By Beatriz Wehby and Christian Rosa

There is currently a consensus regarding the need for private agents and the government to cooperate, to a greater or lesser extent, in the provision of services of public interest. This interaction, in favor of providing services to the community, necessarily occurs through legal instruments, adjustments that formalize the relationship of obligations between the parties, and thus enable the construction and operation of highways, railways, sanitation systems, generation, transmission and distribution of electricity, among many other activities necessary for social well-being and economic development. The strategy is based on the use of private resources and expertise in the provision of public services, especially those related to infrastructure.

This contract between the Public Administration and market agents is the result of an entire process that involves the conception and structuring of the project – a summary of the technical-operational characteristics of the undertaking, the assessment of its economic-financial viability (investments versus revenues) and the legal modeling of the bidding and contractual relationship to be formalized.

Faced with a reality of unlimited needs, the Public Administration (Federal, State and Municipal) does not always have sufficient staff and resources to prepare its own projects, which are necessary for bidding and contracting private agents. The alternative would be to contract project preparation services – which is completely legal and common, but also requires the availability of the Public Administration's own financial resources, budgetary resources.

Also to overcome this limitation, Brazilian Public Law has outlined an instrument that is an alternative for public agents who intend to mitigate their technical or budgetary insufficiencies, and still make use of private expertise and resources to prepare infrastructure projects – typically marked by a certain degree of complexity.

It is in this context that the Public Administration has at its disposal alternatives for modeling projects and can thus formally count on the participation of private partners in the modeling of public projects, as a way of aligning the expectations of the government and a possible private partner regarding how to set up the project.

Without prejudice to the alternatives traditionally available to the Public Authorities, such as carrying out studies directly internally, entering into agreements or arrangements for this purpose with other public entities, or even contracting studies and research through a bidding process, the legislation contemplates the possibility that the Public Administration may authorize the preparation of projects through the so-called Expression of Interest Procedure (PMI) and Private Initiative Expression of Interest (MIP).

This is a public, formal procedure characterized by a public call for studies necessary to prepare the bidding notice for a specific concession project or public-private partnership. The name and procedure vary according to the federative entity.

In general, PMI is for cases where the initiative is from the Public Power, which already has a project in mind and is open to potential interested parties to present studies, surveys and research necessary for its implementation.

In contrast, MIP is for cases where the private sector takes the initiative to develop studies and research to demonstrate the economic and financial viability of a given project for the public entity, on an inaugural basis.

It is important to recall that Article 21 of Law No. 8,987 of 1995 was the first legal provision to allow private entities to request authorization from the Public Administration to conduct studies, surveys, research or investigations useful for bidding processes. The actual regulation of the PMI only occurred in 2015, with the issuance of Decree No. 8,428. The rule states that, in such a procedure, the private individual – whether an individual or a legal entity – prepares and submits to the Public Administration projects, studies, surveys or investigations related to a specific project already defined as a priority by the Government.

The studies are carried out under the technical and financial responsibility of the private interested parties and, submitted for evaluation by the public sector, may or may not be used in a future bidding process for the contracting of a Common Concession or Public-Private Partnerships.

In general, two types of private agents usually participate in the procedures. On the one hand, consultancies, whose objective is to operate in the project modeling market, and, on the other, potential bidders – market agents interested in structuring and expanding market opportunities for which, at a later stage, they may compete.

The incentive for such agents is clear: as they participate in the preparation of studies, they prepare themselves in advance to subsidize their – possible – entry into a future competition, and thus may hold some legitimate comparative advantage over others.

Regarding the advantages, on the one hand, the Public Administration gains by encouraging a procedure that values transparency. The PMI is a phase prior to the bidding process and, therefore, ensures that the object of the investment is public knowledge and adheres to market expectations from the beginning.

Furthermore, the publicity and transparency of the procedure during the public call contribute to the suitability and regularity of projects and future contracts. The procedure provides legal certainty to the investor, while protecting public agents.