The Public Contracts Code, approved by Decree-Law 18/2008 of 29 January, as amended (PCC), is the key legislation regulating public procurement and government contracts in the Portuguese legal system.
The last significant amendment to the PCC was approved by Decree-Law 111-B/2017 of 31 August 2017, which transposed Directive 2014/23/EU (Concession Contracts Directive), Directive 2014/24/EU (the Public Procurement Directive) and Directive 2014/25/EU (Utilities Directive), all dated 26 February 2014, to the Portuguese legal system. This amendment significantly modified the legal regime applicable to the public procurement procedures and public contracts, revoking 35, adding 54 and changing 155 articles.
This amendment was complemented by both Ministerial Order (Portaria) 371/2017, of 14 December 2017, which established the model contract notices applicable to the pre-contractual procedures under the PCC, and Ministerial Order 372/2017 of the same date, which established the rules and terms concerning submission of the contractor’s qualification documents.
Further Relevant Laws
Also relevant is Law 96/2015, of 17 August 2015, which establishes the legal framework for the access and use of electronic platforms for public procurement purposes, as well as Decree-Law 111/2012, of 23 May 2012, amended by Decree-Law 84/2019, of 28 June and Decree-Law 170/2019, of 4 December 2019, which provides for a special legal framework for public-private partnerships (PPPs).
Additionally, it is also relevant that the Decree-Law No 28/2019 of 15 February 2019 was established in the context of SIMPLEX +, a programme that foresees a set of measures to simplify and modernise Portuguese Public Administration.
As such, the Portuguese government has promoted the implementation of digital receipts/electronic invoicing. The main objective of this measure was to reduce paper tax invoices and stimulate digital transition, as well as to promote less bureaucracy in Public Administration and cutting down on the use of paper.
The deadlines for implementing the electronic invoicing towards public entities are the following:
Autonomous Administrative Regions
Portugal has two autonomous administrative regions, Madeira and Azores, each of which has adapted regional public procurement rules to the particularities of their territories.
In Madeira, the most relevant piece of legislation is the Regional Legislative Decree 34/2008/M, of 14 August 2008, as amended, which introduced minor adjustments to the national legal framework.
In Azores, the regional government approved Regional Legislative Decree 27/2015/A, of 29 December 2015, which consolidated the main provisions referring to the award of public contracts in the region and has implemented some provisions of the European Union (EU) directives on public procurement not yet transposed into the national framework.
The APC and ACPC
Reference must be made to the Administrative Procedure Code (APC), approved by Decree-Law 4/2015, of 7 January 2015, and to the Administrative Courts Procedure Code (ACPC) and the Statute of Administrative and Tax Courts, both amended and republished by Decree-Law 214-G/2015, of 2 October and by Law No 118/2019, of September 2017; all three apply to public procurement procedures in general.
Moreover, 2020 is a very exceptional year, also in what regards public procurement. One must consider the exceptional and temporary regime regarding public procurement procedures adopted as from March 2020, due to the pandemic COVID-19, and to deal with the pandemic in public acquisitions related thereto, as set forth in 5.4 Legislative Amendments under Consideration.
The PCC establishes a wide concept of contracting authorities. However, until the revision of the PCC introduced by Decree-Law 149/2012 of 12 July 2012, certain public entities – eg, public foundations for university education or corporate public hospitals – were excluded from its subjective scope of application.
The Portuguese legislation currently recognises three main categories of contracting authorities.
Article 2(1) of the PCC enshrined the first group of entities; it is generally composed of the traditional public sector and includes:
In accordance with the Article 2(2) of the PCC, the second group of entities is made up of bodies governed by public law, including:
Finally, the third group of contracting authorities is foreseen in Article 7 of the PCC and is composed of entities operating in the utilities sectors (water, energy, transport and postal services) that fall within the following three subcategories:
Further to the three main categories of contracting authorities referred to above, the PCC also extends its scope of application to entities that enter into public works contracts or associated public service contracts, provided those contracts are directly financed, for more than 50% of the contractual price, by contracting authorities and the values of the contracts to be executed are equal or greater than the relevant thresholds (Article 275 of the PCC).
Additionally, the PCC also extends the application of certain specific public procurement rules to contracts to be carried out by public works concessionaires or by entities holding special or exclusive rights, under certain circumstances expressly defined in Articles 276 and 277 of the PCC.
The contracts that are subject to procurement regulation are those whose scope is, or may be, subject to competition. In this sense, in accordance with the PCC, the following contracts are considered to be subject to competition, without limitation:
Relevant thresholds (referring to the thresholds’ value net of VAT) may vary depending on the contracting authority at stake and on whether the contracting authority pertains to the traditional public sector or to the utilities sector.
