This report discusses the Brazilian laws that apply to government contracts, more specifically the law that regulates government procurement. The report provides the constitutional principles and statutory requirements that must be followed by people and companies who want to participate in government bidding processes, constitutional principles supporting domestic sourcing, and additional procurement regulations applicable to different industries.
II. World Trade Organization
Brazil is not a party to the World Trade Organization Plurilateral Agreement on Government Procurement. The purpose of the agreement was to open government purchases to international competition and was designed to make the instruments that regulate government procurement more transparent, so that foreign competitors can be assured fair treatment and equal access to international markets.
III. Constitutional Principles
A. Power to Legislate
Article 22(XXVII) of the Brazilian Constitution of 1988 determines that the Union has exclusive power to legislate with respect to the general rules for all types of public tenders and contracts, in all of their forms, for the direct public administration, public companies, and foundations of the Union, states, Federal District, and municipalities, provided that the requirements of Article 37(XXI) of the Constitution are observed, and for public companies and mixed-capital companies, as provided for in Article 173(§1)(III) of the Constitution.
B. Public Bidding
Section XXI of Article 37 states that, except for cases specified by law, public works, services, purchases, and transfers of ownership must be contracted through a process of public tender that assures equal conditions for all bidders, with clauses that establish payment obligations. The effective conditions of the bid must be maintained, as provided by law, which may only allow requirements for technical and economic qualifications essential to secure performance of the obligations.
Pursuant to Article 173, with the exception of the cases provided for in the Constitution, direct exploration of an economic activity by the State must only be permitted when necessary for the imperatives of national security or a relevant collective interest, as defined by law.
In addition, the law must establish the legal regime of public companies, mixed-capital companies, and their subsidiaries that engage in economic activities of production or marketing of goods or services, dealing, inter alia, with bidding and contracting of public works, services, purchases, and transfers of ownership, which must observe the principles of public administration.
C. Concessions and Permits
Article 175 of the Constitution specifies that the government is responsible for providing public utility services, either directly or under a regime of concession or permission, which must always be done through public tender.
D. Domestic Sourcing
Article 170(IX) of the Constitution, determines that the economic order is founded on the appreciation of the value of human labor and free enterprise and is intended to assure to everyone a dignified existence, according to the principles of social justice, which must observe, inter alia, preferential treatment for small companies organized under Brazilian law that have their headquarters and management in the country.
Furthermore, according to Article 219 of the Constitution, the domestic market is part of the national patrimony and must be encouraged to enable the cultural, social and economic development, the well-being of the population and the technological autonomy of the country, as provided by federal law.
Article 37 of the Constitution is regulated by Law No. 8,666 of June 21, 1993. Law No. 8,666 does not apply to the purchase of computers and automation either in the form of goods or services, computer software, specific digital electronic equipment or telecommunications equipment, which are regulated by Law No. 8,248 of October 23, 1991, as amended by Law No. 10,176 of January 11, 2001.
Concessions and permissions are regulated by Law No. 8,987 of February 13, 1995. The petroleum industry is regulated by Law No. 9,478 of August 6 1997, which determines that the contracts for the acquisition of goods and services of the government-controlled petroleum company, PETROBRÁS, must be preceded by a simplified tender process, which is regulated by Decree No. 2,745 of August 24, 1998.
A. Law No. 8,666 of June 21, 1993
Law No. 8,666 is the main law regulating government procurement in Brazil. The Law establishes the general rules for public tenders and administrative contracts regarding public works, services including publicity, transfers of ownership, and leasing within the ambit of the Union, states, Federal District, and municipalities.
Law No. 8,666 is applicable to all organs of the direct administration, special funds, public foundations, public companies, mixed-capital companies, and other entities that are directly or indirectly controlled by the Union, states, Federal District, and municipalities.
C. Bidding Principle
Public tender was designed to ensure compliance with the constitutional principle of equality and to select the proposal most advantageous to the public administration and must be processed and judged in strict conformity with the basic principles of legality, anonymity, morality, equality, publicity, administrative probity, adherence to the tender announcement, and to its objective judgment.
D. Restrictions Imposed on Public Agents
Public agents are not allowed to accept, anticipate, include, or tolerate in the tender announcements clauses or conditions that compromise, restrict, or frustrate its competitive character; set preferences or distinctions by reason of place of birth, place of headquarters, or domicile of the bidders or any other circumstance irrelevant to the specific object of the contract; or establish differential treatment of commercial, legal, labor, social security, or of any other nature, between Brazilian and foreign companies, including currency, mode, and place of payment, even when financing of international agencies is involved, except as provided in Article 3(§2) of Law No. 8,666 and Article 3 of Law No. 8,248 of October 23, 1991.
In case of a tie between bidders in identical conditions during the public tender process, preference will be given, successively, to goods and services that are produced or rendered by Brazilian companies of national capital; produced in the country; produced or rendered by Brazilian companies; and produced or provided by companies that invest in research and technology development in Brazil.
Law No. 8,666 provides detailed definitions of several situations, steps, and procedures encompassed by the public tender process, including what is considered to be public works, services, purchases, and transfers of ownership; prohibitions of direct or indirect participation in bidding processes; modes of execution of public works and services; technical and specialized professional services; acquisitions and transfer of ownership.
Article 21 of Law No. 8,666 mandates that all notices with a summary of the public tenders must be published in the Official Gazettes (Diário Oficial da União, Diário Oficial do Estado ou do Distrito Federal) and in newspapers with a large circulation. In addition, the bidding announcement must indicate the place where the interested bidders may obtain a full copy of the bidding announcement and the minimum period of time for the receipt of proposals in the many different modes of bidding.
