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Time To Really Consider Escalation Clauses

 
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Old 03-18-2008, 09:43 PM   #1
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Time To Really Consider Escalation Clauses


Heck, with oil at $ 111.00 per barrel and materials jumping all over the place, like for instance, April 1st an increase of between 10% to 15% across the board on all roofing materials. On May 1st, the exact same increase is projected from letters we received from manufacturers and suppliers.

I just delivered 2 proposals and had the prics calculated with the lower end of the increase, so I would not get burned, but I am certain that few other contractors I compete with will do the same, so now my prices are even farther away from the run of the mill crowd of low-mid ballers.

I could probably pull in more clients, if I just add an "Escalation Clause" to the contract, instead of guessing and trying to be as completely up front with the customer as possible.

Now, what would be the proper and ethical and most legal way to do that. It can not just be made up on a whim, with no relevant back up to show the original date and quoted price of a certain material, so I looked at some informative articles on the subject.

Ed

Here is one from Michael Stone, of MarkUpAnProfit.com, monthly newsletter.

Contract Escalation Clauses

Contract escalation clauses have been around a long, long time. They have been primarily used on large commercial projects where the job duration will exceed one year. However, with the increased size of residential new construction and remodeling and recent economic changes due to oil prices and Katrina, it is time to look at including a Contract Escalation Clause in your contracts. If done properly, they will protect you from the inevitable bump in prices. If done improperly, you are headed for a big fight with your customer and possible legal problems as well.

Please remember this is not legal advice. We are not attorneys. Use any and all of the materials in this newsletter at your own risk. We strongly recommend that you consult your attorney for help in reviewing and/or writing any contract language and especially a Contract Escalation Clause.

Depending on the work you do or service you provide, the primary function of the Contract Escalation Clauses is to protect you against lumber and sheet material price increases. However, in today's market, you also need to protect yourself against increases on any product made from petroleum (roofing and gas/diesel, floor coverings, etc) and anything else that could increase the overall price of your job more than 2% to 3% at any given time.

Here are some things you should consider when compiling your Contract Escalation Clauses:

How do you define the original prices that have escalated? The definition must be specific.

On large commercial work the Contract Escalation Clauses is normally set by price indexing the materials involved.

Specify materials and or labor likely to increase. Again, you should be very specific on what the Contract Escalation Clauses includes. The term "building materials" won't fly. Dimension lumber, all plywood, OSB, particle board, TJI, manufactured trusses, fasteners, etc, give you a specific definition.

Set the limit of escalation at 2% to 3% of original price on specific materials. In other words, you will honor the original quote on the job unless the price of the materials will increase your cost more than 2% or 3%. If the price of dimension lumber increases your cost by 5%, the owner agrees to pay you not only the additional 5%, but you should also include a percent to cover the additional bookkeeping and the time spent on the phone and processing the increased expenses.

If you aren't getting a significant down payment on jobs, one option is to have the owner agree (by contract) to pay you for materials on the day they are delivered. That way you can pay the supplier that day or the next, guaranteeing the price of the materials. Be sure and specify that if the owner delays payment in any way, they are responsible for any price increases that apply to those materials until they are paid. You could apply this same wording to cover the materials that your subcontractors bring to the job site.

The downside to this is that you must keep accurate notes. Everything I have read says loud and clear, you must be able to document any price increases above the original contract amount. If you can't document, you won't collect the difference. Also be sure to specify how Change Work Orders are impacted.

Dan Cline, owner of Diversified Refrigeration Company, in Valley Springs, CA, a commercial contractor, sent the following note, outlining what is probably the simplest approach:

"The way we deal with this is quotes are only good for 30 days and if it is a major material order we make the supplier hold their pricing for the same period (or longer). If the customer wants to accept the bid after this date, than we check the pricing and advise. If the job is accepted during the 30 days we place the order and bill the customer, advising them of their option to order early and save the increase in cost."

Sonny Lykos sent the following note about Contract Escalation Clauses:

"An 'escalation' clause such as you ask can be done, but only if the contractor specifies the current cost of pertinent materials he included in his proposal. For example, the cost of CDX plywood. Furthermore, those amounts cannot just be inserted, but should be in the form of a 'quote' from a lumberyard at the time of the contract, and inserted as an 'Addendum' to the contract. By having the quote, the contractor cannot later be accused of showing unrealistic 'current' costs as a tactic to get more money."