All public contracts executed by entities pertaining to the traditional public sector or that are considered bodies governed by public law fall within the scope of procurement law, regardless of the contract value. Nevertheless, contracts whose value is under certain amounts can be awarded through a non-competitive procedure (direct award) and their terms are also regulated by the PCC.
The scope of application of the direct award has been reduced by the latest amendment to the PCC, with the inclusion of a new procurement procedure (prior consultation) that imposes the consultation of three entities for the award of a contract.
The Utilities Sector
For contracting authorities in the utilities sector, regardless of the general application of the public procurement principles to all contracts carried out by those entities, the European thresholds apply and are currently as follows:
All public works concession contracts and all public service concession contracts, as well as companies’ incorporation contracts, fall within the scope of the PCC, regardless of their value.
The PCC does not establish any restrictions on the opening of contract award procedures. However, the regulated competitive public procurement procedures must be advertised in the national gazette (Diário da República), and also in the Official Journal of the European Union (OJEU) if their value is over the European thresholds.
According to the Portuguese legislation, the award of contracts is subject to compliance with the principles of the Treaty on the Functioning of the European Union, in particular, the free movement of goods, freedom of establishment and freedom to provide services, as well as with the principles deriving therefrom, such as equal treatment, non-discrimination, mutual recognition, proportionality, competition and transparency.
Additionally, the law sets forth key obligations regarding opening and selection of procurement procedure, notices, tender documents, procedure phases and the course of the procedure, bidders’ requirements and impediments, qualification and bid submission and evaluation, award, contract execution and performance.
Regarding the advertising of contract award procedures, contracting authorities are obliged to adopt two types of notices.
Prior Information Notices
According to Article 34(1) of the PCC, prior to the formal opening of the pre-contractual procedures, and in accordance with the transparency principle, the contracting authorities should disclose their annual procurement plan in a prior information notice that complies with the model provided in Article 48(1) of Directive 2014/24/EU for publication in the OJEU, provided that the aggregate contractual value of the contracts to be executed during the following 12 months equals or exceeds the European thresholds (see 1.3 Types of Contracts Subject to Procurement Regulation).
In accordance with the Article 34(2) of the PCC, contracting authorities may also send a prior information notice for publication in the OJEU that complies with the model provided in Article 31(2) and (3) of Directive 2014/23/EU, in the case of service contracts for social and other specific services listed in Appendix IV of the Directive.
Additionally, pursuant to Article 35 of the PCC, contracting entities in the special utilities sector may send an indicative periodical notice for publication in the OJEU, with the mentions provided for in Article 67 of Directive 2014/25/EU, and covering a period of 12 months as a rule.
As mentioned in 1.3 Types of Contracts Subject to Procurement Regulation, depending on the value and the scope of the contract, public contract authorities are, as a rule, bound to advertise the awarding procedures: with the exception of the direct award and the prior consultation procedures, all public procurement procedures are required to be advertised in advance in the Diário da República, only, or also in the OJEU.
The information to be included in the contract notices is provided for in Annex V of Directive 2014/24/EU (for announcements to be published in the OJEU) or in Ministerial Order 371/2017 (for notices to be published in the Diário da República), and varies according to the type of procedure. However, regardless of the type of procedure, the following information is expected to be disclosed in all advertisements:
Significant amendments to the PCC in 2017 included the introduction of Article 35-A, regarding “preliminary market consultations”. As a result of this, the awarding authorities may conduct informal market consultations before the launch of the contract award procedure, namely requesting the opinion of experts, independent authorities or economic operators.
The PCC provides for the following procurement procedures:
Both the prior consultation procedure and the partnership for innovation were introduced in the PCC in its 11th amendment, of 2017.
Negotiation with Bidders
The use of procedures involving negotiation with bidders in Portugal is limited to certain specific circumstances, and the PCC establishes two procedures that involve negotiation with bidders: the competitive dialogue and the negotiation procedure.
Currently, the PCC provides that the adoption of a competitive dialogue or a negotiation procedure may occur if:
In addition to the two cases referred to above, provided that some requirements are fulfilled (in particular if it is provided for in the procedure programme), a negotiation phase can be carried out in the procedures of direct award, prior consultation or in public tenders, including, for example, in public tenders for the award of public works or public services concession contracts, or for the award of public works, supply or lease of goods or services provision contracts whose contract value is below certain amounts.
In general, awarding authorities may freely choose to adopt an open procedure or a restricted procedure with pre-qualification.
