Ukraine War - Impact on material prices

Working on an NEC4 Option A project just now looking for a route for recovery for material increase due to the war in Ukraine. Right now its steel and fuel.

We arent sure if the programme will be impacted but we do know the prices are. Has anyone had any success with recovery routes on this?

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If you had used Option X1 in the Contract then that would be the easiest route for claiming these additional costs. Other than that you are going to try and argue that the war in Ukraine is an event that stops you completing the Works and is a Compensation Event under Clause 60.1(19). That I think may be a tough one to argue but its your only route unless X1 applies.

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Anonn, firstly I agree with Mike that it is unlikely to be any of the CEs in the contract other than 60.1(19) but you must be sure to notify an early warning under 15.1 as soon as possible. This doesn’t mean that you will get a CE but it will protect you because if it does ever qualify as a CE you may be sanctioned under clauses 61.5 7 63.7 if you have not notified an early warning.

Under 15.1 the Contractor may “give an early warning by notifying of any matter which could increase the Contractor’s total cost.”

If you can prove that the effects of the war are delaying the project then you must also notify the event under clause 19.1 to the PM and the PM is obliged to instruct you on how to deal with it, that in turn triggers CE 60.1(19).

In exceptional circumstances and if clause 19.1 is not applicable, you could also try and negotiate a change to the contract under clause 12.3, if you cannot get fully compensated you could at the very least, seek to be protected against delay damages (if they are in your contract).

Good luck.

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Another option to consider is X2 if you have that secondary option in your contract. The sanctions against Russia, including Russian shipping and goods and services, have been enacted in law, so depending on the particular circumstances increased costs could be covered by X2.

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Check out @Mike_Tiplady webinar on 19 April - Construction Cost Inflation which will be picking up some valuable points and insights in to how spiralling costs are affecting construction contracts and how to address these issues

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What legislation has been introduced that directly impacts construction contracts?

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It is highly unlikely that this would be the case, especially for fuel but you’d have to look at this separately for other materials. The UK only imports a fraction of its oil from Russia which in itself is a tiny proportion of Russian exports. The EU imports around 50% of Russian oil and as yet they have not imposed any sanctions against Russian oil. Whilst the new UK sanctions against Russian oil imports are a change in the law, there is little or no causal link between these sanctions and the cost of oil in the UK.

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Hi Neil, although the UK only buys 5% of its oil from Russia, the cost of oil and consequently petrol is still effected by the sanctions against Russia.

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