Understanding the Fine Line: Failure or Fraud in Bidding Cases, Says São Paulo University
Failures and fraud in bidding processes show that, despite the control over public contracts and the bidding process, the country still needs to improve the instruments capable of avoiding this problem. A recent example is the case of suspected irregularities in the bidding process for the purchase of imported rice, which is still being investigated. The question that remains, then, is how the Brazilian State has adapted to the anti-corruption law, considered a milestone for the development of compliance in Brazil. Marina Zago, from the Department of Administrative Law at the USP Law School, says that “the line between failure and fraud is a fine line”.
How a bidding process works
First of all, it is necessary to understand the bidding process: in short, it is a procedure that the administration – the states, municipalities and the federal government – uses to purchase goods or contract services. The professor explains: “The Brazilian government spends a lot buying goods, products, and contracting services to make goods and services available to the population,” adding that “they cannot go around buying and contracting whatever they want and with whomever they want because they are handling public resources.”
Bidding is a bureaucratic procedure that organizes and establishes parameters for contracting or purchasing. “Before purchasing, it [the State] has to follow this rule, carry out a procedure that will allow them to properly base their choices on what they are buying,” says Marina Zago. “What are the specifications of the object? What are the minimum qualities that I will require from the person I am going to hire?” are some of the maxims that she exemplifies.
In theory, this internal procedure of the public administration will also allow the best proposal to be chosen. The equality and transparency of a broad competition are essential, so that any interested party who meets the qualification conditions can compete for this contract.
Failure or fraud?
Mistakes can occur in bidding processes, which may be intentional or not; this, according to the expert, is not always easy to say. “Public administration is in a very difficult balance to achieve, because, at the same time as it has to establish technical and financial qualification requirements in the notice, it also cannot do so in an absolutely restrictive way, because otherwise it may restrict the universe of competition too much”, says Marina Zago. By opening the bidding process too much, the winners may be excessively expensive or insufficiently capable; if it is too narrow, the bidding process may indicate “marked cards”.
The professor explains that the law already provides for several regulations and that cases of error do not necessarily indicate legislative errors. Cases must be studied individually, especially because the error, if intentional, can come from both public bodies and the private sector. Regarding the latter case, Marina comments: “Companies that participate in this public procurement market can defraud the spirit of competition in several ways, either by presenting documents that are not truthful, that make them fit those technical conditions improperly, or through bidding cartels.”