How to Withstand Rising Material Costs
No one is exempt from the risks of inflation in construction costs. Historically, construction costs are impacted by labor, services, equipment, and material costs. Having a handle on material costs can help you address and survive the effects of high inflation in your industry. Our Miami construction attorneys have put together ways to tackle the rising material costs on contractors.
How Much is the Increase?
According to research conducted by the U.S. Bureau of Labor Statistics and the Associated General Contractors (AGC) of America in 2017, material costs are expected to have a 2-3% increase. Asphalt paving, fabricated steel, concrete blocks, and gypsum products will all experience a cost increase.
Increase Your Contractor Prices
Naturally, the contractor needs to arrive at the lowest possible project cost to maintain investment goals. Unfortunately, construction costs continue to outdo inflation and when material costs increase, contractors are forced to increase their prices as well. Work with your estimator to know how to price your jobs to cover overhead expenses and make a profit.
Allow for Incident
Keep a history of materials to refer to during your estimates. In most construction budgets, there is an allowance for contingencies or unexpected costs occurring during construction. Additionally, a specific material may not be available when needed and its replacement could cost more than anticipated. You can include the contingency amount when calculating each line item or add it at the end of each estimated material cost. If the contingent amounts are not spent they can be released to the owner or added to another part of the project.
An estimate below the actual price could lead to a legal dispute over money. Keep an accurate log of all labor and materials. If you do not document these change in prices, you may not be able to collect for undocumented expenses. In addition, you must have an invoice for every material. Schedule meetings with the customer to communicate job progress and building materials. Address cost concerns at these regularly scheduled meetings.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.