OHLA - comment
Inflationary pressure in material and labour costs is prompting action in the US and EU from contracting agencies to support builders. This will benefit OHLA which is now concentrated on Civil projects and away from commercial development. Civil engineering and development are lower risk than commercial development where the lead contractor bears cost risks (to be covered in its profit margin). State agencies in the US and Europe are choosing to insert inflation (material and labour costs) clauses in construction contracts to prevent projects from being half completed and ending up in court disputes. There is no benefit in the project ending up being half-built and stranded in litigation.
To cover rising material and labour costs the US State of Maryland has increased the budget for its Washington light rail project from EUR1.7bn to EUR3bn. OHLA/ACS are the building contractors on this project. The size of the increase in Maryland is also to cover contingencies as the project already has one contractor walk away. However, similar cost clauses are appearing in Spain where price inflation clauses are being inserted by ADIF (rail operator) on €250m of projects.
The UK sees 23% increase in Raw Material costs - no relief in sight