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Name the volatile materials and how they will be adjusted

Steel, aluminium, copper cable, timber and energy-hungry products such as plasterboard and insulation can move more in a quarter than your margin. Instead of guessing a contingency, list them in your quotation with their tender prices and how each will be adjusted.

Updated: . By Jack Butler-Kettle, Construction Claims Consultant.

Why it matters

A contingency is a guess, and it is either too big to win the work or too small to cover the rise. Naming the few materials that really move, and how they will be adjusted, shares the risk openly instead. It is also easier to agree than it looks. Many main contractors have an adjustment in their own contract with the client, such as the JCT formula option or NEC Option X1. Asking for the same terms only asks them to pass down protection they already have.

How to do it

  1. Pick the few materials that make up most of the package value and have moved most in the last two years.
  2. List each in the quotation with its quantity, tender rate and the date it was priced.
  3. State the adjustment basis for each: a named published index, or the invoiced price against the tender rate, from the base date.
  4. Ask whether the main contract has a price adjustment clause and, if it does, ask for the same terms in the subcontract.

Example

Illustrative example. The scenario and figures are invented.

The facts

An electrical subcontractor's £900,000 package includes £310,000 of cable. Its quotation names the cable, its tender prices and an adjustment by a named published cable price index from the base date. The main contractor accepts the term into the subcontract.

What happens

  1. Each month the quantity surveyor saves the index value and applies the change to the cable installed that month.
  2. The index rises 7.3% on average across the months the cable goes in.
  3. The adjustment goes into each monthly application with the index values attached.

The outcome

£22,630 of adjustment is paid through the monthly applications. A cable rise that would have taken most of the margin never becomes a dispute.

To have this set up for you, see our Price Rise Loss Prevention service.