Steel prices have skyrocketed since January, and for many contractors, that means the price of nails, rebar, cables, fasteners and drywall studs has increased the cost of construction at their expense. The Associated Builders and Contractors recently released an advisory to help protect contractors against the high cost of steel.
According to ABC, contractors should evaluate what kind of materials will be affected by the cost increase, and should then meet with a lawyer with construction contract experience to review all current and future contracts. For fixed-price contracts, the legal advisor should identify any provisions, such as changed circumstances and equitable adjustment clauses that could be relied upon to justify contract price changes. ABC also suggests quotes or other contract documents from vendors setting fixed prices of supplies should be looked at, and that all new contracts should anticipate price increases and delays.
“ABC member companies are caught in a pricing squeeze, between their steel suppliers that have imposed ‘surcharges’ on their products and the construction purchasers that often negotiated fixed-price contracts in their bid specifications,” said Kirk Pickerel, president and chief executive of ABC. “Generally, steel suppliers are only guaranteeing the price of their steel for five days. We have heard from members who have had their steel prices change every other day. The uncertainty in steel price quotes is making the bidding process extremely difficult and financially dangerous.”
Prior to publishing its suggestions, ABC met with the president of the Steel Manufacturer’s Association to discuss what actions needed to be taken to address the issue. ABC also met with several federal agencies, including the General Services Administration, the Federal Highway Administration, the U.S. Army Corps of Engineers and the Office of Federal Procurement Policy. During the meetings with federal agencies, ABC urged the acceptance of price adjustment clauses for federal work.
Although ABC developed the steel advisory to help contractors protect themselves from steel prices, it notes that the documents do not constitute legal advice, and that contractors should seek their own competent legal counsel. To read the entire advisory, click on the link to the right.