Government Flexibilizes Public Contracting to Increase Construction Pace and Housing Supply
The Portuguese government has published Decree-Law no. 112/2025 in the Diário da República on October 23, a legislative measure that introduces significant flexibility into public procurement rules. This move, which amends both the Public Contracts Code (CCP) and Law no. 30/2021 on special procurement measures, is aimed at accelerating the pace of construction and increasing the national housing supply, a critical issue in metropolitan areas like Lisbon.
The new decree addresses a long-standing limitation in public works projects related to the use of the 'design-build' contract model. This integrated approach, where a single contract covers both the project's design and its physical construction, has been largely treated as an exception under the CCP. This has hindered the adoption of modern and efficient construction techniques, such as 'off-site' manufacturing, which offer substantial benefits in terms of cost and delivery times. With the amendment to Article 43 of the CCP, contracting authorities are now empowered to opt for design-build contracts based on their discretionary judgment of the public interest, rather than being required to provide exceptional justification. The stated objective in the decree's preamble is to "eliminate legal entraves to the aproveitamento... of the benefits of construction techniques associated with 'off-site' manufacturing."
Under the new rules, the contracting authority can define the execution project's elaboration as a component of the contract itself. In such cases, the tender specifications will be based on a preliminary program, and the base price must clearly separate the maximum costs allocated for the design and construction phases. This change is expected to provide greater clarity and efficiency in project execution. For developers and construction firms, particularly those specializing in innovative building methods, this reform opens up new avenues for engagement in public projects. Understanding the nuances of these new contractual frameworks will be key, and consulting with professionals like constructors in Lisbon who are adapting to these changes is advisable.
To further amplify the impact of this measure, the decree also adjusts the special procurement measures for housing contracts under Law no. 30/2021. It raises the value thresholds for using simplified procedures like prior consultation and direct awards, specifically for contracts intended for the promotion of public or cost-controlled housing. This is a direct attempt to reduce bureaucracy and speed up the delivery of affordable housing units. The changes reflect a broader strategy to tackle the housing crisis, a topic frequently covered in our regulatory and legal frameworks blog.
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Significantly, the new law also revokes Article 2-A of Law no. 30/2021. This article had established a temporary, special design-build regime exclusively for projects financed by European funds, including the Recovery and Resilience Plan (RRP), and was due to expire at the end of 2026. The government reasoned that the "special and transitory nature of this measure limits the transversal use of the advantages associated with the design-build modality." By repealing it, the design-build option is now permanently and universally available for all public projects, a move welcomed by construction industry associations who have long advocated for such a reform.
The Decree-Law no. 112/2025 will officially come into force on October 28 and will apply to all public contract formation procedures initiated from that date forward. This legislative shift is poised to have a lasting effect on Portugal's construction sector and its ability to respond to the pressing demand for housing. As these new regulations take hold, staying informed through reliable sources like our news section is crucial for all market participants.
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