For contracts designed for the utilities sector, awarding authorities may freely choose between the open procedure, the restricted procedure with pre-qualification, the negotiation procedure, the competitive dialogue or, if the respective requirements are fulfilled, the partnership for innovation. Also, for public works or public services concessions, as well as for company incorporation contracts, awarding authorities may freely choose between the open procedure, the restricted procedure with pre-qualification, the negotiation procedure or the competitive dialogue. In both cases, other procedures may be adopted provided certain criteria legally set forth – based on the value of the contract or material criteria – are met.
Regarding the defence and security sector, Decree-Law 104/2011 provides three procedures: competitive dialogue; a restricted procedure with pre-qualification (both governed by the rules of the PCC); and the negotiation procedure, which may or may not be preceded by a contract notice.
Special procedural instruments are also set forth for design procedures, dynamic purchasing systems and qualification systems, the latter applicable to the utilities sector.
As the EU directives state the importance of simplifying and dematerialising procurement procedures with a view to ensuring greater efficiency and transparency, the PCC opts unequivocally for electronic procurement, and the awarding authorities are bound to adopt electronic procurement procedures.
Further to the above, there are certain criteria that are relevant and have to be fulfilled for the adoption of certain types of procedures – based on the contract value, material criteria, or the type of contract.
Criteria Based on Contract Value
For entities pertaining to the traditional public sector or that are considered bodies governed by public law, the thresholds are the following.
However, in some situations, a direct award or a prior consultation may be adopted irrespective of the contract value, in particular when the following material criteria are met, inter alia:
Other material criteria are set forth in the law, specifically for each type of contract (Articles 24 to 27 of the PCC).
Even when one of the material criteria for the adoption of a direct award or a prior consultation is met, the law specifies that prior consultation should be adopted whenever the recourse to more than one entity is possible and compatible with the criteria used for the adoption of such a procedure.
Negotiated procedures and competitive dialogues
The awarding authorities can adopt the negotiated procedure or the competitive dialogue, when:
Partnerships for innovation
The awarding authorities may adopt the partnership for innovation when they intend to carry out research activities and the development of innovative goods, services or works, irrespective of their nature and areas of activity, according to their subsequent acquisition, provided that they correspond to the levels of performance and prices previously agreed between it and the participants in the partnership.
Finally, there are also specific rules and conditions for the adoption of a specific procedure for the award of mixed contracts as to its scope.
As a rule, apart from procedures where the submission of a proposal depends on an invitation (ie, direct award and prior consultation), the award authorities shall provide a free, unrestricted and full direct electronic access of the procurement documents, from the date of publication of the notice. In the other cases, ie, when direct award or prior consultation is adopted, the documents of the procedure shall accompany the invitation.
Additionally, the PCC also establishes the obligation to disclose, in the public procurement portal (called BASE), the information related to the pre-contractual procedure and performance of public contracts, through a form conforming to the model in Annex III of the PCC.
In this respect, the Ministerial Order 57/2018, of 26 February 2018, regulates the operation and management of the public procurement portal. This portal was designed to centralise the most important information relating to all pre-contractual procedures, which must be carried out electronically as required by the PCC. It is a virtual space where the elements regarding to the pre-contractual procedure and performance of public contracts are publicised, thus enabling their follow-up and monitoring.
See also 2.1 Prior Advertisement of Regulated Contract Award Procedures.
The PCC establishes the minimum timescales to present applications (technical and financial qualification documents) or tenders. Pursuant Article 63(1) of the PCC, the awarding entity may broaden the timescales in the procedure documents, with respect for the following time limits stipulated by the PCC:
If the notice is not subject to publication in the OJEU, the PCC establishes a minimum time limit to submit bids of six days after notice is sent to publication, unless the proceeding concerns the formation of public works contracts, in which case the time limit is 14 days. If the works are of significant simplicity, the time limit of 14 days can be reduced to six days. If the notice is publicised in the OJEU, the minimum time limit is 30 days, which can be reduced to 15 days in cases of urgency duly reasoned by the awarding entity or if a prior information notice has been published complying with certain conditions set forth in the law. In urgent open procedures, the time limit is 24 hours on working days for acquisition or lease of goods or acquisition of services, and 72 hours on working days for public works contracts.
Restricted Procedure with Pre-qualification
The minimum timescale to submit tenders is 40 days after invitation is sent. Regarding prior phases for submission of applications for technical and financial pre-qualification and for submission of solutions, there are no minimum deadlines set forth in the law, the awarding entity being bound to indicate the same in the notice and in the invitation, respectively.
Partnership for Innovation
Public procurement law sets forth conditions for interested parties to participate in tenders, and if a bidder does not comply with these requirements it will be disqualified and excluded from the tender. These requirements certify the professional and personal suitability of bidders and are distinct from the technical and financial capacity requirements whereby candidates’ technical and financial qualification is assessed.
