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Discussion Starter · #1 ·
Hey Guys,

With the amount of volatility in lumber pricing this year I have decided to add a material inflation clause to my contract. For that last year I have been prcing a lot of the increases ahead of time with a larger material mark up. It is now getting so bad that things are increasing up to 40% within a week and I am booked till the end of June so I don’t have a clue what the price will be at the time of ordering.

I have been very upfront on this with customers but want to officially put it black and white.

Any suggestion on wording?
What’s your trigger amount?

Thanks
 

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Mine is based on actual lumber prices. Plywood/OSB per sheet, framing lumber per board foot. It's a pain in the ass to track, but I don't know any other way to do it. I think it's important to be transparent when your hitting your client for a substantial up charge. I also do it as a straight up pass through, no P&O added to the cost.
 

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Discussion Starter · #3 ·
Mine is based on actual lumber prices. Plywood/OSB per sheet, framing lumber per board foot. It's a pain in the ass to track, but I don't know any other way to do it. I think it's important to be transparent when your hitting your client for a substantial up charge. I also do it as a straight up pass through, no P&O added to the cost.
I get all my jobs quotes with the address on the quote. This lets me get them re quoted and show the price difference for the same materials.

I was looking more for the wording of the clause and at what point most would have it start. I was thinking a 10% increase in material cost would be when a change order would be written for the new cost
 

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I get all my jobs quotes with the address on the quote. This lets me get them re quoted and show the price difference for the same materials.

I was looking more for the wording of the clause and at what point most would have it start. I was thinking a 10% increase in material cost would be when a change order would be written for the new cost
Got it.
My contracts say material cost as of date x. There is no threshold percentage or amount of material listed. It means I have to compare material prices between the date on the contract and the date on each invoice. It's a pain in the ass, but I don't see any other way of doing it.
 

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On a slightly different tack.

What about deeascalating pricing.

Say you bid a job now, folks want to build now, but material is sky high.

They decide to wait until next spring after getting your firm bid with an escalation clause.

Do you drop the cost next Spring? Some of it? All the hard costs, but keep the mark up? Run job at same price, but give a discount at the end?

This is of course, contingent on the prices dropping significantly.



Sent from my SM-N975U using Tapatalk
 

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On a slightly different tack.

What about deeascalating pricing.

Say you bid a job now, folks want to build now, but material is sky high.

They decide to wait until next spring after getting your firm bid with an escalation clause.

Do you drop the cost next Spring? Some of it? All the hard costs, but keep the mark up? Run job at same price, but give a discount at the end?

This is of course, contingent on the prices dropping significantly.



Sent from my SM-N975U using Tapatalk
Usually taken care of by "the prices in this bid are reflective of current material and labor pricing and are good until..." (and/or expire on)...

As to material pricing, under normal times, we updated it quarterly, but like everyone else, with the volatility added protections are important and that window has been truncated.... in our case, we set it as any above 5%...

The 5% is already in the pricing as a cushion, so if it goes above that, the cost goes to the ones who want the work... that's no different than your suppliers...
 

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Here's what I have in my contract. Have had it in there since 2018 when lumber prices went up sharply (if only I could get it for those prices now LOL. Found it on the interwebs and tweaked it a little.

The Proposal Price is based upon construction material prices as of the date of this Proposal. Any significant price increases in lumber, trusses, steel, and/or other construction material that occurs during the period of time between Proposal date and substantial completion of the Project, shall cause the contract price to be equitably adjusted by an amount reasonably necessary to cover any increase. As used herein, a significant price increase shall mean any increase in price exceeding FIVE percent (5 %) experienced by the contractor from the date of Proposal.
 
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