How do I handle material cost inflation between bid time and contract time?

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Welcome to our advice column where our estimators offer thoughtful answers to your questions on estimating. Go here to this form to submit an anonymous question.

Material and labor prices are changing every week, and predicting hundreds of material increases to the dollar is impossible. Whether your costs are shifting due to supply chain complications or inflation, there are several practical ways to safeguard your bid:

  1. Sub-contracts and letters of intent for construction crews that specify a schedule and a confirmation window
  2. Contract language that is specific to inflation in materials and holds the owner responsible for all inflation costs as a direct reimbursable
  3. Predictive estimating that provides an “inflation: add alternate” to a bid for each day it takes for an award to be passed down

If you’re concerned about prices increasing between a signed contract and the build phase, consider requiring upfront deposits for building materials, so that materials can be purchased closer to the time of the estimate.

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