On May 24, 2022, the Council of Ministers decided to increase the financial limit for the National Road Construction Program by PLN 2.6 billion and the 100 Bypasses Construction Program by PLN 115 million. This decision also includes an increase to 10% of the indexation limit for contracts for which it was previously lower.
Since the beginning of July, meetings have been held with representatives of the General Prosecutor's Office and the Ministry of Infrastructure, along with industry organizations. The main goal of the talks was to reach an agreement on the content of planned annexes to construction contracts, which were to increase the indexation limit to 10% of the Approved Contract Amount.
The General Directorate for National Roads and Motorways (GDDKiA) announced that annexes have been concluded with companies since July 22nd, and several dozen more are expected to be signed by the end of August. The fundamental assumption of the indexation mechanism is the joint and several-proportion risk-sharing mechanism, which results from increased contract implementation costs, between the contractor and the General Directorate for National Roads and Motorways (GDDKiA), as the ordering party. Therefore, 50% of the contract value is subject to indexation.
According to the General Directorate for National Roads and Motorways (GDDKiA), "the annexes cover remuneration for work performed after February 24th of this year, following Russia's aggression against Ukraine and the related economic consequences. The increase in the indexation limit will also apply to contractors who recently signed contracts, submitted bids in 2021, and are awaiting the selection of the most advantageous bid or the signing of a contract.".
It's also important to note that, depending on the current economic situation, the indexation index may assume positive values, resulting in increased contractor remuneration. This is very good news for the industry, as the recent period has been extremely challenging due to the rapid increase in contract costs. It's worth noting that the main price-determining factors influencing the final contract cost include fuel, cement, asphalt, steel, aggregate prices, and average industry employee salaries. Furthermore, the Consumer Price Index, which is de facto the main inflation indicator, is taken into account.
Our office will be closely monitoring the future of the protective mechanism introduced by the government in response to the rising costs of road construction projects. Therefore, we will soon publish our alert, providing more details on this crucial issue for the construction industry.
This alert is for informational purposes only and does not constitute legal advice.
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