Eligibility criteria include:
(a) insolvency or similar;
(b) conviction for crimes affecting professional reputation;
(c) administrative sanctions for a serious professional breach;
(d) non-payment of tax obligations;
(e) non-payment of social security obligations;
(f) sanction of prohibition to participate in public tenders set forth in special legislation;
(g) sanction for a breach of legal obligations in respect of employees subject to payment of taxes and social security obligations;
(h) conviction for crimes concerning criminal organisations, corruption, fraud or money laundering, as set out in the PCC;
(i) direct or indirect participation in the preparation of tender documents, thus obtaining a special advantage;
(j) unlawful influence on the competent body for the decision to contract, or obtainment of confidential information granting undue advantages, or provision of misleading information;
(k) conflict of interest; and
(l) significant faults on the performance of a previous public contract in the past three years.
In the situations mentioned in b), c), g), h) or l), the PCC allows bidders to demonstrate that enough measures have been implemented in order to demonstrate a bidder’s probity for the performance of the contract.
Besides these eligibility criteria, in procedures allowing for a pre-qualification phase, contracting authorities may establish criteria to evaluate bidders’ technical and financial capacity. These may include factors linked to the bidder and not to the bid to be presented, as is the case in the EU directives.
In procedures with a pre-qualification phase – restricted procedure with pre-qualification, negotiated procedure, and competitive dialogue – it is possible to restrict participation to a limited number of qualified interested parties.
Following the assessment of the interested parties and their compliance with the technical and financial qualification criteria, a limitation of the number of bidders may occur. There are two different legal systems for the selection of the qualified interested parties and limitation of the number of entities that will be invited to submit a bid ("qualification of bidders"), at the free choice of the awarding entity.
Simple and Complex Systems
Under the first system, the simple system, all interested parties that comply with the minimum technical and financial criteria set forth in the tender documents shall be invited to participate and submit their bids.
In accordance with the second system, the complex or selection system, the technical and financial qualification of the interested parties will be evaluated and ranked, with the criteria of the higher technical and financial capacity prevailing, and only the highest qualified parties being qualified for the submission of bids.
If the complex or selection system of pre-qualification is adopted, a minimum of five (or a minimum of three, in case a competitive dialogue procedure is at stake) interested parties shall be qualified and invited to submit their bids, unless the number of entities that comply with the minimum technical and financial criteria of pre-qualification is less than five (or three in the case of competitive dialogue).
It is important to stress that economic operators may resort to the technical qualification of third parties in order to demonstrate full compliance with the qualification criteria. To do so, they must submit with their qualification documents a declaration in which they state that the third party at stake will perform the relevant part of the scope of the contract for which such expertise is required.
Beyond the pre-qualification procedures, in non-competitive procedures, such as the direct award, the selection of the invited entity(ies) is at the discretion of the awarding entity.
In direct award or prior consultation procedures, the selection of the invited entity(ies) for submission of bids is at the discretion of the awarding entity – one entity only in direct awards and a minimum of three entities for prior consultations.
As a result of the 11th amendment to the PCC, the only award criteria is the most economically advantageous bid, which may assume one of two types:
Subject to grounded reasoning, the awarding entity may choose not to submit to competition and not to evaluate the price or cost, in which case it shall establish in the tender documents a fixed or maximum price.
The factors and sub-factors of the evaluation criteria should have a connection to the subject matter of the public contract in question, comprising all, and only, the aspects of performance of the contract to be executed. They may include quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, cost-effectiveness, after-sales service and technical assistance, delivery date and delivery period or period of completion, environmental or social sustainability.
With the 11th amendment to the PCC, it became mandatory for the rules of the procedure to establish a tie-breaker criterion in case of tied evaluation of bids. This can be related to the evaluation factors established, or to the bidder being a social enterprise or a small or medium-sized enterprise. The PCC specifically determines that the tie-breaker criterion cannot be the time when the bids were submitted.
According to the PCC, contracting authorities must be transparent. This general obligation is enshrined in the requirement to properly publicise public tender proceedings, and to make public all procedure documents, which must also be transparent and clear, thereby ensuring a level playing field among bidders.
One of the elements that have to be disclosed is the criteria and evaluation methodology of the bidders (pre-qualification phase, where it exists) and of the bids evaluated.
In accordance with the PCC, there is a general provision that demands the absolute disclosure at the beginning of the procedure of all features of the evaluation methodology that cannot be altered during its course. Thus, the relevant pre-qualification criteria for the selection of bidders, as well as the criteria for the selection of bids and their corresponding weight, the evaluation methodology, the scoring system for every single criterion, factor and sub-factor must be clearly specified in the tender documents at the beginning of the procedure.
