Giuseppe Giamundo and Fernanda Leoni

Subcontracting in administrative contracts has always been a controversial matter, since it involves delegating to a third party outside the main relationship the performance of part of the object of a contract obtained through a tender, often without that third party going through the same strict selection procedures used by the Public Administration. Accordingly, issues of equal treatment and morality have permeated the debate on the subject, alongside a classification of whether or not administrative contracts are of a strictly personal nature, using the taxonomy of the General Theory of Contracts.

The legal provisions on the matter did not help much in resolving the controversy either, since Federal Law No. 8,666/1993 did not adequately regulate the situation, merely indicating that subcontracting was possible within the limits authorized by the Public Administration [1], and clarifying that total or partial subcontracting formalized without the contracting party’s authorization could be grounds for terminating the administrative contract [2]. Currently, the rules of Federal Law No. 14,133/2021 are clearer regarding the limits of and formal steps for subcontracting, although they leave much of the matter to the government’s discretion [3].

However, with regard to contracts entered into with state-owned companies, under the Statute approved by Federal Law No. 13,303/2016, the provisions on subcontracting are, to some extent, much more restrictive than those in the public procurement legislation. The wording of the regulatory guidelines on the subject is striking given that contracts entered into by state-owned companies — although they have not yet lost this character in the day-to-day practice of relationships with these legal entities — are not strictly speaking administrative contracts [4].

The general rules on subcontracting in contracts with state-owned companies are set out in article 78 of Law No. 13,303/2016, and may be complemented by internal procurement and contracting regulations issued on the basis of that law [5]. Under the provision, subcontracting is permitted within the limits established by the state-owned company in the tender notice, following, in principle, the same rationale as the General Procurement Law.

Analysis

On the other hand, under §1 of article 78 of the State-Owned Companies Law, the subcontractor must meet “the technical qualification requirements imposed on the winning bidder” with respect to the subcontracted object, so that, at least in terms of proving technical experience, the technical requirements imposed on the main contractor — directly responsible to the contracting party — and on the subcontractor will be exactly the same [6], within the scope of the object itself. The rule contains no additional provisions on the other qualification requirements — legal, economic-financial and tax — whose assessment is left to the contracting state-owned company.

There is no doubt that the legal provision aims to ensure that subcontracting does not compromise the quality of the service provided or the fulfillment of the contractual object. However, since the original contractor is not relieved of its responsibility for the main scope, such a restrictive requirement for proving technical qualification seems excessive, at least when interpreted literally.

Another striking point is the prohibition, in article 78, §2, item I, on the winning bidder subcontracting a company or consortium that took part in the tender. This prohibition, whose purpose is not very clear [7], apparently aims to prevent collusion in contracts awarded by state-owned companies [8], but could have been better designed, instead of imposing a generic presumption of illegality on the matter.

It is known that subcontracting, if poorly managed, can negatively affect the governance of state-owned companies, either because of the risk of exposure to shady market practices or because transferring part of the contract performance to third parties can lead to loss of control over internal processes and difficulty in ensuring the quality of the services provided. On the other hand, these alleged problems can be overcome by strengthening internal control mechanisms, ensuring that subcontracting processes are conducted transparently and responsibly; so many abstract restrictions on subcontracting, which has associated benefits, do not seem justified.

Finally, although included in the provision dealing with subcontracting, §3 of article 78 is quite out of place, requiring that “companies providing specialized technical services must ensure that the members of their technical staff personally and directly perform the obligations assigned to them, when the respective list is presented in a tender or in direct contracting”. This is, in fact, a general rule for companies providing specialized technical services, not limited to subcontracting.

It can therefore be seen that subcontracting under the State-Owned Companies Law poses a significant challenge for public management, requiring a critical and proactive approach from state-owned companies and mixed-capital companies, since the legislation, while framing the institution as an efficiency tool, ended up restricting its application, missing an important opportunity for state-owned companies themselves to improve their control and transparency mechanisms and, consequently, their management and governance.

[1] See: “Art. 72. The contractor, in performing the contract, without prejudice to its contractual and legal responsibilities, may subcontract parts of the works, service or supply, up to the limit allowed in each case by the Administration”.

[2] See: “Art. 78. The following constitute grounds for terminating the contract: (…) VI – total or partial subcontracting of its object, the association of the contractor with others, total or partial assignment or transfer, as well as merger, spin-off or incorporation, not allowed in the tender notice and in the contract (…)”.

[3] See, in this regard, mainly the provisions of article 122 of the NLLC.

[4] See: “State-owned companies, as legal entities governed by private law, in principle enter only into Private Law contracts, without exorbitant clauses, except insofar as these embody unilateral contractual powers contained in private law contracts themselves (e.g., the power of termination without cause – unilateral termination – in lease agreements)” (ARAGÃO, Alexandre dos Santos. Empresas estatais: o regime jurídico das empresas públicas e sociedades de economia mista. 2nd ed. Rio de Janeiro: Forense, 2018, p. 185).

[5] See article 40 of Law No. 13,303/2016.

[6] Although the purpose of the analysis is not comparative, it is worth mentioning that the NLLC is much less restrictive, merely stating that “the contractor shall submit to the Administration documentation proving the subcontractor’s technical capacity, which shall be assessed and added to the corresponding case file” (article 122, §1). There is therefore no requirement that the technical requirements be the same.

[7] In this sense: “There can be no subcontracting of anyone who took part in the tender or who participated directly or indirectly in preparing the basic or detailed design of the object being tendered, which the law sets out – without much objectivity or precision, in a kind of blind moralism that is so fashionable – to curb possible collusion between bidders. The purpose of this prohibition, it bears repeating, is not very understandable, since, if the contractor’s price is good for the state-owned company; if responsibility for performance always lies with the contractor; and if the subcontractor – whether or not it took part in the tender – is as qualified as the contractor, then why so much concern about who the subcontractor is? What difference does it make to the state-owned company who it is? It is a kind of preemptive witch hunt”. (RIGOLIN, Ivan Barbosa. Contratos nas estatais – Lei nº 13.303/2016. Boletim de Licitações e Contratos, São Paulo, v. 30, no. 9, p. 840-846, Sept. 2017).

[8] Although quite restrictive, some scholars argue that the rule is insufficient and that its scope could even be broadened. In this sense: “Although this provision is commendable, it still seems insufficient to deal with the issue in all its complexity. After all, Law No. 13,303/2016 was silent on also prohibiting the subcontracting of companies that, although they did not actually bid for the contract, were able to do so and chose not to compete. The new legislation apparently concerned itself only with companies that submit cover bids in tenders, failing, however, to provide a solution for those that deliberately refrain from competing because they have already agreed on a future subcontract” (CARVALHO, Victor Aguiar. O Estatuto das Estatais sob a ótica da Teoria dos Leilões: alguns aprimoramentos para a prevenção à corrupção e aos cartéis nas licitações. Revista de Direito Público da Economia – RDPE, Belo Horizonte, year 16, no. 64, p. 175-203, Oct./Dec. 2018).

Originally published by Conjur (in Portuguese).