I sent a note to Tom Reavey in Los Angeles, CA asking for his opinion on Contract Escalation Clauses. Tom fired back the following question and comment:

"Would any of this fall under 'The Act of God' clause? Things outside of our control that impact a job. Usually you try and absorb small increases, etc. You don't want to send the signal that you are trying to gouge someone unduly, but if it is a legitimate condition that is obviously no fault of the Contractor or the Owner, it is the Owners responsibility to suffer the blow since it is his property that is being improved and requires the materials that are costing a premium. It's not the Contractor's property and the Contractor is not being enriched by the work. He is just asking for what is reasonable to cover the increase cost of materials, etc. I do have a clause in my contract that speaks to acts of God, union issues; material increases after contract signing, etc. I have never used it to collect for increased material costs but I would if it meant taking a big enough hit. I would discuss it as soon as possible, laying out the rationale, cost differential, and method we plan to use for passing these cost increases onto the Owner. It would be important to let the Owner see you are not doing this to enrich yourself but just to get the increase material cost covered, as it should be, by the Owner."

Here is some language that we drafted up to give you a start. If you can improve on this, please send it along and we will revise and repost this for everyone.

Material Price Increase:

Owner understands and agrees that a material allowance amount has been estimated and included to cover the entire expense of the {SPECIFY MATERIAL(s)} for this job. This amount is included to set the price on those materials in anticipation of potential material price increases beyond {CONTRACTOR}'s control. The MATERIAL ALLOWANCE AMOUNT IS: ${SPECIFY AMOUNT}.

{CONTRACTOR} will notify owner immediately during the job if material price increases cause the cost of {SPECIFY MATERIAL(s)} for this job to exceed the MATERIAL ALLOWANCE AMOUNT. The Owner may then, at his option, terminate this contract by providing within (#) business days both written notice of termination to the Builder and payment to the Builder for all costs expended in performance of the contract up to the date of termination, plus payment of ${SPECIFY AMOUNT} based on the percent of completion. If Owner fails to terminate this agreement upon notice of the material price increases within (#) business days, {CONTRACTOR} may proceed to purchase the {SPECIFY MATERIAL(s)} at the increased price, and the Owner shall be required to pay the increased cost as provided herein.

Final review of all specified material invoices will be reviewed by Owner and {CONTRACTOR} within 24 hours of job completion and the final price for the {SPECIFY MATERIAL(s)} will be calculated, along with (%) for administrative fees, and will paid to {CONTRACTOR} by Owner in addition to the final payment for the job.

Additional Contract Escalation Clauses can be found on the NAHB Web site. You can find much more information on the web and we encourage you to do so.

Again, we want to remind you that this is not legal advice. We are not attorneys. Use any and all of the materials in this newsletter at your own risk. We also strongly recommend that you consult your attorney for help in reviewing and/or writing any contract language and especially a Contract Escalation Clause like we have included here.

Finally, please don't read this and set it aside with a plan to "get back to it later." Price increases are coming at you as a result of the big storms around the gulf states, and those that procrastinate are going to pay dearly. The time to review and revise your contracts is now.

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Old 03-18-2008, 09:45 PM   #2
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Re: Time To Really Consider Escalation Clauses


Here is the "Escalation Clause" referred to, provided by the NAHB.

Ed



Protect Your Bottom Line From Rising Lumber Prices
Although economists believe the construction industry has weathered the worst of the oriented strand board (OSB) and plywood price spikes, home builders are still paying much more for these materials compared to last year and the market is not entirely predictable.

The following sample escalation clauses from NAHB’s Building Products Issues Committee can help protect your bottom line against unexpected surges in the cost of panelized lumber.

Under the two options provided, builders can include in their construction contracts language establishing that the home buyer will pay for unanticipated increases in the cost of the materials.


Builders are advised to have their own legal counsel review the sample language before actually incorporating it into their contracts. For further information, e-mail David Crump or call him at 800-368-5242 x8491, or e-mail David Jaffe or call him at 800-368-5242 x8317.


Escalation Clause for Panelized Lumber

Option One

The house will require approximately ________ square feet of__________ (describe material: plywood, OSB, other). As of the date of this contract, the Builder’s cost of _________________ (describe material) is___________(price) per thousand square feet, based on ________________ _________________(describe basis for determining cost: name of supplier). The stated consideration to be paid under this contract is based on current material costs without margin for fluctuations in the price of ___________ (describe material). The current market for __________ (describe material) is considered to be volatile, and sudden price increases could occur. The Builder does agree to use his best efforts to obtain the lowest possible price from available building material suppliers. But, should there be an increase in the price of __________________ (describe material) purchased after execution of this contract for use in the construction of this house, in order to avoid inequities, the Owner agrees to pay this cost increase to the Builder. Any claim by the Builder for payment of a cost increase, as provided above, shall require written notice delivered by the Builder to the Owner stating both the increased cost and the source of supply, supported by invoices or bills of sale.

