adapt quickly and definitively to remain competitive.
The new feasibility rule therefore appears healthy. At the same time, it discourages the government from contracting reckless bids, raising the quality and certainty of the intended deliveries. It also serves as an incentive for good contractual practices (no company will want a sanction on its registration record), in addition to promoting worthy causes such as gender equity, integrity, innovation, the environment and local development. May practice confirm the positive potential of the change.
Article originally published on the Consultor Jurídico website (in Portuguese), on 04.11.2021.
