Amendments to the price variation provisions in the Capital Works Management Framework
On 24 November 2021, the Office of Government Procurement (“OGP”) issued general guidance for Contracting Authorities whose public works tenders were impacted by the marked price inflation in the construction industry and stated that broader amendments to the price variation provisions in the public works contracts would be introduced by it in Q1 2022. For further information on this general guidance please see our Insight published on 1 December 2021 here. These interim amendments were released by the OGP on 7 January 2022 which saw the introduction of the following new provisions into the public works contracts:
- an indexed price adjustment mechanism to address the risk of inflation to materials prior to the award of a contract for PW-CF1 – PW-CF6 (inclusive). Two formulas have been developed and introduced to the Instruction to Tenderers documents to determine what increases may apply by relative movements in the CSO Wholesale Price Index (the “Index”) relating to building and construction materials;
- in forms PW-CF1 – PW-CF5 inclusive, the Base Date for PV1 and PV2 has been reduced from 30 months to 24 months from the Tender Inflation Indexation Date (being the last day of the month in which the latest available Index is published as at the Contract Date); and
- in forms PW-CF1 – PW-CF5 inclusive, the sub-clauses in PV1 and PV2 dealing with exceptional material price increases have been amended to adjust the threshold from 50% to 15%.
For Contracting Authorities currently conducting a live tender process, the amendments are to be used in tenders due to be received from 18 January 2022 onwards.