A mid-year budget increase of almost £1m is on the table from Lincolnshire County Council as inflation hits rocketing highways costs.
In a bid to protect the large number of smaller businesses sub-contracted by main contractors Balfour Beatty and Colas, members of the council are recommended to approve the move at a meeting on Monday.
Rapidly rising costs in fuel, energy and supplies are hitting the contractors, says a report to go before the Highways and Transport Scrutiny Committee.
“Any forward budgeting requirements will be dealt with in the same way as other authority budget pressures and is likely to include a review of potential areas of underspend in year, reviewing income levels in year,” said a spokesman for the county council.
The additional funding, a total of £964,000 across both contracts, would be put in place as a ‘mid year uplift’ to ensure smaller businesses can remain operating as sub contractors to the two main suppliers.
“The level of service from Small and Medium Enterprises (SMEs) working within LCC is high and the loss of any of these firms would be significant in terms of Lincolnshire’s economic impact, but also quality of the ongoing highway service,” says the report.
If approved, the measure would apply for contracts from August 1 where small enterprises are providing more than 75 pre cent of the service. It warns that replacement sub-contractors would ‘take several months’ and could lead to staff members going elsewhere.
“Rapidly increasing inflation pressure within the construction sector is currently outstripping the inflationary mechanisms built into the original contract and is causing real pressure on the contractors and supply chain working for Lincolnshire County Council,” the report says.
“Based on the latest inflationary figures there remains a significant risk that SMEs working within the highways works and traffic signals contract are struggling to deal with the pressures they are facing.”
The option of a mid-contract increase in funds will also include steps ensuring both Balfour Beatty and traffic signals provider Colas pass on the full increases to the areas involving SMEs.
“The decision to pursue any of the options is a significant one given the challenges that are also faced by local government as additional funds from central government remain unlikely.
“However, the cost to replace those at risk is real and service continuity plays a significant factor when delivering essential services of this type,” the report says.
