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The Bidding Process and the Rehabilitation of the Bidder Declared Dishonest

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The Bidding Act # 8.666 / 93 - establishes in its Article 87 the sanctions that may be applicable to those who do not comply with the administrative contracts resulting from the bid object.

These sanctions include: (i) warning letter, (ii) fine, as provided for in the invitation to bid or in the contract, (iii) temporary suspension of participation in bidding and impediment to contract with Management, for a period not exceeding 2 (two) years, and (iv) declaration of non-conformity to bid or contract with the Public Administration while the reasons for the punishment persist or until rehabilitation is promoted before the authority that applied the penalty, which will be granted whenever the contractor reimburses the Administration for the resulting losses and after the expiration of the sanction applied based on the previous item.

The fourth penalty, however, with regard to the rehabilitation of the bidder, in order to cease the effects of the declaration of non-conformity to bid or contract with the public administration, has always been conditioned to 2 (two) requirements:

1. The bidder reimburses the Public Administration for the resulting losses.

2. The temporary suspension determined by the Public Administration must be complied with, within a period not exceeding 2 (two) years.

The penalty is considered so severe that the law assigns exclusive competence to the Minister of State, State Secretary or Municipal Secretary to enforce it and also guarantees the full defense and the right of litigation to the bidder, enabling 10 days to offer its defense.

Finally, on June 9, 2020, the Comptroller General of the Union - CGU regulated the rehabilitation of the bidder declared dishonest, by means of an administrative act, by publishing the Normative Instruction CGU 1.214 / 20 in the Official Gazette.

From then on, the requirements for claiming rehabilitation are 3 (three):

I. The period of 2 (two) years without bidding or contracting with the Public Administration, counting from the publication date of the act that applied the sanction of non-conformity declaration,

II. The full reimbursement of losses caused by individuals or legal entities, when pointed out by the Public Administration, as a result of the acts that justified the application of the penalty of declaration of non-conformity; and

III. The adoption of measures that demonstrate the overcoming of the determining reasons for the punishment, which includes the implementation and application of the integrity program1, structured in accordance with the parameters established by art. 42 of Decree No. 8,4202, of March 18, 2015.

Observation: 1. Integrity program is the term attributed by the Brazilian government to the compliance program. 2. Decree that regulated the Brazilian Anti-Corruption Act # 12.846 / 2013 which also deals with bidding fraud.

It is important to note that the proof of full compensation for the losses caused in item II above, must be made taking into account the Normative Instruction CGU / AGU 2, of May 16, 2018, which has the primary purpose of establishing the methodology and the spreadsheet for calculating the administrative fine to be applied under the leniency agreements, provided for in the Brazilian Anti-Corruption Act # 12.846 / 2013.

According to the aforementioned normative instruction, the reimbursement to the injured public entity comprises the 3 (three) value categories described below:

1. Sum of any incontrovertible damages attributable to the controlling companies,

2. Sum of all bribes paid, and

3. Profit or enrichment that would be reasonable if there had been no wrongdoing.

As for the adoption of measures that demonstrate the overcoming of the determining reasons for the punishment, provided for in item III above, in the event that the bidder is a legal entity, it must adopt the definitions and methodology contained in the Ordinance CGU 909, of April 7, 2015, which covers the evaluation of corporate integrity programs.

The request for rehabilitation must be filed with the Federal Internal Affairs Department - CRG (not to be confused with the Comptroller General of the Union - CGU), which will process the request through its Directorate for Accountability of Private Entities (DIREP).

After the analysis is completed, CRG will forward the conclusive technical analysis to the Legal Consultancy Department of CGU, for legal opinion, and the process will then be forwarded to the Minister of State of CGU, for a final decision, positive or negative, to proceed with the rehabilitation of the interested party or not.

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