A jump in material prices threatens construction projects

The jump in prices of raw materials and building materials imported into Latvia is too big.

Such rapid price growth has a significant impact on the execution of contracts previously concluded as a result of state and local government procurements, because in cases where the increasing expenses of builders will exceed fines for non-fulfilment of the contract, it will be more profitable to terminate the contracts, and in the end result it may cost the state more than indexing the costs in time, Dienas Biznesam says Leonids Jākobsons, chairman of the board of the Association of Building Materials Manufacturers.

Procurements can fall apart because of prices

Indexation in state and local government contracts is not provided for, and this will in some cases lead to the termination of contracts, to new procurements that will be closed in compliance with the already appropriate prices in the market. “The reasons for the jump in the prices of building materials are not only in growing demand, but also in insufficient supply. For this reason, Latvian building material manufacturers are forced to buy the missing raw materials in reserve and freeze the working capital in warehouses, which creates additional problems. Such a situation can most likely remain until the end of the year, which actually means an indefinite time for manufacturers,” reveals L. Jākobsons.

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