After so much waiting, the professionals of the building and public works sector have received a saving answer from the government, which has agreed to satisfy most of their demands. A circular from the Head of Government was issued on April 18, containing a series of measures to bring the sector out of its lethargy and ease the burden of rising prices on businesses. The latter have been so struck by the effects of the crisis that they could not bear the soaring prices of construction materials. For this reason, several companies awarded public contracts have found themselves unable to complete ongoing projects at the risk of incurring penalties.
Noting these difficulties, the government agreed to allow them to benefit from mitigating circumstances. The circular has given them the possibility for companies engaged in public contracts to terminate the contracts without this giving rise to the retention of sureties and bank guarantees. This derogation is possible in case of impossibility to complete the services for exceptional reasons related to the current economic situation. This is one of the main demands of the National Federation of Building and Public Works (FNBTP) which has remained so attached to the option of amicable termination without risk of penalties. This is exactly what it has obtained from the Executive who has empowered the winning companies to recover the sums of penalties they have suffered. The circular states that all successful bidders who have been subject since October 1, 2021 of decisions to terminate their contracts with penalties and retention of bank guarantees, will be able to present to the principals requests for restitution of sums levied and guarantees if it is proved that the said delays are due to the exceptional circumstances.
The cancellation of the penalties is also valid for the delays of the services. As companies will have the possibility to extend the execution period of their services by another six months, they will be able to claim back the penalties for delay.
In addition to all these facilities, the companies have obtained what they demanded the most; it is the revision of prices to take into account the increase in prices of raw materials in the contracts. This involves updating the formulas for calculating the indexes, which will be applied retroactively (this includes all contracts concluded before October 1, 2021, the reference date for the start of the steep price rise). In addition, the Circular has encouraged principals to activate payments even in the absence of the new updated price indices, with the responsibility of making up for price increases in subsequent payments.
For greater fluidity, companies that have completed their sites without delivering them definitively will be entitled to a release of contracts. Furthermore, as soon as difficulties arise due to price increases or shortages of raw materials, companies are requested to systematically inform their clients, indicating the possible consequences on the execution deadlines.
The current economic situation has shown the need for a thorough review of the way in which prices are revised as provided for in the current regulations. The Ministry of Public Works and Water will therefore proceed with this reform in consultation with the professionals.
By giving reason to the grievances of the construction companies, the government, through the Ministry of supervision, does not want to let go of a vital sector, which contributes to 6% of GDP and employs 11% of the country’s workforce. Perhaps this sector would have succumbed to the crisis without the government’s intervention as raw material prices have soared to unprecedented levels. A survey by the Ministry of Industry and Trade revealed that the prices of construction materials such as aluminum, concrete iron, concrete and glass have increased by 51%, 19%, 7% and 189% respectively. In addition to this, there are supply problems with suppliers.
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