FEDERAL GOVERNMENT PUBLISHES DECREE REQUIRING THE ADOPTION OF INTEGRITY PROGRAMS IN PUBLIC BIDS AND CONTRACTS

On December 10, 2024, Brazil’s Federal Government published Decree No. 12,304/2024 (the “Decree”), which regulates Law No. 14,133/2021 (the “Law on Public Bids and Administrative Contracts”) in order to require the adoption of integrity programs by companies involved in large-scale public contracts, including as a criterion for resolving tied bids and as a condition to rehabilitate ineligible companies.

Aligned with the Office of the Comptroller General’s (“CGU”) existing anti-corruption and compliance agenda, the Decree seeks to promote greater transparency, ethics, and sustainability in the Federal Government’s contracting procedures, reflecting a trend of regulatory enhancement and increased scrutiny of private sector integrity practices, especially in highly regulated industries reliant on government contracts.

The Decree also breaks new ground by introducing normative requirements centered on environmental, social, and corporate governance (“ESG”) matters, making it one of the first Brazilian anti-corruption regulations to address these issues in a binding manner. This initiative underscores the increasing convergence of compliance and sustainability practices in the market, particularly in government relations and public procurement.

I. APPLICABILITY

The Decree applies to all contracts for large-scale works, services, and supplies, as well as to concessions, permits, and public-private partnerships involving:

• Agencies and entities under the jurisdiction of the Federal Government; and
• State, district, and municipal government agencies and entities, whenever the contractual arrangements involve funds originating from voluntary transfers by the Federal Government.

II. OBLIGATES COMPANIES

The following companies are required to demonstrate the implementation and adoption of an integrity program:

• Companies contracted to execute large-scale works, services, and supplies (i.e., exceeding the amount of BRL 239,624,058.14, considering the value of the contract and any existing amendments).¹ In the case of consortium contracts, all consortium members must demonstrate the adoption of the program.
• Companies that submit, in a bid, a declaration of adoption of an integrity program as a tie-breaking criterion between two or more proposals.
• Contractors or bidders seeking rehabilitation following penalties imposed due to (i) submitting false declarations or documentation during the bidding process or contract execution; or (ii) committing any of the violations foreseen in Law No. 12,846/2013 (the “Anti-Corruption Law”). Sanctioned companies with an integrity program in place at the time of the sanction must prove the program has been improved—in this case, remediation measures related to the facts that led to the penalty will also be considered.

III. DEFINITION OF INTEGRITY PROGRAM AND NEW EVALUATION CRITERIA

For the purpose of evaluating integrity programs, the Decree adopts the concept of “integrity program” and the 15 evaluation parameters originally established by the Anti-Corruption Law, as regulated by Federal Decree No. 11,129/2022.

However, the Decree introduces an innovation by requiring specific mechanisms aimed at preventing, detecting, and combating violations of human, labor, and environmental rights – alongside those focused on preventing and combating corruption and fraud. It also emphasizes promoting greater transparency and socio-environmental responsibility within companies. These new mechanisms will now be required both for defining the integrity program and for evaluating its existence and effectiveness, expanding the list of parameters used to assess the programs adopted or improved by obligated companies.²

IV. DEADLINES

The information and documents required to demonstrate the implementation, development, or improvement of the integrity program must be submitted:

• Within six months of signing the contract for large-scale works, services, or supplies. If the contract amount reaches BRL 239,624,058.14 through an amendment, the six-month period will be counted from the date the amendment is signed;
• When submitting a proposal that serves as a tie-breaker between two or more proposals; or
• When submitting an application for rehabilitation.

V. CGU ENFORCEMENT AND RESPONSIBILITIES

The CGU will be the agency responsible for receiving and addressing information and documents related to integrity programs. Under the terms of the Decree, the CGU will carry out both (i) prevention, through guidance, supervision, and evaluation of the programs and (ii) enforcement, through the initiation of administrative liability proceedings and the application of penalties.

a. Preventive Activities

The Decree provides that the CGU will engage in activities to (i) raise awareness and provide training for public agents and private entities on integrity and ethics matters; (ii) gather and analyze relevant information and data to support the evaluation of integrity programs; and (iii) assess the adherence of programs to the evaluation parameters established in the Decree.

The CGU may evaluate integrity programs (i) ex officio; (ii) as part of periodic evaluations, including by sampling methods; or (iii) in coordination with other public agencies and entities. In any case, the CGU may evaluate programs by requesting information, conducting due diligence, performing technical visits, and holding interviews.

An evaluation that concludes the integrity program has been implemented, developed, or improved will be valid for two years.

b. Enforcement Activities

Violations

Under the Decree, violators may be held administratively liable by the CGU for irregularities in the submission of information and documents concerning integrity programs. These actions are considered violations (Article 17 of the Decree) and can lead to liability under the Law on Public Bids and Administrative Contracts.

The new violations include (i) omitting or refusing, without justification, to provide information or documents necessary to prove the implementation, development, or improvement of an integrity program; (ii) failing, without justification, to meet deadlines or comply with measures outlined in the compliance plans; and (iii) provided inaccurate documents or information related to the implementation, development, or improvement of the integrity program.

If any of these violations also constitute violations defined under the Anti-Corruption Law, they will be investigated and prosecuted in accordance with that law.

Penalties

Companies found administratively liable for violations under the Decree may face the following sanctions: (i) a warning; (ii) a fine ranging from 1% to 5% of the value of the bid or contract; (iii) suspension from participating in public bids and contracts; or (iv) declaration of ineligibility to bid or contract.

If the violations also constitute violations defined under the Anti-Corruption Law, the penalties set forth in that law may also apply.

VI. ENTRY INTO FORCE

The Decree will come into force 60 days after the date of its publication (i.e., on February 8, 2025).

The publication of the Decree reinforces the CGU’s strategy to strengthen integrity and social responsibility initiatives in the private sector, making integrity programs and ESG practices not only legal obligations, but also a competitive advantage in public bids and contracts. More than ever, the adoption and enhancement of these programs will serve as indicators of a company’s genuine commitment to corporate governance and business ethics, which are increasingly being demanded by Brazilian authorities.

If you have any questions, do not hesitate to contact us. Our Global Investigations & White-Collar Defense and Public Law teams are available to offer personalized support, discuss how these provisions can impact your company, and help you implement or adapt your integrity program in accordance with the new rules and deadlines stipulated in the Decree.

¹  The Law on Public Bids and Administrative Contracts defines “large-scale works, services, and supplies” as “those with an estimated value exceeding BRL 200,000,000.00 (two hundred million reais).” This amount was updated to BRL 239,624,058.14 by Decree No. 11,871/2023.

²  Article 2. For the purpose of this Decree, an integrity program is considered a set of internal mechanisms and procedures for integrity, auditing and encouraging the reporting of irregularities and the effective application of codes of ethics and conduct and other policies and guidelines for integrity and the prevention of acts of corruption, in order to: (...) II – mitigate the social and environmental risks arising from the organization’s activities, in order to ensure the protection of human rights (...).

Article 3. The integrity program will be evaluated, as to its implementation, development or improvement, according to the following parameters: (...) IX – specific mechanisms to ensure respect for human and labor rights and the preservation of the environment; (...) XVI – transparency and socio-environmental responsibility of the legal entity; and XVII – continuous monitoring of the integrity program in order to improve it in preventing, detecting and combating the occurrence of fraud, irregularities, harmful acts committed against the public administration, national or foreign, and conduct that violates human and labor rights and the environment.