It still remains unknown to many, but to host an event like 2014 FIFA World Cup Brazil went through a number of reforms and massive changes in public procurement legislation.
The country literally created an alternative Procurement Law, the so called Differential Public Procurement Regime.
The main goal of the Regime is to organize procurement of goods, works and services for 2014 FIFA World Cup and 2016 Olympics and to do it on time, within budget and with proper quality.
What exactly is the difference between Brazil’s Procurement Law and the Differential Public Procurement Regime? Some significant variations are listed below:
Reduced bidding time. Purchasers can notably reduce response time and shorten tendering period. Risky? Yes, but if you advertise properly and on well-known platforms, it can help.
Not publishing the budget. The existing Law requires publishing contract budget for market orientation purposes. This practice was abolished in Differential Regime and it should be saluted. Disclosing contract budget has many downsides. Seeing higher budgets vendors artificially raise prices. Oppositely, when the published budget is lower, purchasers may end up with no bids.
In any case, vendors should properly calculate their prices and come up with bids, so publishing budget adds no value to the process. Actual tender is the best market research one can organize.
Moving towards e-procurement. Before introduction of changes procurement of ordinary goods and services had been conducted online, nevertheless works and major projects were tendered via regular bidding. With Differential Public Procurement Regime all tenders are conducted electronically irrespective of nature, scope or amount.
Payments for performance milestones. Purchasers are allowed to pay for major milestones achieved by contractors. For example, finishing stadium seats installation. This practice contains risks too, the vendor may say “good bye” after milestone payment and never finish the stadium. However, this practice also motivates contractors, fills up their bank accounts and allows bonus payments to staff, subcontractors, etc.
Turn key (or integrated) procurement. Architects and consultants working on project design may also be contractors to finish the project. This gives total control over the process and clearly shows who is responsible for failure and who should be praised for success. This practice is considered unsafe in many other countries or organizations, however Brazil was brave enough to introduce it for the project of this magnitude.
Harsher penalties. Says for itself. I am not a big fan of “punishment as solution” tactics, yet recognising the risks noted above one needs to prevent danger on time and be serious about it.
Could any of the changes mentioned above be fruitful if introduced alone? I doubt it. This is a combination of tools and efforts targeted towards specific, measurable goals.
Could Brazil make it with the existing Law? Does the very idea of creating a Differential Public Procurement Regime and not following the existing Procurement Law tell us that the Law is not perfect? I’ll leave this for you to answer.
Procurement for 2014 FIFA World Cup added enormous chapter to Brazil’s public procurement history. The unique and important lessons learnt here will help the country “fine-tune” existing procurement legislation and make it even more effective, transparent and operative.