Procurement should heed engineering input cost rises

8 June 2011

8 June 2011 | Lindsay Clark

Civil engineering suppliers have told buyers that they need to start recognising increasing commodity prices in tender awards.

The Civil Engineering Contractors Association (CECA) found in a survey that fuel costs had risen by 10 per cent and metals had increased by 7 per cent over the past year. Meanwhile, tender prices are still slipping.

CECA director of external affairs Alasdair Reisner said: “Procurement practices need to take account of current concerns over inflation, in order to offer contractors a sustainable means of recovering costs due to inflation.”

If input costs continued to rise without commensurate increases in contract prices, many contractors would be stuck in an unsustainable situation that threatens to place the jobs of many skilled and unskilled workers at risk, the Association said.

“We are doing all we can to help our members handle this extra burden, including arranging seminars on commodity price hedging, and lobbying clients to include suitable inflation indexing in contracts,” Reisner said. “But the real worry here is that while costs continue to skyrocket, the prices our members can tender are not keeping pace, squeezing margins to an unsustainable level.“

The CECA survey is based on responses from 53 firms. As well as rising fuel and material prices, it found that the cost of waste to landfill had gone up by 5.9 per cent.

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