Like other areas of the economy, the construction industry is experiencing volatility and rapid price increases in just about every aspect of its business. This has resulted in a growing use of and adaptation of material price increase clauses in construction contracts. In their webinar, Osler's Richard Wong, partner and Construction and Infrastructure chair, Andrew Wong, partner, Commercial, and guest Arif Ghaffur, quantity surveyor and managing editor of Construction Economist, discuss the impact cost fluctuations have had on the construction industry, and the steps being taken to help manage escalating costs.
Some price fluctuations have been dramatic and have disrupted the entire project development cycle. Building owners are responding by deferring projects and self-procuring. In some cases, they are staging projects in phases to help defer costs. If the project is a revenue-generator in a growth area, cost overruns are generally not enough to derail the economies of the project.
Applying indices in contract pricing is becoming more common, typically drawing from indices provided by Statistics Canada. Since there can be a lag in the data collection of an index, current relevancy becomes an issue. There should be flexibility in contract provisions that allow for requests to be made that can be resolved in a pragmatic manner without the request becoming an issue, potentially delaying a project.
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