Can I claim for price rises on a fixed-price subcontract?
Usually not for the rise itself, but you may still recover the part your main contractor caused.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
The answer
A fixed price puts the risk of price movements on you, and a steep rise in costs does not change the price or end the contract. Work your main contractor changed may be valued as a variation at current prices. That depends on your subcontract's valuation rules allowing a new rate for changed work or changed conditions. Work its delay pushed into dearer months may form part of a loss and expense claim. Under an NEC subcontract it may be a compensation event, NEC's route to extra time and money. Both depend on your subcontract's wording and on records made at the time: the tender prices, the supplier increase notices and the invoices. Beyond that, help is a negotiation. Some main contractors share an exceptional rise to keep a subcontractor on site, but that is their commercial choice, not something you are owed. For the next job, the fix is in the quotation: a base date, a validity period and the volatile materials on an adjustment basis.
Example
Illustrative example. The scenario and figures are invented.
The facts
A plastering subcontractor on a £340,000 fixed-price package, with no fluctuations clause, faces £19,000 of material increases across the job. The main contractor says the rise is the subcontractor's problem.
What happens
- The rise is split by cause, using the tender prices, the supplier increase notices and the invoices.
- £3,100 relates to redesigned ceilings instructed in month 6, which the main contractor valued at tender rates. They are revalued at current prices as a variation.
- £7,200 relates to two blocks the main contractor's revised sequence pushed back 11 weeks. It is claimed as loss and expense, with the delay taken from the main contractor's own resequencing letter.
- £8,700 relates to work done on programme, and is accepted as the subcontractor's own risk.
The rise, split by cause
| Part of the rise | Amount |
|---|---|
| Changed work, revalued at current prices | £3,100 |
| Work pushed back by the main contractor | £7,200 |
| Work done on programme, own risk | £8,700 |
| Total rise | £19,000 |
The outcome
The variation is agreed at £3,100. The delayed blocks are agreed at £5,400, after 3 weeks are shown to be the subcontractor's own late start. £8,500 of the £19,000 is recovered, where asking for the rise as a whole would have recovered none of it.
Separating the recoverable part of a rise and claiming it is our Price Rise Claim service.