Fuel-price impact on bids sparks talks with province and Winnipeg

The MHCA will be presenting suggestions to address the significant impact of rapidly rising fuel prices on bid-hourly work and construction contracts awarded in the last months, to Manitoba Transportation and Infrastructure, and the City of Winnipeg.

“We have been in direct contact with senior offices at both levels of government to address the untenable situation created by the escalating fuel prices, particularly on bid-hourly snow clearing, and the imminent flood-control work for the province,” MHCA President Chris Lorenc said.

The discussions are expected soon. Contractors are working now on snow clearing on provincial roads and highways, and on streets. Bids on snow clearing were made in October.

Flood-control work, tendered in January and February, would get underway next month.

Further, some construction contracts that span a number of years present issues for contractors whose bids were based on fuel prices a year or more ago.

Fuel prices rise and fall. However, Russia’s invasion of Ukraine and the impact of international sanctions on supply and demand have seen prices shooting up in the last two weeks.

The price of diesel at the pump is approaching or hitting $2 per litre — some 60 cents or more than it was selling for in December. Further, the rising cost of oil will put pressure on asphalting contracts.

“This is largely the fallout of war, the occurrence and effect of which no one could have foreseen and therefore contemplated in the bid risk assessment,” Lorenc stressed.

Fuel prices are expected to continue to increase for weeks and are not contemplated to drop to December’s average for months.

“Both the province and the City have been very responsive to our request for discussions, which indicates they understand the need for adjustments.”

While the province of Manitoba has a fuel adjustment clause as a general condition of large construction contracts, there is no such provision for bid-hourly or flood-control work.

The City of Winnipeg does not include a standard fuel-adjustment clause as part of its construction contracts.

Fuel is easily 20-25% of the cost of operating equipment and that gives some idea as to the impact, overall, on the project costs, Lorenc said.

Industry will be updated on the progress of this issue. Lorenc said he expects a timely solution, given the immediacy of the problem.