Any relevant decisions of the contracting authority shall be notified to all interested parties, including unsuccessful bidders. Also, all proposed decisions taken by the jury of the procedure shall be notified to the same entities.
Thus, all entities or bidders that submit a pre-qualification application or a bid are notified and informed of the preliminary evaluation report, including the unsuccessful bidders. At this stage, bidders are granted a brief period, usually of at least five working days, to comment on the analysis made by the jury. They have the opportunity to present a formal request asking for a modification of the preliminary report if they do not agree with its content. A final report and final decision on the pre-qualification or on the evaluation of bids and award of contracts is issued and also notified to all participating parties, successful or not.
The PCC provides that the contract award decision is notified simultaneously to all bidders participating in the procedure together with the final report prepared by the jury, which must also include the reasoning of the decision. As procedures run on electronic platforms, the relevant entities are alerted through a notification in the platform.
The PCC stipulates a general standstill period of ten days between the time of notification of the contract award decision in writing to all bidders and the execution of the contract, so that unsuccessful bidders are allowed to challenge the decision before the contract has been signed.
However, the referred ten-day period shall not apply where:
As referred to in 3.2 Obligation to Notify Interested Parties Who Have Not Been Selected, the preliminary evaluation report issued by the jury of the tender should be notified to all bidders, allowing them to submit their views, and said report may be reviewed by the jury in the final report.
In Portugal, it is possible to challenge all decisions issued in public procurement procedures through administrative review proceedings that address the contracting authorities (the competent body for the contracting decision) or through judicial review proceedings under the jurisdiction of administrative courts.
The PCC sets forth fines that may be applied for breach of procurement rules and that depend on the seriousness and degree of fault of the defaulting party.
Also, the sanction of prohibition to participate in subsequent public procurement procedures may applied for a maximum period of two years.
Additionally, courts can decide to annul a procedure or a contract due to breach of procurement rules, as well as to award damages (eg, the bid’s preparation costs).
Whenever a public procurement procedure refers to the conclusion of a public works contract, a public works concession, a public services concession, an acquisition or lease of goods, or an acquisition of services, the judicial challenge of the award decision taken by the contracting authority automatically suspends the effects of the awarding decision or the performance of the contract (if it has already been concluded). The suspensory effect can, however, be ended if so requested by the contracting authority and the administrative court considers that the damages resulting from the suspension are greater than the ones resulting from its withdrawal.
When the judicial proceeding refers to a different decision taken in the context of a public procurement procedure (ie, not an award decision), the proceeding shall not have automatic suspensory effect, but the administrative court may be requested to adopt interim measures aimed to ensure the effectiveness of the final judgment.
Any unsuccessful bidder can submit an application for review of a certain decision, tender document or contract, provided it demonstrates it has been directly affected by the infringement at stake and that it will obtain an advantage with the review decision sought.
The appeal proceedings concerning procurement decisions are characterised by their pressing urgency, aimed at avoiding excessive delays in the procurement procedure. An administrative appeal must be brought within five business days. Judicial proceedings regarding pre-contractual litigation must be filed within one month of the relevant decision being issued and notified to the bidder.
Administrative claims tend to be decided very swiftly. Judicial proceedings usually take no less than six months to obtain the first-instance decision.
There is no statistic data regarding this matter. This said, experience is showing that procurement claims have grown in tendency.
Administrative appeal of decisions taken by the contracting authorities does not have any cost to the challenging entity.
Judicial challenge has an initial cost, in the first instance, regardless of the value of the action, of EUR102. However, in the event of appeal of the court ruling, a variable judicial fee will be charged depending on the value of the claim.
According to the PCC, amendments to concluded contracts are permitted without a new procurement procedure only on public interest grounds, if the conditions under which the parties entered into the previous agreement have changed in an abnormal and unpredictable way, and if the contractor’s new obligations would seriously increase the risks it assumes under the original contract.
Amendments can be introduced by a unilateral decision of the contracting authority based on public interest grounds, by an agreement entered into by both parties, or by a judicial or arbitral decision.
The amendments introduced cannot alter the overall nature of the contract and cannot affect competition within the procurement procedure launched for the performance of said contract (ie, the changes to be introduced cannot alter the order of the bids previously evaluated).
In fact, the amendment cannot substantiate an increase of 25% of the initial contractual price, in the mentioned case of change of circumstances, and of 10% in the case of amendments based on public interest. It cannot lead to to the introduction of changes which, if included in the contract documents, would objectively change the evaluation of the bids and change the economic balance of the contract in favour of the co-contracting party.
