Letter from CANS on Price Volatility
March 2, 2022 —
Dear CANS Members,
The Construction Association of Nova Scotia (CANS) represents nearly 800 contractors, suppliers, developers, and service providers to the ICI construction sector. We are writing to bring an important issue to your attention with a request that you consider our solutions as presented below and/or collaborate with us to identify additional options.
The issue of concern is the requirement of owners of bidders to hold pricing for a specified number of days from date of submission of a bid without a fixed award date that reflects our current economic realities outlined below.
As you are aware, the pandemic has introduced significant disruptions in supply chain, product/materials delivery, and unprecedented price volatility. Each of these has added extraordinary risk to contractors and owners/buyers of construction services. For contractors, the volatility of materials has significantly increased the risk profile when bidding public works. We are increasingly hearing that contractors are choosing not to bid certain projects/owners, depending on the requirement to hold pricing for extended periods, especially when award timelines are not specific or rational, based on current economic conditions. For the owner/buyer of construction, this may lead to fewer bidders, higher than expected bid prices, project delays, inefficient transfer of risk and project uncertainty.
We are asking owners across Nova Scotia to consider the following:
- Certainty of award – if tender calling authorities/buyers of construction ensure that awards are made within ten business days of close, pricing certainty increases and will significantly mitigate risk to all parties.
- Pricing redress – where market forces significantly impact pricing volatility during and/or after the bid close/award, we are asking owners/tender calling authorities to consider language that would trigger re‐negotiation of material pricing fluctuations at pre‐determined thresholds articulated in the contract.
We believe that the addition of these considerations would assist owners and contractors alike as reasonable risk mitigation efforts until production levels, supply chains and pricing stabilize over the next 12‐18 months. Should you wish to discuss these challenges and/or suggestions further, please feel free to contact me directly.
Sincerely,
Duncan Williams
President & CEO
Construction Association of Nova Scotia