Combatting Rising Prices on Construction Projects
In recent months, the supply chain crisis has impacted businesses worldwide, and the construction industry is feeling the effects as well. Materials can be hard to get, and when they are available, their prices have often increased. This situation means that contractors are facing delays as well as lost profits. So how can you combat these challenges? Below are some strategies to consider.
Review Your Contracts
It may seem tedious to read all your contracts word for word, but it is imperative that you do. Your contracts protect you from all sorts of scenarios, and if clauses are missing or not phrased correctly, you could be on the hook for unexpected fees and obligations. Check your contracts for these provisions:
- Force Majeure—Meaning “superior strength,” this term refers to circumstances that are unexpected and beyond your control. This clause addresses risk if your project stops or is dramatically delayed due to unexpected events, including earthquakes, hurricanes, tornadoes, wildfires, and situations considered to be “acts of God.” The clause also covers circumstances such as riots, terrorism, war, strikes, and other human-made emergencies.
- Material Delay—In most standard contracts, you are held responsible for material delays because they are not deemed excusable. If your contracts do not include a material delay provision, consider adding one. If your materials are delivered late, this clause will help protect you from liability when your schedule slows.
- Material Substitution—Sometimes, a specific material is not merely delayed but altogether unavailable. In that case, a material substitution provision permits you to use a reasonable substitution for the material in question.
- Price Acceleration—Lately, prices have been increasing, so if they go up after you have signed a contract, this clause is critical. It will allow you to revise your price based on the adjusted material costs, but you will not have to file a change order. However, you will likely be required to provide evidence of the increase to your customer.
- Termination—Sometimes, a termination for convenience clause will be included in a price acceleration provision. This clause allows you to terminate a contract if you cannot get certain materials or their prices increase substantially.
Work with Your Suppliers
It is essential to realize that you are not alone in this supply chain crisis. Other contractors are affected, and so are your vendors. Rather than being combative when prices increase or materials are stalled, work with your vendors to find solutions. Ask your suppliers for advice about the materials you need, what substitutions might be available, and what trends they see. If you treat them like trusted partners, they are more likely to help accommodate your needs.
Keep Careful Records
Everyone is on edge during the supply chain crisis, which can lead to customers and suppliers pointing fingers and assigning blame. To counter that tendency, be sure to maintain thorough records of every order, every delay, every price increase, and all the other issues that you encounter. When you document everything, you are better prepared to defend yourself against legal claims.
Ask for Help
If you find yourself with an angry owner or you are unsure about your contract provisions, do not hesitate to request legal assistance. The experienced construction attorneys at Cotney can review your contracts, discuss your situation, and help you maneuver any legal hurdles. We’re in your corner no matter what challenge you are facing.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.