Portuguese courts, in relation to amendments introduced to concluded contracts, still follow the Pressetext case law.
The legislation permits direct contract awards under the circumstances established in 1.3 Types of Contracts Subject To Procurement Regulation.
Several decisions have been taken in relation to public procurement matters, of which the following should be highlighted.
Decision of the Supreme Administrative Court of 9 July (Case 0357/18.7BEFUN)
The Supreme Administrative Court considered that the expression of interest directed by a tenderer (legal person) with a corporate object not related to the final contract must not be accepted, for violation of the law.
However, this should just operate if corporate object is patently not related with the final contract. When in doubt, the judge shouldn’t sanction the tenderer.
Decision of the Central South Administrative Court of 4 January 2021 (Case 1169/06.6BELSB)
In a works contract based on series of price, it is licit to adopt a measurement criterion that implies that the remuneration of the contractor for the excavation work is based on the final measurement of the overall volumes of excavated earthworks, from which, for quantification purposes, the volumes of excavated earthworks that are 20% or less below those foreseen in the project are deducted
COVID-19: Exceptional Measures
Given the exceptional circumstances caused by the COVID-19 pandemic, several measures have been taken by the government in regard to judicial terms, relationship with the administration and public procurement.
The following legislative acts have been approved, among others:
Resolution of the Council of Ministers No 10-A/2020
This Resolution sets forth an increased duty of cooperation by the public contractor, in particular with regard to payment of contractual debts.
Decree-Law 10-A/2020, of March 13th
Decree-Law 10-A/2020 establishes an exceptional public procurement regime for the execution of public works, lease or purchase of goods and services supply contracts by entities in the public administrative sector, public companies and local authorities, provided that they are related to COVID-19, ie, the purpose of which was the “prevention, contention, mitigation and treatment” of COVID-19 and the “replacement of normality”. The intention of this regime is to ensure the swift availability of products and services considered essential in the combat against COVID-19, by simplifying and accelerating public procurement procedures in the context of COVID-19.
It is in force since 13 March 2020 and, despite being an exceptional and temporary regime, it has no indication of its term. Thus, it will be in force until revoked by a new legislative act or until the conditions set forth for its application cease to verify. As it applies to contracts related to the replacement of normality, we assume it will be the new normal for quite some time yet.
COVID-19-related events could justify adopting direct award procedures for reasons of "extreme urgency”. The following amendments introduced by Decree-Law 10-A/2020 must be highlighted.
On duly grounded reasons of extreme urgency, and for an 18-month period, the acquired space shall be strictly necessary for instructional advertising on:
Law No 1-A/2020, of 19 March, amended by Law No 4-B/2021 of 1 February 2020
This Law determines the suspension of the deadlines for procedural acts, applying the court holidays regime. However, with the amendment introduced by Law No 4-B/2021, if the parties and the judge decide to pursue the procedure there is no suspension of deadlines. This suspension however does not apply to urgent processes, which include pre-contractual administrative litigation relating public procurement.
Parliament Resolution No 16/2020, of 19 March 2020
This Resolution determines the cessation of the validity of Decree-Law 170/2019, of December 4th, which established the tenth amendment to the Public Procurement Code, and the reinstatement of the legal regime applicable before such amendment.
Considering the challenges of the difficult times that are now upon us, it may be that new exceptional measures are enacted regarding public procurement, public expense and public contracts.
Decree-Law 19-A/2020, of 30 April 2020
Decree-Law 19-A/2020, of 30 April 2020 establishes, in the context of the COVID-19 pandemic:
This Diploma was adapted to the Autonomous Regions of Madeira through Article No 5 of Regional Decree no. 9/2020/M.
This exceptional regime will terminate upon the World Health Organization determining that the SARS-Cov-2 virus’s epidemiological situation and the COVID-19 disease no longer qualify as a pandemic. However, all effects that, given their nature, should occur or become effective after this WHO determination are safeguarded or upheld, such as:
Through a new proposed law (Law No 41/XIV/1.ª) Portuguese Government intends to approve specific public procurement measures for projects co-financed by EU Funds for housing, decentralisation, Information Technologies (IT), PEES Program (“Economic and Social Stabilisation Programme”), Fuel management within the Integrated Management System for Rural Fires (SGIFR) and agrifoodstuffs.
Such measures include the reduction of time limits to submit expressions of interest, as well as specific solutions regarding direct awards in contracts related to the areas above-mentioned.
At this moment, the proposed law has not been approved as the President of the Republic has vetoed such law.
