Rising geopolitical tension involving Iran is placing renewed pressure on global supply chains, energy pricing, shipping routes and commodity markets. For UK local authorities, the impact may be felt through fuel costs, logistics, energy-intensive goods, construction materials, food supply chains and supplier delivery risk.

The immediate question for procurement and contract management teams is not simply whether prices are rising. It is whether suppliers can legally pass those increases on, and what councils are entitled to accept, challenge or refuse.

This is where authorities face risk. Accepting price increases too quickly can undermine value for money, auditability and procurement compliance. Refusing them without proper analysis can lead to supplier failure, dispute, reduced service quality or operational disruption.

A careful, evidence-based approach is therefore essential.

Which procurement regime applies?

Before considering any supplier request, authorities should identify which procurement regime governs the contract.

Contracts awarded from procurements commenced on or after 24 February 2025 will usually be managed under the Procurement Act 2023 (PA23). However, many live council contracts, frameworks and call-off contracts will still sit under the previous regime.

Where a contract, framework or call-off was awarded under the Public Contracts Regulations 2015 (PCR 2015), the authority will usually need to manage and modify it under that regime, including Regulation 72, rather than the PA23 modification regime.

This is particularly important for older frameworks. A call-off from a PCR 2015 framework does not automatically become subject to the PA23 modification regime simply because PA23 is now in force.

Authorities should therefore confirm the applicable legal regime before deciding whether a price increase can be accepted.

This article is aimed primarily at contracting authorities operating under the PA23 and PCR 2015 regimes.

Why the Iran conflict may affect UK procurement

Conflicts involving Iran can have a disproportionate impact on global markets because of their potential effect on energy supply, shipping routes, regional stability and investor confidence.

Even where councils are not directly buying from affected regions, the consequences can flow through supply chains. Increased fuel costs, disrupted logistics, energy market volatility, material shortages and insurance or freight cost increases can all contribute to upward pricing pressure.

Authorities should expect some suppliers to raise concerns about:

Price increases during the contract term Cost pressures outside their direct control Contract sustainability Delivery risk Requests for renegotiation or variation Reliance on force majeure, hardship or change in law clauses

For councils, this creates a contract management issue that must be handled carefully, commercially and lawfully.

Can suppliers legally increase prices?

The starting point is simple. Suppliers cannot increase prices unless the contract allows it or the authority lawfully agrees to a permitted modification.

There is no general right for suppliers to pass on increased costs simply because the market has become more volatile. The legal position depends on the contract terms, the applicable procurement regime and the evidence supporting the request.

Authorities should look first at:

Price adjustment mechanisms Indexation clauses Inflation-linked provisions Review clauses Benchmarking provisions Open-book pricing requirements Variation clauses Compensation event mechanisms Force majeure clauses Termination and suspension provisions

If the contract includes a clear pricing mechanism, increases may be permitted within that mechanism. If it does not, the supplier has no automatic entitlement to increase prices.

When price increases may be lawful

There are several scenarios where price increases may be legally supported.

The most straightforward is where the contract includes indexation. If pricing is linked to a recognised index such as CPI, CPIH, RPI or a sector-specific benchmark, increases can be applied in line with that mechanism.

Another scenario is where the contract includes a review clause allowing pricing to be revisited at defined intervals.

A further scenario is where the authority agrees a formal contract modification. This requires care.

For PA23 contracts, authorities must consider section 74 and Schedule 8. For PCR 2015 contracts, Regulation 72 applies.

The key point is that a price increase outside the contract is not routine. It may be a regulated modification.

The role of force majeure

Force majeure is often raised during geopolitical disruption, but it is frequently misunderstood.

It is not a general right. It depends entirely on the contract.

Importantly, force majeure does not usually allow price increases.

It may allow suspension, relief or termination, but not repricing unless explicitly stated.

What councils should do now

Authorities should take a structured approach.

First, review the contract. Second, confirm the legal regime. Third, request evidence. Fourth, classify the request. Fifth, assess legal grounds. Sixth, consider transparency requirements. Seventh, document the decision.

Councils can strengthen contract management processes and governance through the Prestige Commercial Consulting support hub.

Governance and audit considerations

Decisions must be:

Evidenced Reviewed Approved Recorded

These decisions are likely to attract audit scrutiny.

Building resilience for future disruption

Authorities should review how contracts handle:

Pricing risk Indexation Supply chain disruption Force majeure drafting

Organisations that want to strengthen their approach can explore services through the Prestige Commercial Consulting main website or speak via the contact page.

Developing internal capability

Capability is key.

Teams must understand:

Contractual pricing vs variation Force majeure vs commercial pressure PA23 vs PCR 2015 Supplier resilience vs legal entitlement

Teams can build capability through the Prestige Commercial Consulting Learning Portal.

The takeaway

Geopolitical disruption involving Iran may create real pressure on supplier pricing and delivery.

Suppliers cannot automatically increase prices, and force majeure is rarely a valid pricing route.

Authorities must balance legal compliance with operational reality and ensure all decisions are structured, justified and documented.

This article provides general information only and should not be treated as legal advice.