Some thoughts on the legislative proposal amending the Portuguese Audit Court powers
The Portuguese government laid down in Parliament yesterday a proposal for a new law governing the powers and operation of the Portuguese Audit Court. After weeks of discussion in the media and sniping from both the government and the president of the Audit Court, the proposal is now finally on the table. This is not the time and place to analyse the whole of the proposal being made, but mostly the main issues it raises for public procurement.
Contrary to most EU member States Portugal operates an external ex-ante and ex-post legality control mechanism for public procurement in the hands of the Audit Court since 2006 if memory serves me well. Currently, that means contracts valued above €750k must be approved by the Audit Court between award and contract signing...with the exception of contracts benefiting from EU funds (since 2024).
A failure to obtain the authorisation (visto previo) bars the contract from producing effects and stops the procedure until the issues detected by the Audit Court are rectified, which can ultimately mean going back to the beginning. Furthermore, this decision is final and cannot be appealed, which in a country prone to judicial delays in public procurement is not necessarily a bad thing. Having said that, it is unsurprising that over time the Audit Court has taken a generous view of its competencies and what the legality/financial control encompasses. Over the years this has meant an increase in the rumblings against the role of the Audit Court which can naturally be seen as a sign of it doing its job properly! After all it was the Audit Court who stopped that incredible contract for batteries for electric ferries that had been bought without them. For politicians legal and financial control that gets in their way can easily be perceived as a sign of political decision-making or opposition. It is unsurprising then that both main parties have somewhat converged in their criticism of Audit Court's role and as such I expect the proposal to pass in Parliament.
But it is fair to say as well that a lot of the criticism of Audit Court's role I have heard privately over the years is, frankly, valid. Audit bodies are by default and design extremely conservative. The joke being in finance that if you want to screw a deal, just call in your lawyers into the meeting. In a procurement setting, the equivalent joke is to involve an audit body. Fear will keep them in line.
The consequence of facing certain scrutiny by a conservative body is that the decision making of contracting authorities becomes more conservative as well, to reduce the probability of problems scuppering the procedure. Fear does keep them in line.
That is not free as it is not the delay introduced in the decision making by adding the check between contract award and signing. These transaction and opportunity costs are applied to all contracts subject to the check, so the costs compound very quickly. For all of the enormous mistakes that make it to the front pages of newspapers we do not see the mass of the contracts that go through without a hitch. In 2022 the Audit Court assessed 2.307 contracts, while refusing 22 with a total value of just over €50m. 97% of the contracts in Portugal in 2024 were awarded with lowest price only and I have repeated been told the main reason is the fear the Audit Court will object to quality award criteria. It may well be that the Audit Court is being scapegoated here for lack of capacity, knowledge or resources but there is only one way to find out.
The proposal on the table right now would restrict the ex-ante intervention by the Audit Court to contracts above €10M, with those above €950k having to be 'communicated' to the Audit Court only. While I can understand the increase in the mandatory threshold I'm puzzled about the communication requirement. Surely in this day and age all that is needed is an API call since all that data should be captured via eForms automatically, but I digress. The main point here is that the ex-ante intervention of the Audit Court will be severely curtailed.
Running a simple query on base.gov.pt for contracts valued >€10M in 2025 yields 169 results, out of which we would have to purge those that benefited from EU funding. My gut feeling here is that in Portugal most of these larger contracts are at least partially funded with EU money, meaning the pool of contracts subject to ex-ante control will be a very small fraction from the 2022 numbers.
The increase in threshold for ex-ante assessment works differently for contracts benefiting from EU funds. For these, the only obligation is one of communication for contracts above €10M, meaning that they are not subject to any ex-ante control which I think is already the case anyway. If I am not wrong those are also likely to be subject to ex-post control mechanisms via the EU funding mechanisms but I have not worked with them in a good while to be 100% certain. Nonetheless, this is probably the area where I think the rules have gone too far.
Overall, I am not naive thinking that a reduction in oversight and control will not lead to negative consequences. It increases the potential for honest mistakes to occur and not so honest ones as well. We will still see questionable procurement decisions making their way to the front of the newspapers. Those 22 contracts from 2022 might have gone through assuming none of the other control mechanisms including ex-post audits and judicial review functioned. It is possible that the number of contracts that might have had their hypothetical visto previo refused had the Audit Court not lost its competencies will be higher since the risk of discovery of foul play has gone down.
But the fundamental point to have in mind is what will the new equilibrium be? Are we better off allowing more risk into the system or using the Audit Court to reduce financial/legal risk to a minimum? How will the Audit Court re-orient its activity for ex-post reviews? Trade-offs, trade-offs...
My conclusion here is that this is one of those situations where my opinion has changed over time. I think that reducing the ex-ante intervention of the Audit Court is a positive step in terms of creating the conditions to improve procurement practice in Portugal. It is not, however, a silver bullet and one that comes, evidently, with risks.