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In a large Dutch oven over medium-high, combine the sausage and oil. Cook, stirring occasionally, until lightly browned, about 5 minutes. Using a slotted spoon, transfer the sausage to a plate; set aside.
Reduce to medium, add the bacon and cook, stirring occasionally, until lightly browned, 3 to 4 minutes. Add the onion and ¼ teaspoon salt; cook, stirring often, until lightly browned, about 5 minutes. Add both types of peppers, the garlic, 1 teaspoon of the sweet paprika, the hot paprika and ½ cup water. Scrape up any browned bits, then cook, uncovered and stirring occasionally, until the peppers begin to soften, about 3 minutes. Stir in 1½ cups water, cover partially, and bring to a simmer. Cook, stirring occasionally, until the peppers are fully softened, 12 to 15 minutes.
Stir in the tomatoes, sausage and remaining 1 tablespoon sweet paprika. Cook, partially covered, until the tomatoes release their juices but have not broken down, 3 to 5 minutes. Taste and season with salt.