Dmitry Uryakin has commented for Stroyim Prosto on the Ministry of Construction’s mechanism for changing a price of government contracts

On 9 August 2021, a government decree was approved. The document allows developers to revise the terms of contracts for construction, reconstruction and overhaul as well as for conservation of cultural heritage sites. In particular the decree provided an opportunity to increase the price of government contracts up to 30% due to the increase in a cost of construction materials for contracts of one million rubles concluded before July 2021.

Dmitry Uryakin, Associate at Maxima Legal, has specially commented for Stroyim Prosto online publishing on the innovation: 

“Due to excessive volatility of construction materials the problem of the impossibility of changing most government contracts has been around for quite some time. According to some reports, a price of construction materials rose by as much as two or even three times. Of course, the changes proposed by the Government can only be supported in this respect.

However, the mechanism presented in the decree is not without flaws. The point is that the algorithm proposed in the decree requires a contractor to gather comprehensive information and data to persuade a client to sign a supplementary agreement to a contract to increase a price and/or a deadline for performing the work. At the same time, the decree states that an increase in the price cannot lead to an increase in the deadline.

It turns out that the contractor must collect evidence of a substantial increase in the cost of materials and must in parallel continues construction in order not to breach the deadline for completion of the contract. The contractor is also not being able to receive compensation for materials have already been purchased. In such a case, the contractor may find itself “trapped in a vise”. If the contractor halts construction, he risks being held liable for not completing the work on time. On the other hand, if the contractor continues construction, he may not be able to change the price of the contract”.

By suspending construction, they risk being held liable for violating the deadlines. If he continues construction, he may not be able to change the contract price.

To read the full article (in Russian) please visit Stroyim Prosto online publishing website >>>