Uplifts – A guide on what it means for you
- Inflation & Price Increases – the current situation
There are several issues in the supply market that are driving increases in the cost of materials and labour being used in the delivery of our frameworks
These include:
- Additional tariffs and import administration overheads
- Increased transport costs
- Material shortages (driving price increases)
- Energy price increases
- How are we dealing with inflationary pressures?
To ensure that the framework rates remained up to date, LHC/SWPA have always applied an annual adjustment to the original rates supplied by appointed companies when they applied to be appointed to the framework, in accordance with the relevant pricing index. However, in view of recent price volatility and rate of inflation, we are now carrying out adjustments on a 6 monthly basis.
In order to calculate any index change applicable to the framework, unless otherwise set out in the tender documentation issued the base index will be the month of the specific framework tender return date. Therefore, index comparisons will compare the index change from the base index month, which will be applied on the 6 monthly anniversaries of the framework commencement date. LHC proactively notify appointed companies of the percentage change that can be applied to the framework rates on these 6 monthly anniversaries.
- What does this mean for clients?
Where a direct award from a framework is the clients preferred option, the permitted maximum rates that an appointed company may provide are the original rates with the relevant index % adjustment applied when the contract is awarded. Whether these are applied in full for new direct award call off contracts is at the appointed company’s discretion.
The alternative method is to call-off by mini competition/mini tender. This will provide alternative pricing based on the specific requirements of the project from a number of suppliers who will demonstrate competitiveness in the current market.
- What does this mean for appointed companies?
The 6 monthly uplifts only apply to the maximum framework rates supplied by the appointed companies, for existing projects secured through an LHC/SWPA framework, any ability to apply price increases during the contract term will be in accordance with the contractual terms set out call off project. Where no specific price review mechanisms are set out in the contract terms for the call off contract, any adjustment to the rates should be negotiated directly between the client and the appointed company for the specific call -off contract. For absolute clarity, the appointed company is not legally able to automatically apply the adjustment framework rates to a specific call off contract.
Appointed Companies should ensure that (where the framework they are appointed to has been in place longer than 6 months) they are aware of any existing inflationary adjustments already available to them, which can be applied to their maximum rates when quoting for new works. If in doubt, contact procurement@lhc.gov.uk to confirm this.
Where a direct award is being pursued, LHC/SWPA will recommend clients to request information from the appointed company for any proposed increase in rates (above the maximum framework rates) prior to them signing the contract. The information provided must clearly evidence how the changes in supply chain costs can be directly attributed to the client’s call-off contract requirements.
Exceptional price increases
There may be circumstances where material or labour prices are subject to exceptional adjustments (up or down). We will work with clients & appointed companies to evidence the differences in an open and transparent manner and aim to reach an agreement that is acceptable to all.
Contact our SWPA team for more information on this and our frameworks.