The year of 2020 was an abnormal year due to the Pandemic situation declared in March. The public investment came to a violent and abrupt slow down or even a complete stop and the government turned over to the implementation of emergency legislative measures to deal with the health crisis. Almost all the ongoing public procurement procedures came to a stop and saw the deadlines being extended. The main long-term government contracts in implementation were all negatively affected, and some were even suspended or had their terms extended.
COVID-19 and Its Impacts
In the first half of the year measures implemented by the government only considered the lockdown or the postponement of the investments but on the second half other type of measures began to be put in place, regarding ways to tackle with the necessary economic and social downfall and preparing for the post pandemic as the government had the notion that it needed to boost and accelerate the investment that was stopped.
It was terrible to see the huge investments announced in 2019 by the government to be implemented in 2020 instantly to come to a stop or a standby, like the new Lisbon Region second airport in Montijo, the urban road passenger transport concessions all around the country, the new port terminals in Sines (Vasco da Gama), in Lisbon (Barreiro) or in Leixões, the modernisation of the rail network, or the metro expansion in Lisbon and Oporto, among others that were envisaged, in a public/private investment estimate of almost EUR5 billion.
The only major exceptions to this general lock down were one or two tenders for urban road passenger transport concessions, being Lisbon the major one, a tender for the expansion of the Lisbon Metro (infrastructure and rolling stock worth of EUR115 million), new rolling stock for the Metro do Porto, worth of EUR50 million, and ten new electric ferries for Transtejo, the government owned ferry transport company in charge of the crossing of the river Tagus, worth of EUR50 million.
As said, the first legislative emergency measures taken by the government, in March and April, aimed only:
Law No 1-A/2020, of 19 March 2020, suspended all court and administrative procedures, with some exceptions, namely urgent procedures. Therefore, since 9 March 2020 all proceedings were suspended including public procurement. This measure was considered disproportional and Law 4-A/2020, of 6 April 2020, lifted the suspension in what regarded public procurement procedures, so in fact they were only suspended from 9 March 9th to April 6th.
Decree-Law No 10-A/2020, of 13 March 2020, authorised an exceptional procurement regimen for the supply of medical products to fight the Pandemic. Direct simplified awards were authorised, and other simplified regimens were put in place to allow a speedier acquisition of medical products and workers considered legally justifiable by way of necessity and urgency. These exceptional rules override the normal regime of the Public Procurement Code.
Suspension of Public Contract Clauses and Legal Regime
More controversial and constitutionally dubious was the exceptional regimen introduced by Decree-Law No 19-A/2020, of 30 April 2020, which suspended all the public contract clauses and legal regime (Public Procurement Code) on economic and financial rebalance and on the right to be compensated due to lesser infrastructure utilisation, including related to PPP contracts. Obviously, the several Highway Shadow Toll Concession Contracts in place, based on vehicles utilisation payments, with the demand risk split between the government and the private operator, were the most affected by this measure.
By this exceptional rule, it was prohibited to ask for an economic and financial rebalance or a compensation for facts affecting the concession during the emergency period. It was also stipulated that economic and financial rebalance due to pandemic causes or compensation for lesser infrastructure utilisation due to facts occurred outside of that period, could only give rise to a mere extension of the term of the contract and no monetary compensation.
This exceptional rule was soon challenged by concessionaires and should see several arbitrations and judicial disputes emerging from this limitation if the government cannot agree in amicable terms to a reasonable and fair alternative means of compensation as this can be called as utterly violating consolidated legal and contractual rights of private counterparts and has to be seen as a unilateral modification of contracts that has to give cause to a just compensation in order to maintain the existent economic and financial balance of the contract. By the Portuguese Constitution it is deemed that the government can promote public interest but within the respect of private rights.
The Portuguese Procurement Code establishes the right to economic and financial rebalance and the right to be compensated in case of unilateral modifications of a contract by the government, and this is a general principle of law, established since early days, even before the current Constitution of 1976, when the powers granted to government had fewer constitutional limitations then today. Therefore, this limitation on the rights of concessionaires is seen as a huge violation of constitutional fundamental rights and will necessarily be challenged if the government is to pursue in this sense.
It must be kept in mind that the lockdowns due to COVID 19 had a huge impact on road mobility and we have seen our highways almost empty in this period. A concessionaire that is paid for vehicle driving through the infrastructure had an abrupt down fall of its payments and has obviously the right to be duly compensated as it kept the obligation to continue with the maintenance of the road. It is something that we are going to see the consequences in the new future and litigation cannot to be put aside.