Special Circumstances – Right of Termination

Should there be a rise in the cost of ___________(describe material), exclusive of any other price changes, that would cause the total contract price to increase by more than _____________(%) percent, the Builder shall, before making any additional purchase of _____________________ (describe material), provide to the Owner a written statement expressing both the percentage increase of the contract price and the dollar amount of the increase. The Owner may then, at his option, terminate this contract by providing within ______ business days both written notice of termination to the Builder and payment to the Builder for all costs expended in performance of the contract up to the date of termination, plus payment of a prorated percentage of profits based on the percent of completion. Should both notice of termination and full payment, as provided above, not be forthcoming within ________ business days, the Builder may proceed to purchase the _______________(describe material) at the increased price, and the Owner shall be required to pay the increased cost as provided herein.

Escalation Clause for Panelized Lumber

Option Two

The house will require approximately ________ panels of__________ (describe material: plywood, OSB, other). As of the date of this contract, the Builder’s cost of ____________________ (describe material) is___________(price) per panel, based on ____________________________ _________________(describe basis for determining cost: name of supplier). The stated consideration to be paid under this contract is based on current material costs without margin for fluctuations in the price of ___________ (describe material). The current market for __________ (describe material) is considered to be volatile, and sudden price increases could occur. The Builder does agree to use his best efforts to obtain the lowest possible price from available building material suppliers. But, should there be an increase in the price of _______________ (describe material) purchased after execution of this contract for use in the construction of this house, in order to avoid inequities, the Owner agrees to pay this cost increase to the Builder. Any claim by the Builder for payment of a cost increase, as provided above, shall require written notice delivered by the Builder to the Owner stating both the increased cost and the source of supply, supported by invoices or bills of sale.

Special Circumstances – Right of Termination

Should there be a rise in the cost of ___________(describe material), exclusive of any other price changes, that would cause the total contract price to increase by more than _____________(%) percent, the Builder shall, before making any additional purchase of _____________________ (describe material), provide to the Owner a written statement expressing both the percentage increase of the contract price and the dollar amount of the increase. The Owner may then, at his option, terminate this contract by providing within ______ business days both written notice of termination to the Builder and payment to the Builder for all costs expended in performance of the contract up to the date of termination, plus payment of a prorated percentage of profits based on the percent of completion. Should both notice of termination and full payment, as provided above, not be forthcoming within ________ business days, the Builder may proceed to purchase the _______________ (describe material) at the increased price, and the Owner shall be required to pay the increased cost as provided herein.

The NAHB University of Housing offers a course on construction contracts management designed to help builders avoid future litigation. For a list of current business management offerings, click here.

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Old 03-18-2008, 09:49 PM   #3
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Re: Time To Really Consider Escalation Clauses


Here is another one from the HGTV site.

Ed



Change is the Only Constant: Escalation Clauses

By Erik Cofield, CGA

It's not news to you that unexpected events can have an effect on the completion date and profitability of a project, but your clients may lose sight of the fact that we all face change on an hourly basis. That's why your contract should address the issue of change on several levels, including project schedule, weather, material availability and pricing, and a comprehensive array of possibilities and expectations.

After all, if you communicate the unexpected in advance, it becomes the expected, and the expected is easier to handle than surprises. An escalation clause also permits you to adjust pricing if necessary to protect your margin when material costs are particularly volatile, as we've all seen following Hurricane Katrina.

This summer's media coverage of hurricanes should make every company in this industry realize not only the need to plan for change but also to communicate the issue–and protect your company operations. One method of protection is to use an escalation clause in your contracts. HGTVPro.com and NAHB have extensive information for you on such clauses; check out Builders Confront Price Spikes in Devastated Areas for a sample.

The Post-Katrina Clause
Below is another sample I co-wrote for our own company. Feel free to copy and paste it for use in your own contracts, inserting your own company name and prices, or rewrite it for your particular needs.

Escalation Clause:

This contract has been based on estimates that include costs of materials at current market rates. Due to the recent catastrophic hurricane in Louisiana and Mississippi, [your company name>] is concerned that prices of basic construction materials may rise to levels that would make it impossible to complete this contract without serious financial hardship or loss to [your company name], which would consequently have an adverse effect on our ability to complete and/or warrant the work included.

