Material Price Movement: Managing Cost Over a Long Programme

Prices move during construction, and who bears the movement depends on the contract. How to manage the exposure.

A project priced today is built over months, during which material prices move. Whether that matters to you depends on the contract, and the exposure is manageable if it is addressed before signing rather than after prices have moved.

What this number does and does not include

This covers exposure to material price movement during a construction project. It excludes general inflation in labour and services, which behaves differently and is usually addressed separately.

Steel and metals

Reinforcement and structural steel, which are internationally traded and move with global markets.

• Pushes it up: Global demand shifts and supply disruptions, which can move prices substantially within months.
• Brings it down: Ordering early where storage permits, or fixing prices with suppliers for the project quantity.
• How to control it: Fix the price for the project quantity early where possible, since this is the material most prone to significant movement.

Cement and concrete

Produced regionally, with prices affected by energy costs and local demand.

• Pushes it up: Energy cost increases and periods of high regional construction activity.
• Brings it down: Supplier agreements covering the project period.
• How to control it: Agree pricing with the supplier for the project duration where the programme allows it.

Imported finishing materials

Tiles, sanitary ware, fittings and anything shipped, which carry both material and freight exposure.

• Pushes it up: Freight cost increases, currency movement and supply disruption.
• Brings it down: Ordering once selections are final and securing prices at order.
• How to control it: Secure pricing at the point of order rather than at the point of selection, and understand what the quoted price includes.

Locally produced items

Blockwork, joinery and items manufactured regionally, which move with local input costs.

• Pushes it up: Input cost increases and periods of high demand.
• Brings it down: Ordering against the programme with prices agreed in advance.
• How to control it: Agree prices at order with a stated validity period rather than relying on a quotation given months earlier.

Costs that never appear on the first page

• Contractor claims for escalation where the contract permits them.
• Quality reduction where a contractor absorbs increases on a fixed price.
• Delay while alternative materials are sourced after a price increase.
• Storage cost where early ordering is used to fix prices.

Keeping the budget honest

Address escalation in the contract explicitly: either the price is fixed and the contractor carries the risk, or an adjustment mechanism is defined with a reference and a scope. Silence on this point produces a dispute when prices move.

• Before signing, agreeing whether and how prices may adjust.
• At the start of construction, fixing prices for the major materials where possible.
• Before each long lead order, confirming current pricing.
• When any significant movement occurs, assessing its effect on the remaining work.

If you are procuring materials for a project, Domira can specify, source and verify them against the standards your drawings actually require.