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Web Alert: Petrobras' new bidding procedures

15 February 2018

On 15 January 2018 the new Petrobras Bids and Agreement Regulation was published.

This new Regulation was enacted (under Law no. 13,303/2016) as a result of the ‘Lava Jato’ corruption scandal, in order to target allegations of lack of transparency during the contract bidding process. It has repealed Article 67 of the Petroleum Law, which allowed Petrobras to create the ‘Simplified Bidding Regulation’, which gave the company freedom to conduct procurement using its own rules.

The New Regulation sets out the procedures to be followed by Petrobras and other entities during all stages of the bidding process. Under the new procedure, the bidders must prove that they comply with ‘Petrobras Program for the Prevention of Corruption’ and demonstrate that it will comply with their anti-corruption laws and policies, including 'Petrobras Code of Ethics and Conduct Guide'. A degree of low, medium or high risk will be allocated to the bidders. Those that have a high degree of risk will be prevented from submitting bids to Petrobras (with some exceptions in accordance with the company’s internal regulations).

The tenders will be conducted and judged by a committee. Petrobras may employ a pre-qualification process, which can be subjective (i.e. designed to identify suppliers who meet the requirements for the goods and services), or objective (i.e. designed to identify goods that meet Petrobras technical and quality requirements). The following bidding methods have been adopted:

1. Open bids: The bidders will present their offers and will subsequently present successive bids, increasing or decreasing, in accordance with the adopted judgment criteria. The technical information in the bid will be available to the other participants, but the commercial information including the price will remain confidential.
2. Closed bids: The bids will remain confidential, like the current procedure.
3. Combined bids: The open and closed bids can be combined when the subject matter of the tender can be divided. Each bid will be evaluated in accordance with the chosen method, in accordance with the terms of the tender.
4. Auction: This method will be used when dealing with common goods and services.

The current procedure is based on best price. Under the new procedure, the bids will be judged in accordance with one of the following criteria, as applicable: lowest price, biggest discount or best combination technique/price.

This is a new regulation that aims to improve the transparency of the tender process. However, it will need to go through a process of adjustment and it may suffer some teething problems, as ship-owners may find grey areas that will require further clarification.