June 2, 2021
ConsensusDocs Price Escalation Resource Center
Price escalation price spikes and supply shortages threaten builders’ financial viability in today’s construction market. As the leader of construction contract documents with an unprecedented Coalition of leading construction organizations to draw upon, ConsensusDocs has compiled resources below to address price escalation. The best approach is to include price escalation provisions in your construction contract agreement at contract signing. But if both parties agree, you can use the ConsensusDocs 200.1 price escalation amendment after contract signing.
Owners, Constructors, General Contractors, Subcontractors alike should consider price escalation/de-escalation clauses in these uncertainty times. ConsensusDocs is the only publisher of a standard price escalation clause. The ConsensusDocs 200.1 Standard Time and Price Impacted Materials Addendum and Schedule A is available on all paid subscriptions. “Rather than guessing to price out cost fluctuations, owners and builders would be wise to consider a best practice price escalation clause that is tied to an objective index agreed upon ahead of time, that allow prices to go up, or down. Hope and a contingency fund don’t qualify as a risk management strategy,” says Brian Perlberg, Executive Director and Senior Counsel for ConsensusDocs.
Typically, constructors, subcontractors, and materials suppliers typically bear the risk for cost increases in a firm-fixed or lump sum agreement, even if such increases are unforeseen and not their fault. However, supply shortages, could give rise for excusable performance delay, but paying higher costs for material supplies are usually considered a business risk. Some additional mitigation strategies, include limiting the amount of time a bid can be relied upon; using cost of the work agreements (i.e. ConsensusDocs 230 or 500) rather than lump sum agreements (i.e. ConsensusDocs 205 or 751); breaking projects into phases; providing allowances or alternates for materials; early procurement and storage of materials (see the ConsensusDocs 750.1 Storage Rider); and prefabrication (see ConsensusDocs 753 Prefab agreement).
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Contract Documents
- ConsensusDocs 200.1 Standard Time and Price Impacted Materials Addendum and Schedule A (Including Price Escalation Elements and Clauses)
- Guidebook to ConsensusDocs 200.1
- Webinar April 14th, 2021: Soaring Material Prices and Supply Shortages
- Soaring Material Prices and Supply Shortages PowerPoint Presentation
Federal Resources
Articles & Other Information
- 2021 Construction Inflation Alert by Associated General Contractors of America
- ConsensusDocs Newsletter October 2018 Recovery of Material Escalation Costs Arising from Steel and Aluminum Tariffs by Adrian Bastianelli and Mark Berry of Peckar & Abramson
- Mitigating the Effect of Construction Price Escalations by Jeffrey Reichard of Nexsen Pruet
- Tariffs, Taxes, and Trade Wars: Using Material Price Escalation Clauses to Mitigate Risk in an Uncertain Political Climate
State-Level Resources
By: Brian Perlberg, ConsensusDocs Executive Director & Senior Counsel.
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ConsensusDocs standard construction contracts are the only contracts written and supported by a coalition of leading design and construction industry organizations. With a catalog of 100+ contract documents addressing all project delivery methods, ConsensusDocs contracts incorporate fair risk allocation and best practices to represent a project’s best interests. The Coalition’s organizations collectively represent hundreds of thousands of design professionals, owners, contractors, subcontractors, and sureties. For more information, please visit www.consensusdocs.org, call 866-925-DOCS (3627) or email support@consensusdocs.org