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Dewayne Dean
Senior Member
Username: ddean

Post Number: 223
Registered: 02-2016

Posted on Friday, May 21, 2021 - 12:03 pm:   Edit PostDelete PostPrint Post

Looking for spec language that would provide a process/language to handle cost escalations. It has been suggested to hold the contractor to a PPI index. Has anyone done this? Would you be willing to share ?
John Bunzick
Senior Member
Username: bunzick

Post Number: 1846
Registered: 03-2002
Posted on Saturday, May 22, 2021 - 04:14 pm:   Edit PostDelete PostPrint Post

Are you referring to commodity price increases, such as has recently been occurring with lumber? Sounds like a mine field to me. I think that has to be part of the contract conditions, not the specs, and would likely be the result of a lot of discussion and negotiation between the contractor and owner, who can then write up the clause any way they like.
Dewayne Dean
Senior Member
Username: ddean

Post Number: 224
Registered: 02-2016

Posted on Wednesday, May 26, 2021 - 06:51 am:   Edit PostDelete PostPrint Post

J. Peter Jordan
Senior Member
Username: jpjordan

Post Number: 1158
Registered: 05-2004
Posted on Wednesday, May 26, 2021 - 09:22 am:   Edit PostDelete PostPrint Post

Over the course of my career, this has been a recurring topic of conversation during periods of "hyperinflation." Contractors are generally pretty good about protecting themselves once the cycle starts, not so much when they get blindsided. I would suggest that it is during this initial phase that the construction team (Contractor, subcontractor, and material supplier) needs the protection the most, but it is precisely when the appropriate explicit contract conditions that may afford such protection may not exist.

The doctrine of "force majeure" may come into play here, but it will generally need the cooperation of all the parties involved in order to successfully apply it.

In some cases, there simply are not funds available for such escalations. Delays in construction schedules may cause other problems that can become equally difficult. Enforcement of liquidated damages may not be an equitable solution.

At the end of the day, a good working relationship between the Owner and the Contractor will go a long way in resolving this. If the relationship is adversarial, it will be difficult to cope with such issues without winding up in court. Even then, there are some parties that may not have the resources to sustain them through the claims process.
J. Peter Jordan, FCSI, AIA, CCS, LEED AP, SCIP
Dave Heuring, AIA, CCCA, LEED AP
Senior Member
Username: dave_heuring

Post Number: 6
Registered: 06-2021
Posted on Tuesday, June 29, 2021 - 05:01 pm:   Edit PostDelete PostPrint Post

Here are listed indexes - what NOT to use and what you can use... take your pick...

Source: https://edzarenski.files.wordpress.com/2021/05/inflation-construct-forecast-may-2021.pdf

Consumer Price Index (CPI), tracks changes in the prices paid by consumers for a representative basket of goods and services, including food, transportation, medical care, apparel, recreation, housing. This index in not related at all to construction and should not be used to adjust construction pricing.

Producer Price Index (PPI) for Construction Inputs is an example of a commonly referenced
construction cost index that does not represent whole building costs.

Engineering News Record Building Cost Index (ENRBCI) and RSMeans Cost Index are examples of commonly used indices that do not capture whole building cost.

Construction Analytics Building Cost Index, Turner Building Cost Index, Rider Levett Bucknall
Cost Index and Mortenson Cost Index are all examples of whole building cost indices that
measure final selling price (for nonresidential buildings only).

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