Between the onset of the COVID-19 pandemic in March/April 2020 and mid-May 2021, lumber prices have risen an incredible 308% according to Yahoo News. Steel prices have also risen over 60% according to Trading Economics. These increases, among others, led the Associated General Contractors of America to issue a construction inflation alert, something that the group had not done since 2008. While the reasons for the price increases are too numerous for this article, the question remains: how can construction industry participants minimize the risk of ever-increasing prices?
The impact of these price increases is being felt across a wide spectrum of projects and is beyond what could have reasonably been expected. It is not just owners, contractors, subcontractors, and material suppliers on commercial and civil projects who are feeling the brunt of this price inflation—average consumers are also being affected. As an example, if you recently purchased a house or are in the process of a small renovation project, you have probably been impacted by the rapidly increasing materials costs. But how can the risks associated with the increasing costs be managed effectively to mitigate the risk is the question? This article provides a few recommendations.
- Read and Re-Read Your Contracts