Additionally, realizing every client has a right to expect certain cost levels, a benchmark price for base construction materials is included below as part of this contract. Should those prices rise, the increase, applied to all similar materials, will be billed to the owner without change order fees, but with a [insert your own overhead markup profit or margin], and owner agrees to pay for these cost increases as billed.

Insert your own benchmark prices for items such as follows:

Roof shingles $xx per square
Concrete $xx per yard
1/2" CDX plywood $xx per sheet
2x4 framing $xx /Mbf
2x12 framing $xx /Mbf

Keep in mind, too, that there are other factors that affect pricing, such as trade tariffs with Canada. Your company is not immune, by location or other variables, to price changes, potential price gouging, or any other type of change. It's better to protect yourself with an escalation clause before starting a project than to risk a loss or a lawsuit afterward.
Erik Cofield, CGA, is chief operations officer of Houston Structural, Inc., Houston, an award-winning residential design/build remodeling company with an annual volume of just over $4 million. Erik is also a speaker, freelance writer and business management consultant to the housing industry.
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Old 03-18-2008, 09:54 PM   #4
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Re: Time To Really Consider Escalation Clauses


And another point of view, with the author credited from the website of http://www.coatsrose.com/public/artcl72.aspx

Ed



Price Escalation Clauses

by Brian R. Gaudet

What is the most influential part of any construction project: the designer? the contractor? the owner? the selected materials? No. Money is. Money either holds a project together or allows it to fall apart. Unanticipated or uncontrolled costs can ruin a project and those associated with it. Given the current market conditions for various building materials and the potential for trouble when the cost genie comes out of the bottle, a price escalation clause that allows for an equitable adjustment for the increased costs of certain materials may be advisable.

Escalation clauses should be tailored to the individual project and commodity. This is a sample escalation clause, being provided for context only:

The amount of this Contract is subject to increase if the cost of products increase by more than _____% over the amount quoted to us between the date of this Contract/ Proposal and delivery of such ________ products to the Project. In the event of such increases, and upon written documentation establishing the extent of the increase, the contract amount will be equitably adjusted.

Why should an owner provide one? It is unlikely that an owner will be unable to avoid the price escalation altogether. If an owner refuses to provide a reasonable equitable adjustment, the contractor will likely pursue a claim, declare a breach and attempt to terminate or go under. The owner will be faced with litigation or arbitration, and may have to hire a replacement contractor who will undoubtedly pass the price escalations on to the owner. There will be additional costs associated with the replacement contractor providing a warranty for the initial contractor’swork, if at all. There will be time delays associated with locating a replacement contractor and giving it time to mobilize. There may be a drop in the quality of the project as the contractor attempts to save costs to compensate for the increases in prices.

A price escalation clause allows the parties an opportunity to plan for the uncertainty and allocate how and to what extent the additional costs will be absorbed. Another issue that usually walks hand in hand with price escalations (i.e. supply and demand) are material shortages. The contract should also contain a companion provision allowing for time extensions for material shortages. While many contracts allow for time extensions for unforeseeable circumstances that cause delay, depending on the circumstances, material shortages may be foreseeable.

If an owner cannot or will not agree to a price escalation clause, consider arranging for the advance purchase of materials, the use of a bonded warehouse and payment by the owner for materials stored in the bonded warehouse. If an owner cannot agree to an unrestricted price escalation clause, consider including a contingency budget in the contract for price escalations.

Price escalation clauses are potentially important to every trade. In the recent past we have seen significant price escalations occurring with concrete, steel, lumber and fuel to name a few. With the hurricanes of last year, there have been regional shortages of certain building materials. The sources of these price escalations are not going to go away. Make sure you have explored the possibilities of a price escalation clause while your contract is in negotiations. Do not wait until the escalations begin affecting the project, your profitability or your company’s sustainability to try to convince the owner that it should absorb the cost increases.

