With the new Procurement Law, there is a promising outlook for greater dialogue between the public administration and companies

by Luiz Felipe Graziano and Joaquim Augusto Melo de Queiroz

The recent evolution of Public Administration relationships has reinforced its drive to encourage dialogue with the private sector. The new Procurement Law (Law 14,133/2021) embraced this trend by fostering solutions agreed with private parties. Two institutions mark the dialogic tone incorporated into the text of the new law: the Expression of Interest Procedure and the Competitive Dialogue.

The Expression of Interest Procedure (PMI) had already been legally accepted since the General Concessions Law in 1995. However, previously restricted to Concessions and PPPs, it became expressly permitted in any type of public contracting with its inclusion in art. 81 of the new Public Procurement and Administrative Contracts Law.

There is a promising outlook for greater dialogue between the Public Administration and the private sector

In general terms, the PMI system involves calling on the private sector to carry out studies and projects for innovative solutions that may serve a future tender. The Public Administration then evaluates these studies and projects and may accept them or not, within its discretion. Whether the future tender takes place will depend on the Administration’s decision, should it consider that the studies met its needs and can enable the competition. In that case, the author of the studies and projects will not be barred from taking part in the tender and, if it is not the winner itself, will be entitled to reimbursement of the costs incurred in preparing them. It will not, however, enjoy any preference in the future tender procedure, which may discourage it from investing in more elaborate studies.

In this context, specific questions were raised regarding the PMI. The reasoning put forward by some is that private parties might be discouraged from carrying out more robust and sophisticated studies, prompting them to hold back and keep strategic information to themselves. For those who advocate this view, the tactic would aim to boost their chances of winning a possible future tender by holding project details not shared in the PMI, especially in tenders whose award criteria involve best technique. Doubts were also raised about possible conduct by the Administration. The argument is that the Administration could gather information from the private sector and, using its discretion, discard the studies carried out, claiming that the proposals were unsatisfactory. Later, however, the Administration could hold a tender for public works (rather than for a concession), using those same studies but preventing the interested party from participating.

Brazil’s experience with PMIs shows that occasional criticisms of the institution should be analyzed with caution. Although the PMI can be improved, several successful cases demonstrate its usefulness, both for the private sector and for the Public Administration itself. Successful PMIs are many. Notable among them are the tenders for airport concessions and the PPPs for water supply and sewage services.

The success of these initiatives shows that the procedure can be fruitful if properly structured, despite its attrition rate. Proof of this is the use of PMIs in new segments, especially for presenting energy efficiency studies and for structuring centralized and distributed power generation.

If the scenario of proliferating PMIs was already encouraging, expectations with the advent of the new Procurement Law are even higher. This is because the new law seeks to promote greater cooperation with the private sector, including through new institutions. And the Competitive Dialogue (CD) emerges as the new star of Law 14,133/2021.

The CD has been celebrated as an instrument complementary to the PMI, capable of easing some of the restrictions raised regarding the latter. It is argued that it may give the private sector greater incentive to prepare even more detailed studies, since the tender is guaranteed to take place and, therefore, the private party will be reimbursed. It is true, however, that different situations will justify adopting one model or the other, depending, for example, on the Administration’s desire for faster presentation of projects and solutions, which could weigh in favor of the PMI. The outlook is therefore auspicious, with yet another mechanism added to the menu available to the Administration to improve its interaction with the private sector.

From this perspective, there is a sense of excitement arising from the possibility of using this new dialogic instrument, as well as from the improvement of the PMI. And public managers should be encouraged to use both. For example, the fear that choosing them might trigger greater scrutiny by oversight bodies should be set aside. In reality, proper reasoning to justify the choice will always be the best antidote to any hesitation on the part of public officials.

In short, there is a promising outlook for greater dialogue between the Public Administration and the private sector in public procurement. Designing innovative solutions built together may enable greater efficiency in the Administration and encourage technological development by the private sector.

Article originally published in the Valor Econômico newspaper (in Portuguese), on 01.23.2023.