H. Bidding Modes
Bidding modes include bidding (concorrência); pricing (tomada de preços); invitation; contest; and auction. Paragraphs 1 to 6 of Article 22 define each bidding mode. Bidding, pricing, and invitations are determined according to the estimated value of the future contract.
Article 24 of Law No. 8,666 lists the situations that are exempt from public tender and Article 25 identifies the situations in which a public tender is not required because competitive bidding is not viable.
Bidders must be legally established or represented in the country in order to qualify for participation in public tender processes for government contracts. In order to participate in a public tender process, the interested parties must only present documentation regarding legal authorization; technical qualification; economic and financial qualification; tax compliance; and compliance with the provisions of Article 7(XXXIII) of the Federal Constitution.
Article 28 of Law No. 8,666 specifies the documentation required to prove legal authorization. Documentation regarding tax compliance is listed in Article 29, and Article 30 and 31 deal respectively with documentation regarding technical and financial qualifications.
The documentation required for qualification may be submitted in the original, by any means of copy notarized by a competent registrar office or civil servant, or by publication in the official press.
When participating in international bidding, foreign companies that do not operate in the country must comply, as much as possible, with the provisions of Article 32 of Law No. 8,666 through similar documents, authenticated by the respective consulates and translated by an official translator, and must have legal representation in Brazil expressly authorized to receive service and to respond administratively or judicially.
L. Joint Ventures
When the public tender allows the participation of companies in consortia (joint ventures), the following rules must be observed:
- Proof of a public or private compromise to form a joint venture, which must be signed by the participating companies;
- Indication of the company that will be responsible for the joint venture in Brazil, which must meet the conditions of leadership as established in the public tender notice;
- In the joint venture of Brazilian companies and foreign companies, the leadership must necessarily be exercised by the Brazilian company, subject to the provisions of Article 33(II) of Law No. 8,666; and
- The winning bidder is obliged to promote, before the formation of the contract with the government, the formation and registration of the joint venture, in accordance with the compromise referred to in Article 33(I) of Law No. 8,666.
V. Concluding Remarks
Domestic sourcing is justified under the Constitutional principles that determine that government procurement must be done through public tenders that are regulated by federal law; that small Brazilian companies enjoy preferential treatment; and that the domestic market is considered to be part of the national patrimony. A few industries are regulated by specific norms, but no government entity is exempt from a public tender process.
Federal regulation defines the public tender process and its various modes and formats, its applicability, and its restrictions, exceptions, and exemptions. The proposal that is more beneficial to the government is awarded the contract. However, if a tie occurs, Brazilian goods and services are given preference.
Aligned with constitutional principles, Brazil did not sign the World Trade Organization Plurilateral Agreement on Government Procurement. Nonetheless, foreign companies may participate in the bidding process for government contracts as long as they are legally established or represented in the country.
Prepared by Eduardo Soares
Senior Foreign Law Specialist
 World Trade Organization, Government Procurement: Opening Up for Competition, available at http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm10_e.htm#govt (last visited Jan. 12, 2010).
 Constituição da República Federativa do Brasil de 1988 [C.F.] art. 22(XXVII), available at the website of the Brazilian Presidency, http://www.planalto.gov.br/ccivil_03/Constituicao/ Constituiçao.htm (last visited Jan. 12, 2010).
 Id. art. 37(XXI).
 Id. art. 173.
 Id. §1.
 Id. (III).
 Id. art. 175.
 Id. art. 170(IX).
 Id. art. 219.
 Lei No. 8.666, de 21 de Junho de 1993, https://www.planalto.gov.br/ccivil_03/leis/l8666 cons.htm.
 Lei No. 8.248, de 23 de Outubro de 1991, arts. 3, 16A, 16A(§2), http://www.planalto. gov.br/ccivil_03/Leis/L8248.htm.
 Lei No. 10.176, de 11 de Janeiro de 2001, http://www.planalto.gov.br/ccivil_03/Leis/ LEIS_2001/L10176.htm.
 Lei No. 8.987, de 13 de Fevereiro de 1995, https://www.planalto.gov.br/ccivil_03/leis/l8987 cons.htm.
 Lei No. 9.478 de 6 de Agosto de 1997, http://www.planalto.gov.br/ccivil_03/Leis/L9478.htm.
 Decreto No. 2.745 de 24 de Agosto de 1998, http://www.planalto.gov.br/ccivil_03/decreto/ D2745.htm.
 Lei No. 8.666, de 21 de Junho de 1993, art. 1.
 Id. sole para.
 Id. art. 3.
 Id. §1.
 Id. (I).
 Id. (II).
 Id. §2.
 Id. at I. Constitutional Amendment No. 6 of August 15, 1995, revoked Article 171 of the Constitution, which defined “Brazilian company” and “Brazilian company of national capital.” In practice, the Amendment terminated with the discrimination between companies formed under Brazilian law. However, the Amendment introduced Section IX to Article 170, establishing a preferential treatment for small companies organized under Brazilian law that have their headquarters and management in the country.
 Id. (II).
 Id. (III).
 Id. (IV).
 Id. art. 6 et seq.
 Id. art. 9.
 Id. arts. 10, 11, 12.
 Id. art. 13.
 Id. arts. 14, 15.
 Id. arts. 17, 18, 19.
 Id. art. 21(I), (II), (III).
 Id. art. 21(§1).
 Id. art. 21 (§2).
 Id. art. 22(I).
 Id. (II).
 Id. (III).
 Id. (IV).
 Id. (V).
 Id. art. 23.
 Id. art. 27.
 Id. (I).
 Id. (II).
 Id. (III).
 Id. (IV).
 Id. (V).
 Id. art. 32.
 Id. art. 32(§4).
 Id. art. 33.
 Id. (I).
 Id. (II).
 Id. art. 33(§1).
 Id. art. 33(§2).
Last Updated: 09/16/2014