Additional contracts - Court of Auditors report

The Court of Auditors of Portugal (“TCP”) recently released the Report on Concomitant Supervision: Additional Contracts for the three-year period 2020–2022, where it analyzed amendments to public works contracts.

Report’s main findings

·        The percentage of public works contracts without amendments fell to 55.1%.

·        Most of the amended contracts are still awarded by local authorities, but the highest number occurred in the state enterprise sector.

·        The analyzed addenda represented an overall increase in costs due to new prices.

·        In the three-year period 2020–2022, the value of the added work was considerably higher than the value of the omitted work.

·        There was a decrease in the number of entities that still finalize additional contracts without complying with the applicable legal regime, which does not allow for the offsetting of supplementary and reduced work. In additional contracts that include supplementary work awarded under Decree-Law 111-B/2017 and Law 30/2021, the value of each one is not separated.

·        Generally, the current quantitative limit of 50% for the addition of supplementary work is still followed.

·        The regime introduced by the Public Procurement Code for identifying the work required to correct errors and omissions in the tender documents and for sharing responsibilities was not properly followed.

·        Greater stringency is needed in the preparation of public works plans.

·        In cases where the applicable regime is still the version of the Public Procurement Code in Decree-Law 111-B/2017, greater stringency is needed in interpreting the concept of “unforeseen/unforeseeable circumstances.”

Recommendations for contracting authorities

In light of the above, the TCP has prepared the following recommendations for contracting authorities:

·        Comply with their legal and management obligation to approve stringent and precise public works plans that establish the purposes and characteristics of the works to be carried out and the work sites’ features.

·        Obtain the mandatory opinions of external entities in advance and ensure that the plans comply with the legal and regulatory requirements for the type of works in question.

·        Monitor the preparation of plans in accordance with the legally established terms, even when they are completed by external entities, and critically evaluate them.

·        Promote the careful revision of plans before putting them out to tender.

·        Expressly and carefully consider the errors and omissions identified by bidders in pre-contractual procedures during the bid-submission period, identifying the terms for remedying them.

·        Comply with the legal requirements set out in article 370 and the following articles of the Public Procurement Code for carrying out supplementary work.

·        Scrupulously comply with the quantitative limit for supplementary work, without offsetting any reduced work.

·        Formalize, in the contract or in any additional document to the works contract, the amendments deriving from supplementary or omitted work.

·        Observe and promote the appropriate sharing of responsibilities for errors and omissions detected during the works.

·        Exercise the right to receive compensation when errors and omissions stem from design flaws admitted by third parties.

·        Stringently comply with the duty to submit additional acts, contracts or documents to the TCP within the established time limit.

·        Submit additional acts and contracts using the eContas-CC application at https://www.tcontas.pt.

Recommendations for the Portuguese Parliament and government

Finally, the TCP also made the following recommendations to the Parliament and the Government:

·        Clarify the regime to be applied to amendments to contracts that are already being performed.

·        Consider not using indeterminate concepts in the wording of article 370.2 of the Public Procurement Code.

·        Create additional requirements and conditions for greater stringency in public works plans.

·        Regulate mandatory plan insurance.

These recommendations aim to increase transparency, efficiency and legal compliance in awarding and carrying out public works, while also improving the management of public resources and the accountability of all parties involved. Contracting authorities and contractors must remain vigilant and adapt their practices and procedures to meet the TCP’s legal requirements and recommended best practices.