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Decree Law No. 36/2022: Exceptional and temporary framework in the context of price increases with impact on public procurement

On May 20th, 2022, Decree Law no. 36/2022, was published in the Portuguese Official Gazette, establishing an exceptional and temporary framework for price revision in public procurement, in response to the cost increase of raw materials, construction materials, labour and support equipment, resulting from the COVID-19 pandemic and the war in Ukraine, with an impact on public agreements, especially in construction.

The Decree Law is applicable: (i) to public agreements, currently in force or to be executed, and to the procedures for the formation of public agreements initiated or to be initiated; (ii) to public agreements for the acquisition of goods, with the necessary adaptations and, in the case of service agreements, as determined by Government order; and (iii) agreements that, regardless of the legal nature of the developer, are subject to public procurement rules.

This legal diploma is not applicable to sectors where the cost increase concerned has already been subject to other sector-specific measures.

Under this extraordinary regime, the builder may submit a request for an extraordinary price revision provided that a certain material, type of labor or support equipment represents, or will represent during the execution, at least 3% of the contractual price increases by 20% or more.

The request must be submitted by the contractor to the developer, before the provisional receipt of the work and the developer shall reply within 20 (twenty) days, otherwise it will be considered accepted.

In case of non-acceptance of the abovementioned request, the developer, exclusively and alternatively, may present: (i) a counter-proposal; (ii) Perform the price revision established in the contract by applying a compensation factor of 1.1; or (iii) Include certain materials and labour with price revision clauses calculated by the cost guarantee method, with the formula in the contract being applied to the rest without any increases.

The extraordinary price revision form applies to all materials, types of labor or support equipment existing in the works and is applied to the entire period of execution of the agreement.

The correction of price revisions already determined according to the form of price revision established in the agreement shall be carried out in the month following the determination of the form of price revision and excludes the application of the ordinary revision provided for in the specific clauses contained in the agreement under Decree- Law No. 6/2004, of January 6, in its current wording (the Regime for Revision of Prices for Agreements and Acquisition of Goods and Services – “RRPEABS”).

If the contractor's cannot obtain the necessary materials for the execution of the work, for a motive beyond his control, and therefore there is a delay in the fulfillment of the work plan, the builder may submit a new readjusted payment plan for the approval of the developer, which serves as the basis for calculating the price revision of the work to be carried out. The developer may accept, within 20 days, to extend the execution period, for the time strictly necessary, without any penalty and without any additional payment to the contractor.

While this regulation is in force, contracting entities may resort to the provisions of the Public Procurement Code, approved in the annex to Decree-Law no. 18/2008, of January 29, in its current wording, even if this possibility is not provided for in the program.

The RRPEABS is subsidiarily applicable, with the necessary adaptations, in everything that is not regulated in this Decree Law in terms of price revision.

This Decree Law will be in force until December 31, 2022.

To access to the Decree Law no. 36/2022, of May 20, please click here.

For more information on this subject, please contact:
Marta Gouveia Gomes – martgomes@ctsu.pt


 

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