FUNDAMENTALS
CONSTRUCTION
Contractual Unity in a Volatile Market
by Taylor Miller
n today’s market, unity amongst construction person-
construction personnel also must factor in certain safety requirements ushered in by the pandemic as well as material prices increasing to a decade high. In such a volatile mar- ket, it is wise for developers, own- ers, and contractors to negotiate an agreement that addresses how the
burden of price fluctuation and safety liability will be shared. This requires a degree of unity that is not typically seen in construction contracts. The progress of a build is entire- ly dependent on how the project team chooses to navigate issues that inevitably arise. Some builds are crippled by small issues due to agreements that weight one par- ty with all the risk and liability. In typical construction contracts, it is the general contractor who bears the bulk of the burden. Ultimate- ly, everyone on the project has the same objective; a successful build that is built as designed, completed on schedule, and remains within the budget parameters. Accomplishing this can be streamlined when own- ers share the risk with their builder via the inclusion of an escalation clause in the contract. An escalation clause allows the general contractor to pass on a percentage of the pro- curement price increases to owners so they can build smaller contingen- cies into their bids. This also gives the owner an opportunity to share the savings if prices drop. If includ- ing this clause in your contract, it is important to identify what materials are at risk, how steep of an increase would activate the clause, and what percentage the owner would assist with. You want to have everything in writing. With this price escalation clause in effect, it protects the project from getting stalled out if a contractor is struggling to cover the fees asso-
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nel has never been more important. Construction projects have always been susceptible to shifting param- eters like weather delays, short- age of skilled workers, and supply chain issues. In the current market,
30 | think realty magazine :: january – february 2022
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