They say my price rises are my problem because I'm on a fixed price
There's no fluctuations clause, our suppliers have all put their prices up, and the main contractor says that's our problem.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
What's happening?
On the rise itself, your main contractor is usually right. 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. Asking for help as goodwill sometimes works, but it is a favour you negotiate, not something you are owed.
What gets missed is the part of the rise that is not yours. Work your main contractor changed can be valued as a variation, and if it was done later or in different conditions it may be valued at today's prices. If its delay pushed your work into dearer months, the extra cost can go into a loss and expense claim. Each depends on your subcontract's terms and on records kept at the time. Miss them and you carry the whole rise.
The solution
Accept the part the fixed price makes yours, and split out the rest. Work out which part came from changed work and which from delay. Value changed work at current prices where your subcontract's valuation rules allow it. Take the delay period from your own records and letters. Then price each part from your invoices and tender prices.
Price Rise Claim separates the rise into what is yours and what came from your main contractor. We take the delay period from your own position rather than analysing it. We value each recoverable part, submit it with its workings and negotiate it. What stays yours is stated plainly, and the Handover Pack we leave you shows how Price Rise Loss Prevention puts an adjustment basis in your next quotation.
Example
Illustrative example. The scenario and figures are invented.
The facts
A brickwork subcontractor on a £520,000 fixed-price package sees brick and block prices rise by about 11%, adding £24,000 to its costs. The main contractor refuses to discuss it.
What happens
- The rise is split by cause, from the tender prices, the supplier increase notices and the invoices.
- £4,300 relates to a facing brick the architect changed after tender, which is revalued at current prices as a variation.
- £9,500 relates to second-phase blockwork, put back 16 weeks by the main contractor's late slab. It is claimed as loss and expense, with the 16 weeks taken from the main contractor's own letters.
- £10,200 relates to work bought and built on programme, and is accepted as the subcontractor's own risk.
- The main contractor shows that 2 of those weeks came from the subcontractor's own late sample approvals, and the delay head is cut to £8,100.
The rise, split by cause
| Part of the rise | Claimed | Agreed |
|---|---|---|
| Changed facing brick | £4,300 | £4,300 |
| Blockwork deferred by the main contractor | £9,500 | £8,100 |
| Work on programme, own risk | £10,200 | £0 |
The outcome
£12,400 of the £24,000 is recovered on the two routes the subcontract allowed. A request for help with the whole rise had been refused outright.