CMS Expert Guide on rising raw material prices in the United Kingdom

The UK government (including also the Scottish Government) has not adopted any specific legislative or regulatory provisions in relation to the recent increase in the price of raw materials.

The main option available to contracting authorities and suppliers is to rely on the existing regulations, which is discussed further in question 2 below.  The only related guidance produced by the UK government is in relation to the war in Ukraine, whereby the UK Government has published a procurement policy note on terminating contracts with Russian and Belarussian suppliers (PPN 01/22: Contracts with suppliers from Russia and Belarus). A similar policy note has been published by the Scottish Government.

The Procurement Bill, currently being debated in the UK Parliament and due to come into force at the end of 2023, considered an inflation provision during amendment debates it being felt that contracting authorities should not be automatically expected to shoulder inflationary costs. Continued economic pressures could see this develop into a legislative provision in the final Act of Parliament.  

Regulation 72 of the Public Contracts Regulations 2015 (PCR 2015) and the Public Contracts (Scotland) Regulations 2015 (PC(S)R 2015) includes specific provisions on amendments that can be made to existing public contracts without requiring a new procurement procedure to be carried out.

This includes circumstances where a price revision clause has been included in the contract and in the initial procurement documents, provided that any such review clause states the scope, nature and conditions for possible modification and does not alter the overall nature of the contract.

It is also arguable that the exceptional nature of the recent inflationary pressures may not have been foreseeable. This may provide a basis on which contracting authorities could seek to rely on ground 72(c) of the PCR/PC(S)R 2015, which provides that amendments can be made when necessary as a result of circumstances which a diligent authority could not have foreseen and provided that the modification does not alter the overall nature of the contract and any increase in price does not exceed 50% of the original contract value, contracting authorities could seek to rely on ground 72(c) of the PCR/PC(S)R 2015. This would need to be carefully documented by the contracting authority and the authority would need to publish a contract notice setting out the modification on the UK’s e-notification system, Find a Tender service (FTS). There are also several further grounds set out in Regulation 72 of the PCR/PC(S)R 2015 that may be relied upon by a contracting authority including where there is a change of supplier due to insolvency or a takeover, or where additional works or services have become necessary and cannot be procured elsewhere for economic or technical reasons.

There is no imprévision theory or any equivalent available in the UK.

Any sanctions for delays or failure to perform a public procurement contract will normally be listed in the contractual provisions of the particular contract.

However, suppliers should note that the Procurement Bill intends to create broader, discretionary rights for contracting authorities to exclude suppliers from procurement processes for breach of contract and poor performance.  The Bill introduces a requirement for a contracting authority to publish information about contract performance if a supplier has breached a public contract and that breach resulted in termination, or if the supplier is not performing a public contract to its satisfaction and has failed to remedy the breach or improve performance after being given a proper opportunity to do so.

Other than the regulations set out about there is nothing specific about the execution of public contracts.

No.