Opinion: Materials Cost Volatility Makes It Vital You Write Contracts With Transparent, Mutually Protective Language on Price Changes
By John S. Koda, Esq.
Now more than ever, building and construction industry professionals must focus on how economic and geopolitical factors raise project-related costs and reduce margins. No matter whether you are a dealer, builder, sub, or vendor, the wise move is to take preemptive, precautionary legal action to mitigate those effects.
The dilemma faced by a client of mine might sound familiar. In the time required for him to develop his final bid on big-ticket waterfront residential renovation/reconstruction projects, his initial projections of materials costs became invalid.
Unexpected price shifts due to tariff announcements, product shortages, and fuel-price hikes can lead to cost estimate contractual disputes and work stoppages. And if goods and materials are substituted to stay within contracted costs, another result could be litigation for breach of contract, fraud in the inducement, or violation of statutory codes such as the Florida Deceptive and Unfair Trade Practices Act.
The unqualified fixed price bid is dead, and may it rest in peace. There are too many headlines today involving price hikes for selling and buying parties to sign contracts that assume material costs won’t change.
At least through 2028, forecasting models from national cost-tracking indices such as Mortenson, Turner, CBRE, and Cushman & Wakefield predict that baseline materials cost will escalate by 4.5% to 6.5% annually across broad commercial inputs. For metal-intensive (steel/aluminum), electrical, and mechanical scopes, the increases are expected to range from 8% to 12% annually.
Construction and building industry professionals and owners may avoid surprises by asking their legal counsel to customize mutually protective contract language. Among other key factors, that language should:
Provide enforceable, two-way price-escalation clauses that acknowledge the necessity of tailored formulas tied directly to verifiable objective indices (such as specific BLS Producer Price Index series for steel, copper, or diesel) rather than vague "market changes."
Define tariff events” and supply disruptions in force majeure because standard clauses often exclude economic factors. Contracts must explicitly define changes in trade policy, new tariffs, or geopolitical embargoes as compensable time and cost events.
Shorten bid validity windows for proposal acceptance from traditional 60–90 days down to 15–30 days, requiring formal re-pricing or supplier quote lock-ins before execution.
Include other essential project contract language that specifically defines mutual responsibility for cooperating in managing and/or ameliorating materials cost increases clearly resulting from economic or geopolitical factors beyond individual control.
John S. Koda is a partner at Brick Business Law. His practice areas include general civil litigation in the areas of business, corporate, real estate, construction, and consumer protection. With more than three decades of experience, he has practiced at all levels of Florida courts including appellate courts, the Florida Supreme Court, administrative hearings and arbitration. Reach Koda at 813-859-6954 or at https://brickbusinesslaw.com/contact
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