Price increases

Dealing with price increase requests from a contracted supplier.

It is of vital importance that contract owners and managers do not accept price increase requests automatically.

Colleagues from legal, finance and procurement will support contract owners and managers to ensure that the request complies with the agreed contract, is reasonable, whether a formal contract variation is required, and the financial implications can be contained within existing budgets or whether additional one-off funding support will be needed.

Contracted suppliers list.

Process for business partner responding to price increase requests

The process for responding to price increase requests is:

1. Issue the template holding letter (attached to this page) to the supplier as soon as possible, requesting further information if required. For example, asking for information to support the request, such as any particular market or financial pressure which is affecting their ability to supply us at existing or agreed prices
2. When considering a price increase request ensure the contract terms and conditions allow for price increases or not and if a particular process needs to be followed to notify or agree a price increase.
3. Ensure you have received all the information from the supplier to substantiate the price increase and include this to enable the prices increase request to be considered by finance, procurement and if required legal.

When looking at the request for the price increase you should consider:

• does the contract allow for a price increase?
• is there a restriction on when a price increase can be requested (for example, after the first 2 years of the contract)
• if the contract allows a price increase, has the price increase process as set out in the contract been followed?
• has there been other price changes during the term of the contract, if yes was this recent?
• the reason for the price increase and whether this is a short- or long-term proposal, for example what particular market or financial pressures is affecting the supplier's ability to supply at the agreed prices.
• if the proposed increase reflects current market trends, aligned with inflation
• the proposed increase amount and the term (for example, is the price increase due to a short-term issue, 3, 6, 9 or 12 months?)
• the financial impact to the council over the remaining term of the contract including any extension periods
• if there is any opportunity to negotiate on the price increase

You should work with your finance business partner to make them aware of the proposed increase so budgetary impacts can be understood and forecasted. Also if the price increase is for a fixed term that arrangements are put in place to ensure payment revert to the original contract price.

Once you have made the decision on whether to accept or reject the price increase request, you should communicate the outcome to the supplier and work with the procurement team to arrange for SAP orders, catalogues and store to be updated, email countyprocurementcompliance.team@derbyshire.gov.uk.

A copy of the information relating to the price increase will be attached to the contract on the central contracts register by county procurement, contract and compliance team.