Fixed-Price Construction Contracts and Cost Adjustment Clauses

This guide discusses the volatility of construction material and equipment costs, emphasizing the need for effective cost adjustment clauses in fixed-price construction contracts. It outlines how the increasing unpredictability of material prices necessitates routine assessments of procurement planning and contracting policies. The document details the ConsensusDOCS policy, which addresses price volatility and delays due to material unavailability, advocating for equitable adjustments in contract prices. It also highlights the limitations of standard force majeure clauses in addressing these issues. The guide explains that cost adjustment clauses can help mitigate risks associated with price fluctuations by sharing the burden between contracting parties. Additionally, it references the Federal Acquisition Regulations (FAR) that allow for economic price adjustments in fixed-price contracts, detailing the criteria and types of adjustments that can be made. Overall, the document serves as a resource for understanding how to navigate the complexities of cost volatility in construction contracts.