For more information, contact [email protected] or 713-653-5761.
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Old 03-18-2008, 10:21 PM   #5
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Re: Time To Really Consider Escalation Clauses


I've been thinking of digging up some of the old contracts
from the 70's to revise the escalation clauses.
Remember "WIN" buttons?
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Old 03-18-2008, 10:24 PM   #6
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Re: Time To Really Consider Escalation Clauses


Here is another slant on it with variations on the "Naming" of the clause and the trigger points which enable it to be set off, from remodelingonline.com

Ed



The ABCS of Escalation Clauses

How to protect yourself against unexpected materials price jumps.
Email this article Print this article Subscribe to REMODELING Subscribe to Newsletters$(document).ready(function(){positionArticleBox(); });Related ArticlesRead more articles related to:More articles from the D.S. Berenson sectionSource:

UPSCALE REMODELING MAGAZINE

Publication date: October 1, 2005

By D.S. Berenson
In the past two years, the costs of lumber, steel, and other building materials have risen substantially and quickly. So what should a contractor do when writing jobs today that may cost much more to build if prices jump unexpectedly tomorrow?
Many contractors mistakenly believe that a “force majeure” clause in their contracts will protect them from cost overruns. A force majeure clause limits a contractor's responsibilities for delays caused by certain events, such as labor strikes, acts of God, terrorism, and the like, that the parties agree are beyond the contractor's control. Most courts in the United States and Canada, however, won't let a contractor out of a fixed-price contract simply because the raw material costs of a job have unexpectedly increased. In the eyes of our legal system, price fluctuations may make a job more difficult to complete, but not impossible.

Going Up?

Instead, contractors may want to consider using an “escalation” clause in their contracts. (Sometimes these clauses are also referred to as “changed circumstances,” “equitable adjustment,” or “cost plus” clauses.) An escalation clause is designed to protect the contractor from volatile job costs by passing the price changes along to the consumer. Obviously, this can be a touchy issue when it arises on a job in progress, so an escalation clause has to be very carefully drafted.

The clause should identify the specific building materials the contractor feels are at risk for price fluctuation, and should then explain that if those costs increase, the total job price will increase by the same amount.

The clause should also explain how the contractor is going to notify the consumer of the price increases, what price guide will be used to measure the changes in prices, and when and how often during the job the escalation clause can be triggered.

Trigger Points

There are three common types of escalation-clause triggers, with many variations. The most basic is the “invoice method,” which generally uses an invoice or letter from the supplier to substantiate the changes in price of the goods from the time the contract was signed to the time of actual purchase.

The second type of trigger, the “index method,” activates the escalation clause based on changes reflected in a designated price index guide, such as are regularly published for lumber, asphalt, cement, and steel. This may work best in those instances in which the supplier is unwilling to provide a fixed-price quote until the time of actual purchase. Price index guides are usually published regionally, so this method may still leave the contractor open to local price fluctuations.

The third type of escalation-clause trigger is a combination of the first two. Here, the parties agree to a “certified bid cost,” in which the contractor discloses his estimate of the raw material costs based on then-current supplier prices or an index price listing. When the contractor actually goes to purchase the materials, if the “supplier's actual price” has increased by more than, say, 5% from the certified bid cost, the increase gets added to the contract price.

D.S. Berenson is the Washington, D.C., managing partner of Johanson Berenson LLP (www.homeimprovementlaw.com), a national law firm specializing in the representation of contractors and the home improvement industry. He may be contacted at [email protected]

This article is for informational purposes only and should not be construed as legal advice.
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Old 03-18-2008, 10:27 PM   #7
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Re: Time To Really Consider Escalation Clauses


Quote:
Originally Posted by neolitic View Post
I've been thinking of digging up some of the old contracts
from the 70's to revise the escalation clauses.


Remember "WIN" buttons?

Whip Inflation Now, during President Nixons term, or was it also through President Ford's?

Ed
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Old 03-18-2008, 10:29 PM   #8
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Re: Time To Really Consider Escalation Clauses


Quote:
Originally Posted by Ed the Roofer View Post
Whip Inflation Now, during President Nixons term, or was it also through President Ford's?

Ed
The buttons were Ford's "solution".
I still remember his prime time address...
I almost choked when I realized he was
serious.
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Old 03-18-2008, 10:35 PM   #9
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Re: Time To Really Consider Escalation Clauses


I was too busy siponing gas out of my neighbors Cadillac to be able to afford to drive my Buick Electra around, so I didn't catch too many of President Fords talks on TV.

Thats how I beat inflation.

Ed
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Old 03-19-2008, 04:39 AM   #10
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Re: Time To Really Consider Escalation Clauses


Thanks Ed.

We ran into this on the last big gas increase, and had some rough wording in our contracts (not that it looked anything like these suggestions).

