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Responding to disruptions in the construction industry caused by unanticipated escalation in material prices, the Associated General Contractors of America (AGC) developed a contractual provision in which clients and contractors agree to equitable adjustments in the contract price based on significant fluctuations in the cost of construction materials. AGC published this model contractual amendment in 2004.
Now, the Engineers Joint Contract Documents Committee (EJCDC) has endorsed AGC’s Materials Price Escalation Clause Amendment, AGC 200.1. The document provides methods by which clients and contractors can calculate an adjustment to construction commodities that increase or decrease in price. By indexing materials pricing against objective factors, the amendment allows contractors to provide lower bids to clients, rather than including pricing risks in bid proposals. EJCDC will reference AGC 200.1 in the forthcoming 2007 edition of EJCDC C-700, Standard General Conditions of the Construction Contract, as well as other construction-related contract documents.
According to Engineering News-Record, the price of cement is up 7.1% during the last year, with steel up 5.2% in that time. The overall producer price index for construction materials and components has jumped 22% in the past three years, more than double the 9% rise in the consumer price index, according to Ken Simonson, AGC’s chief economist. Despite falling lumber and copper prices, steel, diesel fuel, asphalt, concrete, and aluminum prices remain high. With material demands worldwide, supply growth is uncertain.
For more information on AGC and EJCDC contract documents, go to the AGC website at www.agc.org or the EJCDC website at www.ejcdc.org.
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