Contracting With Brazilian Public Administration
- Brazil
- 07/03/2002
- Azevedo Sette Advogados
I. BRIEF INTRODUCTION: CONTRACTING WITH BRAZILIAN PUBLIC ADMINISTRATION
The contracts executed with any of the entities of the Brazilian Public Administration (known as “Administrative Contracts”) always bear what we call “Exorbitant Clauses”, meant to assure the perfect functioning of all areas and activities concerned with public interest, which is always considered to be of more importance than private interest.
The Administration is always favored, and these clauses, regardless if implicit or explicit, are considered legal even if they are not clearly expressed in laws or contractual clauses. They include the possibility of alteration and unilateral rescission of the contract and the application of contractual penalties such as warnings and fines, leaving to the private party sole the possibility of indemnification.
Prior to the execution of the Administrative Contract, there shall be a public bidding to select the private company to contract with the Public Administration, under its conditions.
The Federal Law # 8666/93 regulates the procedures for public biddings and the requirements of all contracts executed with the Public Administration. To participate in the bidding a private company shall comply with (i) legal (incorporation regularity), (ii) technical (certification of the conditions and experiences of the party according to the object of the bidding), (iii) financial (minimum capital, balance sheet, financial demonstrations etc) and fiscal (tax clearance and indebtness) requirements, provided that the proposal that best matches the Administration interests and presents best economic conditions shall be selected by the Administration.
For the execution of the bidding and of the contract to be effectively concluded the public interest must be prior to all the others. This means that the necessity, legality, and form of the bidding and of the contract have to be strictly followed by the Public Administration and the private companies.
The clauses established in Administrative Contracts are not subject to mutual accordance and are not freely modified by the Parties, unless proved being against public interest or in case of prejudice caused by a supervening condition that unbalances the economic relation in the contract. The rescission of the contract is generally more benefic to the Public Administration if compared to a private one, although each specific situation shall be analyzed.
