Porto, July 31, 2025 (Lusa) - A report by consultancy firm KPMG, which Lusa saw on Thursday, suggests that price review mechanisms would make it economically viable to carry out public contracts in the railway sector, which are highly volatile given current market conditions.
"Price review mechanisms offer a solution to ensure the economic viability of railway projects. Incorporating flexible clauses into public contracts for rolling stock, railway infrastructure and railway control systems would make it easier for manufacturers to adapt to market fluctuations," according to the KPMG report.
According to the independent report, called "Railway sector in Europe and Portugal", the consultancy said that such mechanisms promote "the continuity of projects and a fair balance between the parties to the contract, making it easier for public entities and contractors to deal with exceptional economic challenges arising from circumstances of global instability and uncertainty".
In Portugal, the report dated December last year recalls Decree-Law 36/2022, which concerns price revision and applies to all public contracts, coming into force in 2022 in response to inflation.
The document gives examples of contracts in the railway sector that were not covered by the decree, namely the supply by Stadler and Siemens Mobility of a new signalling system and trains for the Lisbon Metro, the contract for 22 new trains for CP - Comboios de Portugal supplied by Stadler, and the contract for 117 urban and regional trains for CP awarded to Alstom.
Other more recent contracts have included price revision mechanisms, namely that of 24 triple units (with an option for 12 more) for the Lisbon Metro ordered from Stadler, the public tender for the Lisbon Metro's violet line and the tender launched in 2024 for 22 vehicles (plus 10 options) for the Porto Metro.
"The implementation of the 2022 decree-law extended the possibility, which already existed in construction contracts, of reviewing prices in public contracts in the railway sector, an important step towards protecting long-term contracts in the face of inflation and market fluctuations," the document's conclusions read.
However, as the decree had a limited duration and "resulted in the exclusion of several contracts from the possibility of review", it reflects "the need to establish a model of a permanent nature".
The report also lists measures taken in countries such as Romania, Germany, France, Ireland and Spain, and recalls that public contracts in the railway sector are "complex, long-term and highly technical, which require good planning in terms of timing, costs, quality guarantees, regulatory compliance and maintenance".
"As these are long-term projects, they are exposed to economic fluctuations during their implementation, which increases uncertainty about the costs of supplying materials, labour and energy," the document states, so contracts in this sector "require sufficient flexibility to adapt to unexpected changes in prices".
This has been the case since 2019 and 2020, with the impact of the Covid-19 pandemic, the war in Ukraine and the current commercial and geopolitical uncertainties, which are reflected above all in the prices of materials and energy.
The independent report notes that the railway rolling stock supply sector "operates with relatively low profit margins, which makes it highly vulnerable to price fluctuations", with these margins ranging from -1% to 3% in 2023.
Companies are trapped in a situation where their suppliers pass on cost variations to them, without them being able to pass on the increases to their customers without jeopardising competitiveness, he warned.
JE/ADB // ADB.
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