I appreciate the research and the information. Bookmarked for in depth review.
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Old 03-19-2008, 06:47 AM   #11
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Re: Time To Really Consider Escalation Clauses


Thanks, Ed. Between inflation and the jump in materials, this is affecting everybody.
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Old 03-19-2008, 10:31 AM   #12
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Re: Time To Really Consider Escalation Clauses


Yeah, I figured it was timely.

I am told we are getting 10% to 15% increases on all roofing materials across the board, both on April 1st and again the same on May 1st.

I included the April 1st increase in the 3 proposals I did this week and delivered 2 of them so far and the other tonight.

I am thinking of removing the actual projected increase out of this 3rd one and using the clause, so that my base bid is not so far out of line. They usualy are on the higher end anyways, but this might prevent someone from pulling the trigger.

Yes, to the people who will claim to sell value. I already do. I usually am anywheres from 25% to 40% higher already, at least in most home owners eyes, untill al of the additional subtle, yet necessary details I included are thorought reviewed and appreciated. At first glance, nost home owners think all roof estimates are just the same, with minor exceptions. Mine includes big exceptions.

I may have to rethink that strategy this year as wel.

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Old 06-10-2008, 12:49 PM   #13
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Re: Time To Really Consider Escalation Clauses


Excellent thread Ed!
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Old 06-10-2008, 01:42 PM   #14
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Re: Time To Really Consider Escalation Clauses


Well, I put this topic forth when oil hit $ 111.00 per barrel, so it is even more relevant today, as the forecasted price increases did actually come to fruition. So far the increases have been about 35 % with another 10% to 15% coming no later than July 1st.

Now, oil is $ 138.00 per barrel, and some supplies are just getting caught up with the increases.

Ed
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Old 06-10-2008, 09:54 PM   #15
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Re: Time To Really Consider Escalation Clauses


I already use an escalation clause with all my bids. Material escalation is pretty straight forward. How about gas? Can we add that into our escalation clause?
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Old 06-10-2008, 10:00 PM   #16
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Re: Time To Really Consider Escalation Clauses


That would be called a Fuel Surcharge, which all of my suppliers have been charging me for quite some time.

Would it be worth it though?

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Old 06-10-2008, 10:06 PM   #17
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Re: Time To Really Consider Escalation Clauses


Here is an article on how fuel increses have impacted contractors and how some are dealing with it.

http://www.charlestonbusiness.com/cu...s/12188-1.html

Ed
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Old 06-25-2008, 07:31 PM   #18
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Re: Time To Really Consider Escalation Clauses


In some instances, maybe this would be more appropriate and suitable fot the job bidding circumstances.

So, would it be ethical to have a stated realistic material allowance for the Good, Better and Best Options that I present to a home owner in their written proposal. One brand with the same warranty can cost a minimum of $ 10.00 per square more than another brand and even be as much as $ 30.00 to $50.00 per square difference.

I have had to limit my product offerings, since in the past, most manufacturers prices were close enough to absorb or quantify for proposal purposes.

Ed



Material Price Escalation - A Material Allowance Clause

Thursday, November 8, 2007

Matt Stevens

Contractors know that material prices are certain. The certainty is that they will change upward. The uncertainty is by how much. The industry continues to struggle with this new problem. Not too long ago, it wasn't a problem. We also thought the same about insurance, fuel and worker's compensation. It is a new world with more risk than ever.


What to do about material cost escalation. Should we tuck in a contingency in our bids or proposals? Should we try to hold suppliers accountable for a hard unit price? How about making the client share some of the risk. Certainly, they are buying our craft skill. This craft skill is rare and we could negotiate a better contract if we are willing to say "pass" to contracts that don't help us with this ominous problem.


Material price escalation language is slowly creeping into contracts. Some construction firms are receiving material escalation allowance language. Some are using another tactic; they are trying to receive "material escalation" clauses in their agreements.


Material allowance allows contractors to state a set amount of a material cost in their contracts. As an example, the total cost of copper of in their bid. That number say $140,000 is compared to the final cost. If the number is less the owner receives a credit. If it is more then the contractor receives extra compensation.
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Old 06-25-2008, 10:42 PM   #19
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Re: Time To Really Consider Escalation Clauses


Just heard that a major steel manufacturer
announced a 96% price increase.
Not that steel would affect anything in our
business.
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Old 02-17-2017, 11:25 PM   #20
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Re: Time To Really Consider Escalation Clauses


I guess that this thread has been dead for awhile, but it just occurred to me what a great resource this site is. Thanks for that fellas!

- Mike
http://www.swmissouriplumbing.com

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