Salient Features of Brazil’s 2021 Government Contracts Act (Law 14.133)

Since January 2024, Brazil has a new Government Contracts Act fully in force.

Law 14.133 was enacted in April 2021 and coexisted with the repealed acts (namely Laws 8.666, 10.520 and 12.462) until December 2023. In a form of “regulatory sandbox”, government entities could choose which laws to apply to each specific public bidding and respective contract. The scheme promoted a gradual and sustainable transition from the old to the new rules, giving time for government entities to experiment and learn in practice.

The original two-year experimentation period was extended for six months before the pre-existing laws were finally repealed. However, their story was not over yet. Most public procurement continued inertially to be governed by the pre-existing laws up to the end of the transition period. As a result, Brazilians will still live with both sets of rules until the 2023 public biddings and contracts, and possible related disputes, are fully concluded, performed, resolved, or terminated.

Given the complexity and size of Brazil’s public procurement market, a gradual transition was a sensible measure. Public procurement is rooted in the 1988 Constitution, which mandates public biddings and reserves for the federal legislature (Union) the power to enact general rules for public procurement that are binding on all levels of government. The Union, 26 States, the Federal District (Brasilia) and over 5,000 Municipalities, regardless of their distinct levels of sophistication and resources, all apply primarily the same federal laws to their many government contracts.

The laws repealed in 2023 had been in force since as early as 1993, when Law 8.666 adapted to the 1988 Constitution Brazil’s first set of comprehensive and structured public procurement rules, enacted in 1986. After almost four decades of government practice under the old rules, a careful transition into a new system was required.

Like the pre-existing laws, Law 14.133 contains rules both for the bidding process and contract formation, administration, and termination. In addition, following a Brazilian tradition in this field, it advances both the typical goal of public procurement rules (seeking the most advantageous tender for a government contract) and those of anticorruption and integrity regulations. Therefore, Law 14.133 provides for penalties for fraud and contractual breach, debarment, rehabilitation, and it even provides for criminal offenses regarding public procurement. Law 14.133 also incorporates public policy objectives, such as reducing gender discrimination and promoting sustainable procurement. The concept of “most advantageous tender” is not solely economic.

The procurement system in Brazil regulates both direct awards, which are single source contracts made without a prior competitive process, and procurement through competition. Direct awards derive from situations in which competition is impossible or inadequate, such as contracts made with the only possible contractor or with specialists or artists that cannot objectively compete with one another, or from situations in which competition is inconvenient or inefficient, such as low-value or emergency contracts. In Brazilian law terminology, the former are situations of non-requirement (inexigibilidade) and waiver (dispensa) of a public bidding. The practical difference is that waivers are expressly provided by law; non-requirement arises from the nature of things.

Law 14.133 benefits from Brazil’s experience in the preceding decades in mainly three areas: (a) the regulation of electronic and in-person reverse auctions, which turned Brazil into a success case for electronic procurement; (b) the regulation of framework agreements, a widespread tool for purchases of goods and services, often through collaboration between different contracting agencies; and (c) the experience of facilitated procurement for the 2014 FIFA World Cup and the 2016 Summer Olympics. Law 14.133 extended to government entities solutions that until then were limited to certain areas of government. Due to this evolution, Brazil conceived Law 14.133 in an experimentalist manner: it examined what worked well in previous fragmented regulations and incorporated them into a unified body of rules. The increased penalties for fraud and contractual breaches in Law 14.133 also reflect Brazil’s experience since 2014 with the unveiling of large-scale corruption scandals involving government contracts.

However, Law 14.133 is not merely a compilation of pre-existing laws and practices. It improves Brazilian public procurement legislation in a variety of areas.

Cesar Pereira

PDF: Salient Features of Brazil’s 2021 Government Contracts Act (Law 14.133)
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