By: Leonardo Neri

The president sanctioned the new Law on Public Tenders and Contracts, published with some vetoes, which will be analyzed by the National Congress, and which will replace Law 8,666, in force since 1993, as well as the laws on the Auction and Differentiated Public Contracting Regime (RDC).

The new law, among other innovations, expands the limits of the surety bond coverage. In the previous law, the surety bond coverage was limited to 10% of the work and, now, it may reach 30% of the contract value for bids for large-scale engineering works and services, as provided for by law (Art. 99 of Law 14.133/2021).

According to the law, the purpose of the surety bond is to ensure compliance with the obligations assumed by the contractor before the Administration, including fines, losses and compensation arising from non-compliance, under the terms of article 97 of the New Law.

Article 97 refers to the “performance bond", in which case the surety bond ensures that the contract entered into with the Public Administration is fulfilled in the manner agreed upon at its conception, thus becoming widely used in the public sector, especially for the construction of large-scale engineering works and services. It is important to highlight that the law itself determined which contracts are large-scale, which according to article 6, item XXII, are those that exceed 200 million reais.

Therefore, if there is any problem in the execution of the contract, such as default by the contractor, the New Law provides that the insurer may take over the execution and complete the object of the contract – resumption clause or step in – and, in this case, it will be exempt from the obligation to pay the insured amount indicated in the policy. However, if the insurer does not undertake the execution of the contract, it will pay the full insured amount indicated in the policy.

The main advantages of the new rule on surety insurance is to attribute responsibilities to the insurer, ie, who will have free access to the facilities where the main contract is executed, will monitor the execution of the main contract, will have access to technical and accounting audits, and may request clarifications from the person technically responsible for the work or supply. In this way, the possibility of suspension or interruption of public works due to problems caused by the contractor is mitigated, since the New Law allows the execution of the work by the insurer. Furthermore, as stated above, the insurer becomes an overseer of the operations, ensuring that they are carried out in accordance with the initial criteria.

Finally, if the service provider does not fulfill its obligations and the insurer does not complete the purpose of the contract, the Public Administration will receive compensation to continue with the contracted project.