Material shortages: NI contractors to get government support

August 5, 2021

The Northern Irish government has set out plans to help contractors deal with material delays and inflation.


*Latest update - The Department on Finance in NI have issued Construction Material Costs during Pandemic Recovery Procurement Advisory Note. Click here to read the document.

The Northern Irish government has set out plans to help contractors deal with material delays and inflation.

The Northern Ireland Executive advised government departments to cooperate “in a spirit of mutual trust” when handling delays caused by the shortage of construction materials. They said that if the contractor has provided the evidence for a materials shortage on an open-book basis, the department should work with them to find alternate materials or a revised completion date. Similarly, they said that irrespective of a clause for price adjustment, an open-book approach should be adopted and the evidence for a potential net price adjustment should be considered.

For future contracts, they said the risks in delays should be looked at beforehand and budgets should be set, keeping inflated prices in mind.

Northern Ireland-headquartered building and civil engineering firm Farrans said the advisory note helped recognise the issues the industry is facing.

Farrans managing director Dominic Lavery said: “While more detail will be issued on the practical application in due course, this acknowledges that contractors could not have foreseen or planned for the price fluctuations and shortages that are currently impacting the global market as a result of COVID and subsequent high demand. We are hopeful that other regions in the UK and Ireland put in place similar mechanisms to support the industry.”

Departments were also requested to speed up the evaluation and award stage of procurements. “It will be difficult for contractors to hold tendered prices open for acceptance for long periods after the tender submission date,” the ministry explained.

Construction Employers Federation managing director Mark Spence said that with public sector work worth £1bn in a £2.5bn market in Northern Ireland, the support was essential. “We welcome this vital lifeline for local contractors who for many months have been shouldering the escalating burden of unforeseen global price increases and material shortages whilst ensuring public works continue to be delivered,” he said.

While contracts in Great Britain included limited provisions for fluctuation in clauses, it had not been the same for Northern Ireland. Spence said that the advisory note would help to equalise things. “This paper allows for increases to be agreed on existing contracts and recommends inclusion of fluctuation clauses in future contracts, bring NI back into line with rest of UK,” he said.

Separately, the Department for Business, Energy, and Industrial Strategy released its latest material price index for the UK today, which showed that prices were up 14.7 per cent in June 2020 compared to the same time last year. Imported plywood and fabricated steel have seen the highest levels of inflation.

Finance Minister, Conor Murphy announced steps are being taken to help government contractors with the rising costs of raw materials.

Minister Murphy said: “Covid-19 has had a huge impact on the availability of construction materials with global demand, product shortages and delivery delays leading to market volatility and increased prices.

“Government contractors are experiencing escalating costs and delays in getting materials which they could not have foreseen when they tendered for government work. I have listened to the concerns of the construction industry and want to do everything in my power to ensure there is no risk to the completion of important projects.

“I am pleased the Executive has agreed my proposals to make provision to manage delays in supplies and to include mechanisms in existing and new contracts to make allowances for inflationary prices. This will provide vital support to our construction industry which will play a key role in our economic recovery while also ensuring important government projects such as schools, hospitals and infrastructure projects are delivered.”

Mark Spence, Managing Director of the Construction Employers Federation said “We welcome this vital lifeline for local contractors who for many months have been shouldering the escalating burden of unforeseen global price increases and material shortages whilst ensuring public works continue to be delivered.

“We particularly welcome the Minister’s recommendation for all new government contracts to provide protection from such external factors in the future. NI construction employers are essential partners to the Executive in delivering every aspect of public services and have continued to do so throughout the pandemic. These proposals start to address the previous imbalance of risk in taking on government contracts and can assist in ensuring continued delivery of public investment in infrastructure.

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