1. Bidding
1.1. Principles
Law 8666/93 establishes general rules on biddings and administrative agreements for works, services (including advertising), purchases, disposals and leases within the sphere of authority of the federal government, states, the Federal District and municipalities. In addition to administrative bodies, all special funds, autonomous government entities, public foundations, state-owned companies, mixed-capital companies and other entities directly or indirectly controlled by the public authority are subject to the ruling of Law 8666/93.
The bidding is designated to guarantee observance of the constitutional principle of isonomy and to select the bid that is most advantageous for the Administration, and shall be processed and judged strictly in accordance with the basic principles of legality, impersonality, morality and publicity.
1.2. Types
There are 5 (five) types of biddings, provided for by the Law:
(i) competitive bidding – Any interested party that evidences the in initial eligibility phase that it has eligibility required under the bidding prospectus is allowed to participate;
(ii) request for quotation – This type of bidding is carried out among interested parties duly registered or that meet all the conditions required for the registration up to the third day prior to the deadline for placement of the bids;
(iii) invitation to bid – The invitation to bid is carried out among interested parties operating in the field pertinent to the object thereof, whether or not registered with the administrative unit, and chosen and invited thereby in a number of at least 3 invitees.
(iv) contest bidding - The contest bidding is placed among any interested party for the eventual choice of technical, scientific or artistic works, by awarding prizes or remuneration to the winners, according to criteria specified in a bidding prospectus; and
(v) auction – The auction is carried out among any interested persons for the sale of moveable assets that are of no use to the Administration or of products legally seized or attached, or for the disposal of moveable assets.
1.3 Non-application of the bidding
The Law provides for a number of exemptions (articles 24 and 25) in which the bidding procedure is inapplicable. The most important, considering Business Objects´ business, is the retaining of unique technical services, with professionals or companies reputedly specialized. And, according to the Law, professionals or companies reputedly specialized means the professionals or companies whose reputation in their field of specialty, resulting from previous performance, studies, experiences, publications, etc. allows one to infer that their work is essential and the most appropriate to full compliance with the object of the contract.
1.4 Eligibility procedures
The Law provides for several requirements that must be demonstrated by the bidder on the eligibility phase, that is, prior to the analysis of the bid. The documentation is specified in the Law 8666/93 shall prove the private entity’s (i) legal eligibility (e.g., proof of registration of articles), (ii) technical qualification (e.g., - evidence of capability to perform activities object of the bidding, which can be done by the filing certificates provided by public entities or private companies, duly certified by their respective professional entities), (iii) economic and financial qualification (e.g., balance sheet and financial statements for the last fiscal year, already consolidated and submitted pursuant to the law and bankruptcy clearance certificates), and (iv) evidence of good standing with the tax authorities.
2. Public Agreements
2.1. Mandatory Clauses
All public agreements are regulated by public law precepts and by general contractual principles provided for by private law. They must set out all the conditions for their performance, duly established in clauses that shall define the rights, obligations and liabilities inherent to the parties, and shall make express reference to the terms of the bidding.
The public agreements must bear the following clauses, set forth in article 55 of the Law:
I. - the object and features;
II. - the execution system, or form of supply;
III. - the price and payment conditions; criteria, reference date and periods for price adjustment; criteria for monetary indexation between the date scheduled for compliance with obligations and their actual payment;
IV. - the start-up terms for the execution, conclusion, delivery, testing and final acceptance phases, as the case may be;
V. - the credit underlying the expenditures, with an indication as to the functional classification and economic category;
VI. - the bonds, if any, offered to secure full performance of the object underlying the agreement;
VII. - the rights and responsibilities inherent to the parties, the applicable penalties and the amounts of fines;
VIII. - events of termination;
IX. - acknowledgment of the Administration rights, in the event of termination;
X. - import conditions; the date and rates for exchange conversion, as the case may be;
XI. - their binding relationship with the bidding prospectus, or with the act that waived or rendered such bidding inapplicable, with the invitation to bid, and with the winning bid;
XII. - the laws applying to performance of the agreement, and especially to cases not set forth therein;
XIII. - the contractor's obligation to maintain throughout the effectiveness of the agreement all eligibility and qualification conditions required under the bidding, in keeping with the obligations assumed thereby.
