FM CONTRACTS
Better days are coming (but not just yet) “The rate of inflation is forecast to keep rising this year, but we expect it to slow down next year, and to be close to 2% in around two years. That’s both because the main causes of the current high rate of inflation are not likely to last, and because we have raised interest rates several times over the past few months.” (Bank of England, 17/06/22) While the reassurance in the predictions provided by the Bank of England in June was no doubt welcomed by all, any impact of the rapidly changing political landscape in the UK during July is yet to be determined. New contracts that are about to be
tendered for must focus on incorporating fair and viable mechanisms to control the impact of rising inflation, both now and in the future. Existing contracts, especially PFI, are going to face even greater challenges depending on the complexity of their mechanisms for change, and potential available gain share opportunities. Senior lenders, those that funded the PFI (e.g., banks and financial institutions), who often have no proverbial ‘skin’ in the game, are typically extremely risk-averse, and will want to see thorough due diligence to support proposed contract variations of this nature.
No ‘quick fixes’ There are no ‘quick fixes’, but sitting tight, and hoping that the inflationary storm will soon ‘blow over’, is a high-risk strategy. The stakes are high, and we need to see engagement, negotiation, and collaboration, from all stakeholders. It is worth remembering in life that you procure a commodity, but you choose a partner. No doubt better days are coming, but not just yet, which is why there is no better time to explore a modern and truly collaborative contract approach to FM.
Further reading n Consumer price inflation, UK: June 2022. Price indices, percentage changes, and weights for the different measures of consumer price inflation. https://tinyurl. com/3mb3dd25
n Harari D, Francis-Devine B, Bolton P, Keep M. Rising cost of living in the UK Research Briefing. House of Commons Library, 21 July 2022.
https://tinyurl.com/2s37mwyr
n Consumer Price Inflation (includes all 3 indices – CPIH, CPI and RPI) QMI cpi@ons.
gov.uk 20 December 2017. https://tinyurl. com/yh46vj6m
n NHS Confederation. Spring Statement 2022: what you need to know: Analysis of what the Spring Statement means for health and social care, 23 March 2022.
https://tinyurl.com/25cw5nf4
n Pettinger T. Difference Between RPI, Dr Rachel Dick
Dr Rachel Dick is an associate director for Archus, and leads Facilities Management consultancy services within the business’s Technical Advisory team.
CPIY, CPI-CT and CPI, Tejvan Pettinger, Economics Help online, 18 February 2017.
https://tinyurl.com/3e8sd3hs
n Frost G. CPI vs RPI inflation: what’s the difference? The Times money mentor Updated July 4, 2022. https://tinyurl. com/yrthzyb8
n When will inflation start to come down? Bank of England. 4 August 2022. https://
tinyurl.com/bdhw5weh
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