The country is currently experiencing the highest inflation rates in over 30 years. Increased costs are beginning to affect our suppliers, which have begun to seek to increase the prices of their goods and services to cover these costs.
It is imperative 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 responding to price increase requests
The process for responding to price increase requests is:
- 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
- Complete a protocol 9 business case for price increase, when completing the form, include if 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.
- Please ensure you have received all the information from the supplier to substantiate the price increase, and include this in your business case to enable the prices increase request to be considered by finance, procurement and if required legal.
When looking at your business case for the price increase we will 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
We will 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.
If the price increase is accepted we will inform you of the outcome so you can communicate this to your 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 business case will be attached to the contract on the central contracts register by county procurement, contract and compliance team.
See procurement business case template documents.
The business case should outline:
- 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
- has there been other price changes during the term of the contract? If so, what, and when?
- if the proposed increase reflects market trends
- has there been any negotiation undertaken on the proposed price increase?
- the proposed increase amount and the term (increases outside contractual terms are only advised to be fixed for a maximum of 6 months)
- the forecasted impact to the council over the remaining term of the contract
Once complete the business case should be submitted by means of the county procurement business case submission portal for review. A collective decision will then be made on whether price increase request is agreed or rejected.