2.2 The right of the Administration to unilaterally modify the Agreement
The Administration is unilaterally bestowed several rights when contracting with private entities on the basis that it must, above all, defend whatever is considered to be of “public interest”. These rights have major consequences to the private entity involved, as they place the Administration on a position of clear supremacy.
One of the rights that most directly affect the private entities is the right to make unilateral changes to the agreement whenever it deems to be necessary. This right will be enforceable even if it is omitted in the agreement or even if the Administration expressly waives it.
Scholars understand that the right to unilaterally modify the agreement is restricted to the modification of the clauses referring to services and regulations, that is, the clauses that refer to the scope of the agreement and its form of implementation.
Please note that the financial balance of the relation shall be guaranteed, that meaning that if there is a substantial increase of costs for the private entity that breaks the balance of the agreement, it must be revised.
2.3. Termination
Total or partial noncompliance with the public agreement may cause its termination, subject to the terms of the agreement and to the Law.
The agreement may be terminated due to the following reasons:
I. - noncompliance with contractual clauses, specifications, plans or terms;
II. - irregular compliance with contractual clauses, specifications, plans and terms;
III. - delay in complying with the agreement, leading the Administration to evidence that the work, service or supply cannot be concluded within the scheduled time frames;
IV. - unjustified delay to start up the works, services or supply;
V. - stoppage of the works, services or supply without good cause and without prior notification to the Administration;
VI. - total or partial subcontracting of its object, contractor's association with third parties, total or partial assignment or transfer, as well as consolidation, split-off or merger not permitted under the bidding prospectus and the agreement;
VII. - noncompliance with the regular determinations of the authority indicated to follow up and inspect implementation of the agreement, as well as with the determinations of the superiors thereof;
VIII. - repeated failures when executing the object of the agreement;
IX. - bankruptcy or civil insolvency;
X. - dissolution of the company or death of the contractor;
XI. - corporate change or modification of the object or structure of the company which adversely affects execution of the agreement;
XII. - reasons of public interest, material relevance and wide knowledge, justified and determined by the authority of the administrative sphere to which the contracting party is subordinated, and rendered in the administrative proceedings to which the agreement refers;
XIII. - elimination by the Administration of works, services or purchases, giving rise to an alteration in the initial amount of the agreement beyond the limit permitted under article 65, paragraph 1 (the contractor is obliged o accept any additions or exclusion of the works, services or purchases up to 25% of the updated initial amount of the agreement and, in the particular case of renovation of a building or equipment, up to 50%.);
XIV. - suspension of execution by written order of the Administration, for a period exceeding one hundred and twenty (120) days, except in case of public calamity, severe turmoil or war, or further due to repeated suspensions totaling the same period;
XV. - any delay exceeding ninety (90) days in the payments owed by the Administration as a result of works, services or supplies, or portions thereof, that have already been received or carried out, except in the case of public calamity, severe turmoil or war, the contractor's being assured of the right to interrupt compliance with the obligations assumed until the situation is regularized;
XVI. - failure by the Administration to release the area, place or object for implementation of the works, services or supply within the contractual terms, as well as the natural resources specified in the plan;
XVII. - events of force majeure, adequately evidenced, which impede the agreement from being executed.
2.4 Judicial and Administrative Sanctions
The law provides for several sanctions for both the Administration and the private entity in case of non-compliance with their obligations.
For the full or partial noncompliance with the agreement the Administration may impose as sanctions on the contractor, (i) a warning, (ii) a fine, as provided for in the announcement to bid or agreement, (iii) temporary suspension from participating in the bidding and prohibition to contract with the Administration, for a period of at most two (2) years, and (iv) a statement of lack of good standing to bid or contract with the Public Administration while the reasons that determined the contractor's punishment persist or until the contractor reimburses the Administration for the resulting losses and after lapse of the sanction imposed according to the previous item.
Those who are involved in or are deemed to have, by any means, cooperated in the occurrence of a fraud in the bid to any extent, may also respond under criminal law.
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