Rio de Janeiro, March 31, 2015 - Petróleo Brasileiro S.A. - Petrobras complies with OFFICIAL LETTER/CVM/SEP/GEA-1/No. 94/2015, which requests the following clarification:

OFFICIAL LETTER/CVM/SEP/GEA-1/No. 94/2015

'In reference to news released today in the newspapers O Estado de São Paulo and Folha de São Paulo, containing the following statements:

O Estado de São Paulo

TCU demands changes to the state enterprise's bidding process

'The Federal Accounting Court (TCU) has ordered Petrobras to make a number of changes to its bidding process. The requirements are designed to make Petrobras's procurement process more transparent and eliminate loopholes used for overpricing and other types of fraud.

After analyzing a set of projects procured under Petrobras's 'simplified bidding regulation', the TCU has concluded that flaws in the bidding process are 'blatantly evident' and that new bids are in need of immediate repair.

The court has ordered Petrobras to create a document for every bid, which precisely specifies the parts of the project that will allow companies to suggest changes to the objective initially procured. In addition, Petrobras will have to prepare a 'risk matrix' for each one of these contracts, specifying clear and objective rules regarding the responsibility of each contractor.

The new bids will have to present detailed information regarding the services that are expected for the project and their cost, in addition to detailed information regarding measurable items of the project, all containing calculation memories and technical reasons in support of that choice.

Moreover, Petrobras will have to demonstrate the expected composition and productivity of the work crews of its contracts and possible provisions taken into account when preparing the proposal.

'Blatantly evident'. Petrobras does not apply the traditional Competitive Bidding Law 8.666 to execute contracts worth billions, a mandatory course of action for any state enterprise engaged in public procurement.

Since 1998, the oil company has sought support from a controversial decree by the administration of Fernando Henrique Cardoso, which dodges the Competitive Bidding Law and allows total freedom for the state enterprise to conduct procurement using its own rules, according to its interests. This procurement alternative has been the target of constant criticism by the court due to the opportunity it provides for the commission of fraud. Now, the TCU has decided to impose changes.

The court's orders directly affect the model used by the state enterprise to set so-called 'prices', a critical phase of the competition for the procurement of projects and services. The current rule, according to the court, is 'merely a list of inputs used in the project, without any specification of the services that will be employed.'

By using an internal model to calculate project costs, Petrobras is limited to requiring 'only the fulfilling of quantities and prices of inputs, in addition to possible subcontracting and other indirect cost items', concluded the TCU.

Petrobras went to the TCU to insist that its procurement model is safe and eliminate the flaws found by the oversight agency. The arguments were not convincing.

'It is blatantly clear that there is no general rule as to how prices offered by bidders must be discriminated, stated justice Vital do Rego in his vote. 'By virtue of this model, when making cost proposals, contractors do not specify the services that are being priced.'

To expose the weaknesses of the procurement, the report even cites excerpts from the testimony given by Maurício Mendonça Godoy, former president of Toyo Setal, in his state's evidence agreement within the scope of the Federal Police's Operation Lava Jato.

Godoy testified that 'only a price spreadsheet and a price setting statement (DFP) are submitted to Petrobras, which do not allow a deep analysis of the information used to set those prices'.

As of the publication of this article, Petrobras had not responded to requests made by Estado.' (original without emphasis)

Folha de São Paulo

TCU says Petrobras must detail costs of projects

'The TCU (Federal Accounting Court) has ordered Petrobras to change its procurement model, requiring detailed project costs spreadsheets from the selected companies. The lack of this requirement facilitated the misapplications uncovered by Lava Jato, said the court.

Justice Vital do Rego, who reported on the background of the case, has stated that the idea behind the measure is to make the company's procurement process more transparent. The state enterprise can still appeal the decision. Vital is the rapporteur of 11 cases probing overpricing at Petrobras.

In practice, the orders of the TCU will make Petrobras's procurement process very much like the RDC (Differentiated Procurement Regime), a new competitive bidding law of 2012, which specifies the steps companies must take when setting prices.

Since Wednesday (25), the company has not responded to requests. Petrobras stated that its procurement practices were in line with a 1998 decree, which allowed the company to procure without a project, and, therefore, the cost spreadsheet was dispensable.'

We request Petrobras's clarification regarding these statements, including possible steps that the company has adopted or that it plans to adopt regarding this matter.'

Clarification

Petrobras clarifies that it is waiting for the official legal notice related to the TCU judgment of March, 25 to evaluate with its Legal Department the procedures to be adopted.

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