The Albanian Government has approved the Normative Act, with the force of Law, act no. 10, dated May 18, 2022, for the Financial Compensation due to the increase in the price for some construction materials, based on the stipulations in the public contracts, as a result of the special situation created in the market during the year 2022, referring to market prices and construction cost indices.<\/p>\n\n\n\n
The following article aims to clarify and visualize some market indicators related to this government act.<\/p>\n\n\n\n
The Normative Act applies and aims to compensate with additional funding, public works contracts (civil works), supported by the State Budget, central and local government funds, as well as contracts implemented by companies that are majority owned by the state. Compensation is justified with the increase in the price of construction raw materials such as iron, cement, bitumen, plastic pipes, aluminum, copper and zinc. These prices have increased in the international markets as a result of the crisis caused by the aggression in Ukraine. Public Contracts, subject to said Normative Act, must have been concluded before the entry into force of the act and be in the process of implementation no earlier than January 1, 2020.<\/p>\n\n\n\n
Compensation will be carried out through Additional Contracts (contract extension), subject to approval from the procuring authority, in the amount of an extra 5 to 30% of the original value. The new regulation and successive assessment of the compensation margin, raises many problems regarding the procedure, its integrity and avoiding undue influence from companies to obtain the extra-financing regardless if they incurred higher costs.<\/p>\n\n\n\n
The foresees additional financial costs that will be covered by the budgets of the State Institution or the Publicly Owned Company.<\/p>\n\n\n\n
The Normative Act supports economic operators that implement public works contracts, in the time frame provided, through two options: by increasing the value of the contract through the approval of the request for financial compensation and by not applying or forsaking penalties for contractual delays in the implementation. Even procedures for the Reconstruction Program are subject to it.<\/p>\n\n\n\n
In this article we will examine two indices that are the basis for estimating increased costs in the implementation of public works contract. Specifically, the Construction Cost Index and the Import Price Index with a focus on construction material items.<\/p>\n\n\n\n
The Construction Cost Index (CCI) measures the price performance of construction materials, labor and other capital expenditures used in the construction of a typical building (8-10 floors). The annual difference in CCI in the first quarter of 2022 is 5%, which means that in the first quarter of 2022 the cost of construction is 5% higher than in the first quarter of 2021. While in the first quarter of 2021 it was only 0.6% more compared to the same period of the previous year. 2022 marks the biggest increase in costs recorded during the reviewed period, from 2018 onwards, where the upward trend of the index dominates.<\/p>\n\n\n\n