Thursday Jul 16, 2026
Thursday Jul 16, 2026
Thursday, 16 July 2026 02:44 - - {{hitsCtrl.values.hits}}
The Treasury has authorised Government institutions to revise prices and extend procurement contracts affected by the Middle East conflict and Cyclone Ditwah, providing temporary relief to contractors facing higher fuel, freight, and construction costs.
The temporary measures allow eligible Government contracts to be repriced or extended to reflect higher fuel, freight, and material costs, giving contractors, suppliers, and consultants engaged in public projects greater flexibility to manage cost increases arising from the two events.
The measures are likely to be particularly relevant for the construction sector, where contractors have faced rising fuel, freight, and material costs on fixed-price Government
contracts.
Treasury...
By providing a mechanism to revise contract prices and extend project timelines, the Circular is intended to ease financial pressure on contractors and reduce the risk of project delays and contractual disputes.
The special measures, issued under Public Finance Circular No. 03/2026 with the concurrence of the National Procurement Commission (NPC), allow Government institutions to adjust contract prices using recognised price adjustment mechanisms and, where necessary, extend contract periods for eligible procurements. The measures, approved by the Cabinet on 1 June, apply with retrospective effect until 30 September 2026.
The Circular covers procurement of goods, works, non-consulting services, and consulting services where bids had closed on or before 1 March 2026 and were subsequently affected by instability in the Middle East, as well as procurement disrupted by Cyclone Ditwah.
For works contracts of three months or less that had already been awarded, Government institutions have been instructed to apply the Construction Industry Development Authority’s (CIDA) Simplified (Composite) Price Adjustment Formula to accommodate fluctuations in fuel and construction material prices.
For contracts exceeding three months where no price adjustment provisions were included, agencies may apply either the CIDA Standard Price Adjustment Formula or the Simplified (Composite) Formula to accommodate fluctuations in construction input prices.
Significantly, the Treasury has instructed Chief Accounting Officers and Accounting Officers to assess the additional financial implications arising from the approved price revisions and ensure adequate funding through transfers of existing financial provisions or supplementary Budget allocations where required.
For procurement of goods, non-consulting services, and consultancy services, the Treasury has authorised the use of internationally or locally published indices, including Producer Price Indices (PPI), freight and shipping indices, and other recognised market indicators, to determine price adjustments.
Where no suitable indices are available, procuring entities may consider price adjustments based on documented additional costs incurred, provided claims are supported by evidence including supplier quotations, invoices, Customs declarations, bills of lading, freight invoices, exchange rate records, insurance documents, and proof of payment.
The Circular also permits Chief Accounting Officers and Accounting Officers to approve price adjustments and contract extensions on the recommendation of Variation Review Committees.
In instances involving bid securities, performance securities, non-recovery of liquidated damages, or similar contractual obligations, procurement committees, or special committees appointed by Chief Accounting Officers, may recommend appropriate action.
The Circular also directs all procuring entities to incorporate appropriate price adjustment provisions in future tenders by adhering to Section 5.16 of the Procurement Guidelines for Goods, Works and Non-Consultancy Services – 2024 when preparing bidding documents and contract documents.
The Circular, signed by Treasury Secretary Dr. Harshana Suriyapperuma, was issued to Secretaries to Ministries, Provincial Chief Secretaries, Heads of Departments, and Heads of Local Government Authorities, Government corporations, statutory bodies, and Government-owned companies.
