Conversations with the commissioning party are continuing – regarding the possibility of resuming the construction work of the “Sarkandaugava” transmission

The construction woThe construction work will be resumed once an agreement with the commissioning party – the Transport Department of Riga City Council –  is adapted according to the current prices, due to the massive increase in costs. The building contractor – the “Inter-party Alliance OTC” – formed by AS LNK Industries, the road construction firm “Binders”, and SIA “LT Betons” – have repeatedly addressed the customer with a call to review the contract price, considering the applicable laws and regulations. Because of the hesitation, a technological break at the site has now been extended.

As it was announced earlier, after the 24th of February 2022, when the Russian Federation commenced a war with Ukraine, extensive international sanctions were imposed on legal and private persons in the Russian Federation and the Republic of Belarus. As a result of the sanctions, the cost of construction products increased significantly. In some categories of construction goods, there have been even multiple price increases, including construction products that are very difficult to buy – such as iron and steel.

"Both the Public Procurement Law and the Procurement Monitoring Bureau guidelines give rights for customers to cover the actual increase. Nevertheless, the commissioning party does not use the mechanisms provided for the regulatory enactments but wants to transfer the largest share of the increase to the builder's shoulders. This action will lead many construction companies to insolvency, which in turn will hinder the construction process in the city as a whole,” – says Kaspars Ratkevics, board member of AS LNK Industries.

This year, following the price increase, the company has received notices from all its subcontractors and suppliers involved in major works stating that, due to the rapid price increases and the unpredictable economic situation, they are not able to meet the commitments. Consequentially – resuming works at the site and fulfilling the obligations under the current contract price and deadlines is impossible.

The situation with the “Sarkandaugava” transmission was also hampered by the fact that the works were delayed already in 2020 when the commissioning party stopped the work for more than half a year. As a result, the jobs planned during the 2020 season were transferred to 2021, when there was an increase in costs due to the effects of the COVID pandemic. Furthermore, the postponed works in 2021 had to be carried out at higher prices than expected. In addition, if there was no delay in the commencement of the work, the works at the site would have been resumed during the last working season, and the issue of increased costs would not have been actual.

Because no agreement was reached with the commissioning party on the compensation for the increase, the commissioning party has extended the technological break, which so far has not led to the continuation of the works at the site.