Drastic Material Cost Increases?

[rmerz01]

So I'm sure everyone is seeing cost increases across the board. I just wanted to see if and how some folks are handling them in fixed-price contracts or for jobs that were won a month ago that we haven't received a contract for yet. Our existing contracts don't have any changed conditions clauses or anything under the force majeure clause that expressly allows OR prohibits claims based on material pricing fluctuations. We're talking about almost 50-100% increases for some materials vs. pricing at bid time.

For the project we have with NO contract yet (but we have an NTP), how would you handle it? Do you redline the contract upon receipt and immediately send in a claim upon contract execution? Do you shoot in an RFI? Not sure where to go with this as the estimate was extremely tight due to some missed items so having to go into a project having to eat the fluctuations that have no real signs of stopping is going to be an issue.

Let me know if anyone has some experience here. Thanks in advance.

 

[Fred B]

So I'm sure everyone is seeing cost increases across the board. I just wanted to see if and how some folks are handling them in fixed-price contracts or for jobs that were won a month ago that we haven't received a contract for yet. Our existing contracts don't have any changed conditions clauses or anything under the force majeure clause that expressly allows OR prohibits claims based on material pricing fluctuations. We're talking about almost 50-100% increases for some materials vs. pricing at bid time.

For the project we have with NO contract yet (but we have an NTP), how would you handle it? Do you redline the contract upon receipt and immediately send in a claim upon contract execution? Do you shoot in an RFI? Not sure where to go with this as the estimate was extremely tight due to some missed items so having to go into a project having to eat the fluctuations that have no real signs of stopping is going to be an issue.

Let me know if anyone has some experience here. Thanks in advance.

I've had this and been up front with the customer that the pricing of materials have had unprecedented increases and asure them that the labor portion isn't changing but that these prices are beyond my potential to absorb and would need to modify the quote for the materials. I'd do it before they submit a signed contract, I also inform them that the prices I pay from the supply house are now being limited to under 5 days from quote. They then have the option of moving forward with the project or opting out, I give them the option. Most have been more than understanding. So far few have said no way, some have cut back on the scope of what they were going to do though.

 

[James L]

I would say if you won the job a month ago, you should have already seen the prices going up, and should have known it's not done going up. Shortages have been running wild for a couple of months now. Probably should have already secured the materials.

If it's going to break you to honor the bid, then you need to back out. Better to lose face than lose all your money

 

[blueheels2]

Look for an increase or walk

 

[petersonra]

Your first stop should be at your lawyer's office to get your contracts and terms and conditions fixed so you don't end up in this condition again.

Generally there's no requirement that you accept a purchase order, and your terms and conditions need to say that you are under no obligation until you accept a purchase order.

If they actually send you a purchase order and you're not in a position where you are comfortable executing the project just turn it down.