Surety Bond Quarterly asked National Construction Leader Joseph Natarelli to discuss material price escalation how contractors and sureties can mitigate market volatility risk.
Joseph Natarelli collaborated with Jared Cohane and Peter Martin of Hinckley Allen on his answer.
Surety Bond Quarterly
The only sure-fire way to insulate against price escalation is by negotiating a material escalation clause, which provides for an equitable adjustment if price increases exceed a certain threshold percentage of the as-bid price. A second option is to strengthen contractual delay provisions, which could provide for an equitable adjustment for material cost increases that result from project delays beyond the contractor’s control.