Drastic increases in the cost of raw materials are creating an impact on contractors who undertake projects on fixed price contracts. Where material prices rise significantly in the course of a project, contractors can find themselves facing major losses, with clients facing the risks of contractors going out of business mid-contract or trying to source inferior quality materials to overcome pressures. 

Current Position

B&ES has raised price fluctuations in raw materials and a suggestion of advance mobilisation payments, with the Cabinet Office and the Construction Clients’ Group, which brings together the main procurers of construction within government. The response to date has not been sympathetic, with the government taking the view that the market needs to adapt to and accordingly negotiate the possibility of such fluctuations as a matter of commercial practice.

Next Steps

B&ES is calling for all partners in the construction industry to join them in proposing that the fluctuations clauses in construction contracts, which have been employed to beneficial effect during previous times of exceptional prices escalation, should be reinstated. However, it is mindful that in the current political and economic climate it will be difficult to persuade government to support the industry view. 

Contact

For more details e-mail Rod Pettigrew