"Corruptissima re publica plurimae leges"

(The more corrupt the State, the greater the number of laws).

Tacit

Petrobras Simplified Bidding Procedure, Decree 2,745 of August 24, 1998, establishes various tender modalities: competition, price-making, invitation, tender, and auction. However, the invitation has been widely adopted, which allows to restrict participation of only three suppliers (and at least three suppliers) in the bidding process. Although the simplified regime is more agile and efficient, its nontransparent nature has left loopholes that have stimulated illegal favors and privileges. The simple reduction of formalism without setting up mechanisms of transparency and compliance gave rise to undesirable practices.

Petrobras is a public company with shares traded on the stock market, subject to the rules of the Brazilian Securities and Exchange Commission (CVM) and B3 (formerly BM & FBovespa), Law 6404/76 (Brazilian Corporation Law), Law 12,846 / 2013 (Anti-Corruption Law), and, since last year, to Law 13303/2016 (State Law). Will all this legal apparatus inhibit deviations of conduct? We hope so.

The State Law has been in force since June 30, 2016 and expressly revoked art. 67 of Law 9,478 / 1997, withdrawing from its Decree 2.745 / 98 its legal validity, and will govern all Petrobras procurement.

The new law is subdivided into two major themes: governance rules and corporate governance; tenders and contracts. The corporate governance system provides four pillars: accountability; disclosure; transparency for stakeholders; compliance: code of ethics and integrity (Anti-Corruption Law); equity: conflict management between the interests of private shareholders and the State (collective interest and national security). Even before the enactment of the law, Petrobras had already initiated a strong process of compliance and adoption of a governance model that culminated recently with the certification in the "Highlight Program on State Governance" granted by B3 on August 9 of this year.

With regard to procurement, the entire system is being adapted because the tender modalities of the new law are distinct, and Petrobras has until June 30, 2018 to adjust. According to information from the Supply and Service Supply Management (SBS), Petrobras will carry out the first major purchase test under the State Law in February 2018 for two hundred product families for the Exploration and Production Operations Unit of Espírito Santo (UO-ES).

Petrobras' Register of Suppliers of Goods and Services through Petronect, the company's procurement website, has for many years been in practice mandatory for suppliers, including due to recent "integrity" requirements - part of the company's program against corruption - that became part of the company's policy after the scandals involving the state-controlled company.

Although the registration is not mandatory under the new law for the participation in tenders, it is likely that the CRCC (vendor list registration) will continue a key tool that will facilitate access to prequalified suppliers.

The big change occurs in the field of publicity, because today, the opportunities are only published on Petronect. Now the notices containing the summaries of the bidding documents and contracts must be previously published in the Official Gazette of the Union, of the State or of the Municipality, in addition to the internet. Petrobras should disclose information such as bidding database and contracts with real-time access to control entities and provide monthly information on contracts performance and budget. Any citizen may challenge a bidding notice within a period of up to five business days prior to the date set for the event to occur, and Petrobras must evaluate and respond within 3 business days.

Publicity and transparency are important to ensure the competitiveness and smoothness of the processes, but to what extent will Petrobras be able to examine and judge thousands of appeals in a timely manner and ensure the agility and efficiency necessary for its hiring processes? Recalling that the state-controlled company must compete with the big ones: Shell, Exxon, BP, Total, and other oil companies that are not subject to these formalities and follow the best global procurement practices. The single recursal phase, envisaged in the new law, seeks to minimize the profusion of appeals and speed up the process.

The new law includes several provisions of the Differentiated Regime of Public Procurement (RDC), which was published in a context of strong pressure to comply with the schedule for the 2014 World Cup and 2016 Olympics, in order to establish a faster bidding environment and improve implementation of contracts.

Concerning the contracts of works and engineering services, the modalities foreseen are: contracted by unit price, contracted by global price, contracting by task; integral contracting, semi-integrated contracting and integrated contracting. The turn-key modality appears to have undergone a legislative reversal. Decree 2.745 / 98 provided for the possibility of integrated contracting, "whenever economically advisable", and the RDC "provided it is technically and economically justified". The State Law restricts integrated contracting to situations where: "the engineering work or service is predominantly intellectual in nature and technological innovation of the object tendered or can be executed with different methodologies or technologies of restricted domain in the market." The question remains: if greater economics or technical advantage is present, even without innovation, would not it be possible to opt for integrated contracting?

On the other hand, Law 13,303 / 2016 establishes that the bidding documents for semi-integrated contracting (and also integrated contracting) must provide for a risk matrix, which will allow greater security and transparency of the contracts, especially regarding risks related to project design.

There is a lot of expectation regarding the publication of Petrobras Internal Regulation, with details of various rules and minutes of public notices and contracts, bidding procedures, and other norms, under the terms of art. 40 of the Law.

A study published in 2014 by the independent, non-profit Natural Resource Governance Institute analyzes the performance of several state-owned oil companies and proposes nine recommendations for them to succeed in gaining benefits from the oil sector and contributing to national development, interesting subject for an upcoming article. According to this study, Petrobras today seems to be on the right track, aligned with several of these recommendations, for example: promoting the limitation of political interference in technical decisions; ensuring transparency and oversight; the definition of commercial and non-commercial roles; the limitation of non-commercial activities, when costly or sophisticated commercial activities increase the risk and cost of conflicts of interest.

It is important to note that, in addition to the improvement of regulatory institutes, there must be mechanisms that control political influence and the pressures of economic power, in favor of efficiency and the reduction of the risk of illicit practices. The State Law comes at a time when citizens are tired of the inefficiency of the state in running public companies. Underpinned by two main pillars - governance and contracting - the law aims to provide the necessary legal basis for a major transformation in the management of these companies, so that they effectively serve the public interest that should guide them.

Petrobras is a world leader in the development of state-of-the-art technology for deepwater and ultra-deepwater oil exploration and has topped the ranks of the world's largest publicly traded oil companies. May the new laws help you avoid further mischief so that the great company can shine again.