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:
- advise the county procurement and contract compliance team, email: countyprocurementcompliance.team@derbyshire.gov.uk who can support you with checking the existing contract terms and conditions
- issue the template holding letter (attached to this page) to the supplier as soon as possible, requesting further information if required. For example, requesting 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
- review the contract to check if price increases are allowable or not allowable under the terms of the existing contract and if a particular process needs to be followed to notify or agree a price increase
- follow the process below dependent on contractual terms
Price increases that are allowable under the terms of the existing contract
It is still vital that you consider:
- 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?
- 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
- 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.
If the price increase is for a fixed term, ensure provisions are put in place to ensure payment revert to the original contract price.
Whether the price increase is subsequently accepted or rejected, a formal letter outlining the outcome should be agreed with legal services and county procurement before being issued to the provider. A copy of the letter should be sent to Karen Byrne, Procurement and Contract Compliance Manager, email countyprocurementcompliance.team@derbyshire.gov.uk so it can be stored with the contract on the central Contacts Register.
Ensure that any SAP orders, catalogues, and store are updated to prevent invoice discrepancies. Contact the central purchasing support team, email pst@derbyshire.gov.uk to get help on amending SAP purchase orders.
Price increases that are not allowable under the terms of the existing contract
Please ensure you have received all the information from the supplier to substantiate the price increase, and submit a procurement business case (protocol 9) to enable the prices increase request to be considered by legal, finance and procurement.
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 of 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.
Complete a procurement business case
A collective decision will then be made on whether price increase request is agreed or rejected.
Whether the price increase is subsequently accepted or rejected, a formal letter outlining the outcome should be agreed with legal services and county procurement before being issued to the provider. A copy of the letter should be sent to Karen Byrne, Procurement and Contract Compliance Manager, email countyprocurementcompliance.team@derbyshire.gov.uk so it can be stored with the contract on the central contacts register.
Ensure any SAP orders, catalogues and store are updated to prevent invoice discrepancies. Contact the central purchasing support team, email pst@derbyshire.gov.uk to get help on amending SAP purchase orders.