By: André Jerusalem

At the beginning of June, Complementary Law 182 of 2019 was approved by the National Congress, which establishes the Legal Framework for Startups and Innovative Entrepreneurship, presenting measures to promote the business environment and increase the supply of capital for investment in innovative entrepreneurship and, among the novelties of the Legal Framework is the bidding modality for contracting technological solutions.

However, according to the Report “GovTech Startups and the Future of Government in Brazil”, GovTech startups were mostly included in the Bidding Law, Federal Innovation Law, State-Owned Companies Law and the Brazilian Digital Transformation Strategy (E-digital), presented in 2018 and regulated by Federal Decree No. 9319/2018.

Now, with the Complementary Law, public contracts for this type of company are duly regulated, making the parameters set out in the Complementary Law an essential condition for contracting with the public sector.

Thus, according to article 12 of the aforementioned Complementary Law, bids and contracts are intended to resolve public demands that require innovative solutions using technology and to promote innovation in the production sector through the use of the State's purchasing power.

In this sense, the type of startups known as “govtechs” are companies that seek to offer innovative technical solutions to the Public Administration. Thus, given the need for the Federal Government to transition to the digital world, which has grown exponentially in the last year due to the lack of technology in the public sector, combined with the COVID-19 crisis, which demonstrated the urgency of the country's digital transformation, “govtechs” aim to provide services with digital tools and analysis for problem-solving and also the implementation of public policies and the dissemination of information, for example.

Therefore, the Complementary Law brings innovations that facilitate the contracting of innovative solutions by the public sector, in addition to bringing security to entrepreneurs, such as the possibility of carrying out a bidding process to contract an individual or legal entity, which provides the best solution to a problem faced by the Public Administration.

It should be noted that the new law encourages innovation by public companies, mixed-economy companies and their subsidiaries, authorizing their participation in future competitions.

Unlike the bidding law, where the criterion for choosing the company is the best proposal, the Complementary Law provides five criteria for selection, in which only economic viability is considered in criteria IV and V. See:

I – the potential for solving the problem with the proposed solution and, if applicable, the likely savings for the public administration; II – the degree of development of the proposed solution; III – the viability and maturity of the solution's business model; IV – the economic viability of the proposal, considering the financial resources available for the conclusion of the contracts; and V – the comparative demonstration of the cost and benefit of the proposal in relation to functionally equivalent options, with the judging panel being able to choose more than one proposal for the conclusion of the contract.

The law also provides that the Public Administration may, upon express justification, based on the comparative demonstration between the cost and benefit of the proposal, accept a price higher than the estimate, provided that the price offered is higher in terms of innovations, reduction of the execution period or ease of maintenance or operation, limited to the maximum amount that it proposes to pay and, for this to occur, the Administration may negotiate with those selected to obtain more advantageous conditions.

Despite the current expansion and the great potential for growth in the sector in the coming years, the government must be aware of the need for digital transformation and its positive impact on society, as well as being aware of the fact that the world is undergoing renewal and that innovative products often become obsolete in the face of great advances in technological innovation. Therefore, it should not be forgotten that technology is linked to improvements in public services and that it provides opportunities for the public and private sectors.