Imagine a contractor who signed a hospital construction contract two years ago based on an estimated project price. Since then, the cost of cement, steel reinforcement, and labor has increased by more than a third, while the contract budget has remained unchanged.
Until recently, the contractor had only two options: complete the project at a loss or leave it unfinished for years. Now, a third option has emerged — legally terminate the contract by mutual agreement with the client.
On July 2, Cabinet of Ministers Resolution No. 833 entered into force, providing a long-awaited mechanism for situations where a dynamic construction contract price no longer reflects market realities. The change affects dozens of publicly funded projects across Ukraine, including schools, hospitals, roads, and water supply infrastructure, many of which have faced delays because original budgets no longer correspond to actual construction costs.
For public sector clients — regional administrations, municipal authorities, and utility companies — the new rules should help reduce legal disputes and minimize the number of stalled construction projects. For contractors, the amendments create a lawful path out of contracts that have become economically unsustainable without jeopardizing their reputation or existing warranty obligations.
What the New Resolution Allows
Resolution No. 833 of the Cabinet of Ministers of Ukraine, adopted on June 24, 2026, entered into force on July 2, 2026.
The document introduces the 49th amendment to Resolution No. 1178 governing public procurement procedures during martial law.
The amendment adds a new provision that allows a contracting authority and a contractor to terminate a construction contract by mutual agreement when the contract was concluded using an estimated (dynamic) contract price model.
This option applies when there is documented evidence that the cost of labor and construction resources required to complete the project has increased by more than 15%, provided that such changes were unforeseeable and beyond the control of both parties.
Contract termination is permitted only if the following conditions are met simultaneously:
- The revised construction project has already been approved;
- At least 15% of the total contract value has been completed;
- All accepted work has been fully paid for;
- Any advance payments have been properly accounted for through accepted work documentation as of the date the revised project was submitted for expert review.
Safeguards Against Budget Manipulation
One of the primary concerns associated with this mechanism is the potential misuse of project adjustments to justify budget increases unrelated to actual market conditions. The resolution therefore introduces several safeguards.
Under the new rules:
- Project revisions may not be used to change the intended purpose of a facility;
- Contractors and clients may not artificially increase the scope of work to justify higher project costs;
- Contract termination does not release contractors from warranty obligations related to completed works;
- Contractors are not entitled to claim compensation, damages, expenses, or lost profits arising from the termination of the contract.
Why This Matters
Until now, public construction contracts based on dynamic pricing effectively left both parties trapped by inflation.
Public clients were unable to increase payments beyond approved budgets, while contractors could not continue construction work at a significant financial loss. In practice, terminating such contracts without penalties, disputes, or lengthy court proceedings was extremely difficult.
The new regulation introduces a transparent and clearly defined legal mechanism that allows both sides to address these situations responsibly and in accordance with established procedures. While it will not immediately resolve every problematic construction project in Ukraine, it provides the construction industry with a practical tool that stakeholders have been seeking since the early years of the full-scale war.
What It Means for the Construction Industry
For companies engaged in public sector projects, the new framework creates greater flexibility and reduces the risk associated with long-term construction contracts in periods of significant market volatility.
It also increases the likelihood that public projects will ultimately be completed rather than abandoned midway through construction due to unsustainable pricing conditions.
For companies such as SpecServis, which has been delivering public infrastructure and construction projects for more than 25 years, these changes represent an important step toward a fairer and more balanced procurement environment — one where projects have a better chance of reaching successful completion instead of becoming long-term unfinished developments.
Source: Public Procurement Advisor
