Public Procurement and Contracting During the Electoral Period

With the approach of the electoral period, a recurring question arises—particularly among representatives of governmental entities: is it possible to conduct public procurement procedures and enter into contracts for infrastructure projects during the electoral period? In this regard, it is necessary to analyze the legislation applicable to the matter.

First, reference must be made to the law that establishes the rules governing elections, Federal Law No. 9,504, of September 30, 1997 (“Federal Law No. 9,504/1997”), which contains a specific chapter addressing the “Prohibited Conduct of Public Agents in Electoral Campaigns.” In this chapter, Articles 73 through 78 set forth restrictions applicable to public agents, relating to the hiring of personnel, advertising expenditures, and the inauguration of public works, with the purpose of preventing practices capable of affecting equal opportunities among candidates in electoral processes. Such practices are prohibited for public agents, whether or not they are civil servants.

By way of example, and subject to the exceptions provided by law, it is prohibited to appoint, hire, or otherwise admit personnel; to dismiss without just cause; to suppress or readjust benefits; or, by other means, to hinder or prevent the exercise of public functions, as well as to remove, transfer, or dismiss public servants within the electoral jurisdiction, during the three (3) months preceding the election and until the inauguration of those elected, under penalty of absolute nullity.

It is important to emphasize, however, that the prohibitions mentioned above apply solely to public agents within the administrative spheres whose positions are subject to dispute in the relevant election.

Accordingly, an analysis of Articles 73 through 78 of the aforementioned legislation reveals no prohibition against conducting public procurement procedures or entering into contracts for infrastructure projects during the electoral period. The only restriction imposed by this law—and from which the mistaken belief regarding a general prohibition on procurement and contracting during the electoral period originates—concerns the prohibition on appointing, hiring, or otherwise admitting personnel, whether civil servants, appointed officials, or individuals approved in public examinations, during the three (3) months preceding the election.

Therefore, Federal Law No. 9,504/1997 does not impose any prohibition or restriction on the structuring, procurement, and/or contracting of projects during an electoral year, whether involving works and/or services contracted under the Public Procurement Law (Federal Law No. 14,133, of April 1, 2021), traditional concessions (Federal Law No. 8,987, of February 13, 1995), or Public-Private Partnerships – PPPs (Federal Law No. 11,079, of December 30, 2004).

It is important to clarify that the execution of public contracts during an electoral year, in and of itself, does not violate Complementary Law No. 101, of May 4, 2000 (“Fiscal Responsibility Law”), which establishes, at the national level, parameters governing public expenditure by each Brazilian federative entity (states and municipalities). A violation of such legislation would only occur, as provided in Article 42 thereof, if the Public Administrator were to incur an expenditure obligation: (i) that could not be fully performed within the last two four-month periods of the mandate; or (ii) that included installments payable in the following fiscal year without sufficient cash availability.

Accordingly, no statutory deadline is established for contracting during an electoral year.

In addition, pursuant to Article 165 of the Federal Constitution, in conjunction with Article 16, paragraph 1, item II, of the Fiscal Responsibility Law, what is effectively required is the existence of budgetary authorization for expenditures related to obligations settled by the last day of the year in which contractual performance by the private party has occurred, as well as the provisioning of installments to be paid in subsequent fiscal years.

The primary purpose of Article 42 of the Fiscal Responsibility Law is to prevent the transfer of obligations from one administration to another (that is, to prevent expenditures that should be paid under one administration from being paid under the subsequent one). Moreover, this provision is part of the chapter addressing “Outstanding Payables,” which does not deal with illegality per se. There is no prohibition against including expenditures as “Outstanding Payables,” provided that there is “sufficient cash availability” to cover the installments due in the following fiscal year(s).

Considering that concessions (whether traditional or Public-Private Partnerships – PPPs) give rise to continuous expenditure obligations (i.e., the provision of public services and the execution of works that generally require the allocation of resources over more than one fiscal year), it would be unfeasible to require the State, within the eight (8) months preceding the end of an electoral year, to fully honor new commitments undertaken during that period, as required by Article 42, in addition to those assumed in prior years. An interpretation to the contrary would clearly disregard the principles of reasonableness and continuity of public services.

In contracts involving continuous performance, the concept of “Outstanding Payables” does not apply, because: (i) the total value of such contracts is not considered as outstanding (in the case of a PPP, such value is already provided for in the Multiannual Plan); and (ii) there are duly provisioned installments that will be executed in subsequent years in order to cover expenses incurred in the fiscal year in which the obligations were lawfully undertaken.

In this context, the assumption of such obligations in a PPP, for example, is permissible provided that they are included in the Multiannual Plan, are compatible with the Budgetary Guidelines Law, and are provided for in the Annual Budget Law.

Therefore, once the prerequisites for contracting are duly observed from an economic, accounting, and financial standpoint, properly structured projects may be lawfully tendered and contracted during the electoral period, with no violation of Federal Law No. 9,504/1997 or the Fiscal Responsibility Law.

Rafaella Borelli and Patricia Ferrari

under the coordination of Marina Cintra