As recently discussed by a panel of construction industry leaders in the Washington D.C., Metropolitan area, material price escalation is the biggest concern facing the construction industry this year. The prices of raw construction materials, particularly steel and lumber, have been rapidly increasing since early 2020. The Associated Builders and Contractors recently reported that iron and steel prices were up 15.6% from January of 2020 to January of 2021, and that softwood lumber prices had increased by as much as 73% during the same period. As a result, there has been a dramatic discrepancy between ultimate input costs and bid prices submitted by subcontractors for raw materials. That has led to significant economic risk, which has fallen disproportionately onto the shoulders of NECA members.
NECA members are struggling with this issue and the associated risk. The question addressed here is how can a NECA member attempt to manage this risk? The answer depends upon what phase is the project in; bidding, contract negotiation, or performance. Each phase requires different strategies to manage the risk.
While there is certainly no magic bullet, and members are encouraged to seek competent local legal counsel and financial advice, we trust that this white paper will assist with some general guidance and practical advice. Please click below to access this white paper.