The Coronavirus has caused many material shipments to be delayed or cancelled. As a result, the cost of ordering and supplying materials for many items has increased. How can a contractor protect itself from labor and material price increases on a project? The contractor should consider adding additional terms to its contract to protect it from labor and material price increases. The contractor’s contract should include a price acceleration clause which consists of the following:
If there is an increase in the actual cost of the labor or materials charged to the contractor in excess of 5 percent subsequent to making this agreement, the price set forth in this agreement shall be increased without the need for a written change order or amendment to the contract to reflect the price increase and additional direct cost to the contractor. Contractor will submit written documentation of the increased charges to the prime contractor/owner upon request. As an additional remedy, if the actual cost of any line item increases more than 10 percent subsequent to the making of this agreement, contractor, at its sole discretion, may terminate the contract for convenience.