Construction Costs Continue to Rise - How Can Contractors Protect Themselves?

Prices for construction materials soared during the pandemic, and have continued to rise. Here are a few ways that contractors can protect themselves from the repercussions of rising costs in their contracts, without committing to a "guaranteed maximum price" (GMP):⁠

🚧 Contractors can try to source their materials locally, from Canada, the United States, and Mexico. This will lessen dependence on overseas shipments whose delay might suspend the project.⁠

🚧 Contractors should try to specify and purchase materials very early in the process. Working together with other members of the team, such as designers and developers, will also help contractors plan around supply chain shortages and plan for them in advance.⁠

🚧 Contractors should insert conditional clauses to protect against GMPs.⁠

🚧 Contractors should negotiate clauses to account for supply chain disruption, and should ask for delays resulting from supply chain disruptions to be treated as both excusable and compensable.⁠

🚧 Contractors should ask for grace periods before liquidated damages start to take effect and add the same into the liquidated damages clauses.⁠

In summary, contractors should endeavor to work together with everyone on the project to lock prices in early so that there is no inflation of costs as the project moves forward. For questions about your contract, call The Parkman Law Firm.⁠