Accelerating the Economic Environment
In the second half of the year, seeing the terrible consequences on the economy, the government began trying to accelerate the economic environment by enacting legislation more favourable to investment. In terms of government contracts this was done by a legislative proposal to simplify the Public Procurement Code and the Administrative Courts Procedural Law (Law Proposal No 41/XIV/1.ª, of June 18th) and by allowing some government contracts to skip the necessary previous review by the Audit Court before being implemented.
Law No 27-A/2020, of 24 July, rose the limit for a contract to be submitted to the previous review of the Audit Court to EUR750,000 (and in cases of joint contracts, to EUR950,000). Therefore, these contracts could begin to be implemented immediately and would be only scrutinized by the Court afterwards, in subsequent audits. This law keeps being in force till today. The measure accelerated the implementation of small and medium government contracts.
Law Proposal No 41/XIV/1.ª was to be a major change in our Public Procurement Code, aiming to simplify procedures and specifically to accelerate procurement of contracts financed with European funds. Government wanted to allow contracts to be signed more quickly by cutting or speeding some procedures so as to execute the public investments in time, especially those that were to be financed by European funds. The government was thinking namely on ways to have immediate access to the coming Resilience and Recuperation European Financing that has a very short timeframe to be executed (four years).
Modifications to procurement procedural rules
At the same time, government proposed modifications in the procurement judicial procedural rules in order also to allow contracts to be implemented more quickly by restricting the automatic suspension of an adjudication (today someone that challenges an adjudication within a ten-day delay automatically stops the implementation of a contract and for the contract to resume its implementation the government has to ask the court to lift the suspension, which is not easy). Nevertheless, although Parliament approved the proposal (as Decree 95/XIV), the President of the Republic exercised its veto by alleging that it did not dealt sufficiently with the necessary Audit Court post-intervention (as its powers of pre-intervention were limited) and was not duly precise on the new parliament review that was included in order to control the contracts of government. Till now, Parliament did not made modifications or insisted on its approval, so it keeps pending and not yet in force.
In terms of main new case law discussions, attention should be called to some important 2020 court decisions. Two main themes continue to be upfront on all discussions:
In a decision of 15 October, the Administrative South Central Court ruled that it was mandatory to electronically sign individually each document before uploading into the electronic platform, even if they are to be jointly inserted into one only PDF. The court said that this was the only way to secure its content and to be sure they were attributable to the bidder and unchanged. The discussion has been going on for some time and this decision is not going to put an end to it.
Immediately, it was violently criticised because it was argued that the electronic signature in a PDF was sufficient technically to secure the entire content of the file including all the documents within. Therefore, to demand that each document inside a PDF should be equally and each also signed was unnecessary. Regarding this, to defend an exclusion of the bidder for not signing each document incorporated in a PDF was disproportional and should not be deemed.
Despite this reasoning, the current jurisprudence continues to demand the signature of each document even if they are inserted in one PDF, considering not enough to sign just the PDF, and sanctioning this omission with the exclusion of the bidder. The decision of 15 October is currently being reviewed by the Supreme Court and we have to wait and see what the final decision will be.
Ownership of Certificates of Public Works
Another important decision in a controversial matter that has been under discussing for some time was decision of 15 July from the Administrative North Central Court, regarding the necessity and the timeframe to prove the ownership of a certificate of public works in a mixed contract, that is to say a contract that includes in its object part of services and part of public works. The issue is controversial, as can be seen in this decision: the court of first instance decided in one way and was overruled by the North Central Court (and, in 2021, the Supreme Court turned again to the decision of the first instance), so we had three different decisions over the same case. What is in discussion is if the bidder in a mixed contract has to prove the ownership of a certificate of public works and if it has to be proved simultaneously with the upload of the bid or in a later stage only with the habilitation documents. Also in discussion was the possibility of a bidder to prove the said ownership via a subcontractor and, if so, when it has to say that it will use a subcontractor.
The courts admitted the general use of a subcontractor to fill in the bidder lack of a certificate but demanded that this must be done jointly with the bid and not afterwards. And the courts final decision was that the certificate has even to exist already at the time of the upload of the bid and not after, so that the Jury cannot override this by asking the bidder to complete the lacking information in a later stage. The North Central Court admitted against the first instance, that the Jury could ask for the lacking certificate, but the Supreme Court ruled against, considering to deliver a certificate only afterwards and one that was obtained also afterwards was deemed to be a violation of impartiality and equality. This matter continues not to be settled as we can see by all those contradictory opinions and we have to follow on this theme in the future.
The year of 2020 was, therefore, a mixed year, with restrained measures on investment on the first half and attempts to boost investment on the second half. Also, in terms of courts decisions we could see some important issues on debate but no final settlings yet on the horizon. Hope that 2021 can bring us the investments and the contracts Portugal so eagerly needs and are waiting for so long to be accomplished.