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Exceptional and temporary regime for the revision of public contract prices

In response to the exponential increase in prices of raw materials, materials and labour, this regime will apply not only to public contracts under execution or to be executed, but also to public procurement procedures to be initiated.

Decree-Law 36/2022 of 20 May has been published, establishing an exceptional and temporary regime for the revision of public contract prices, in response to the exponential increase in prices of raw materials, materials and labour. This regime will apply not only to public contracts under execution or to be executed, but also to public procurement procedures to be initiated.

In view of the circumstances resulting from the COVID-19 pandemic – to which must be added the effects of the global energy crisis caused by the war in Ukraine – the prices of these products have risen considerably, jeopardising the execution and completion of public works.

In fact, this increase in costs is easily observable through the analysis of price and labour cost indexes, calculated by the Portuguese Commission of Contract Indices and Formulas, referring to December 2021 compared to December 2020, which the Portuguese Government shared in the preamble of the referred Diploma.

According to this data, in the period in question, the increase in the costs of materials and raw materials varied between 28% and 71%, while the price of labour related to the main occupations in this area of activity registered an average increase of 6.7%.

Such reality endangers the execution and conclusion of procedures and public construction works planned by the Portuguese Government and by the European Union, since, given the values currently charged and associated costs, there is a serious risk of there being no participants interested in the execution of these projects.

Thus, in an attempt to react to the present circumstances, Decree-Law no. 36/2022, of 20 May was published, establishing – until 31 December 2022 – an exceptional regime that allows the contractor to submit, during the term of the public contract, a request for an extraordinary price revision, provided that the cost increase is reflected in a product representing at least 3% of the contract price and the annual cost variation rate is equal to or higher than 20%.

This regime also allows for the extension of contract execution periods, without any penalty or additional payment to the contractor, if he is unable to obtain the necessary materials to execute the works for reasons that are proven to be beyond his control.

The content of this information does not constitute any specific legal advice; the latter can only be given when faced with a specific case. Please contact us for any further clarification or information deemed necessary in what concerns the application of the law.

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