One of the best things in the world is a large backlog. Peace of mind is hard to find in this business and a healthy backlog makes it easier to sleep at night.

One of the downsides of booking work in advance is prices increasing from the trade contractors and vendors you work with.

A remodeler I know has clients who don’t want to start their project until nine months from now. The project has gone through the remodeler’s design, etc. process. The price is in the six-figure range.

The remodeler and the clients want to sign a contract, but are looking for language/advice on how to protect both parties from increased costs of construction.

Here is what I suggested he might do.

It sounds like the project is planned, specified, and scoped. That being the case, your company could put a firm price on the project right now.

Why do that?
There is nothing like a signed construction contract. So, get one signed.

How is this good for your company?
You can start selling and scheduling other projects with this project locked into your schedule.

How is this good for the client?
They can count on your company being their contractor and getting the job done when it was agreed to be done. That will bring this couple, dealing with other changes in their life, a bit more piece of mind.

Over these last few boom years what trade(s) and/or vendor(s) pricing has gone up?
My bet is that there are relatively few areas where the uptick has been significant.

In your contract, address the likelihood of cost increases in these areas and possibly others, which at this point are unknown.

Say you will handle the change in your company's price as needed by repricing the job several months before it starts. Inevitably there will be some specifications between now and spring 2018 anyway so you will be doing repricing of some sort.

Once you have the revised firm price locked in, adjust the price, scope and/or schedule as needed with Change Order #1.

It goes without saying that your company will not take advantage of the client when doing this. By that I mean that your company will be having serious discussions with its trade contractors and vendors about the following:

  • What could cause their pricing to change and by how much
  • Why it is good for your company and them to not shock the client in six to nine months, as the job might disappear
  • Tell the client that this is what your company is doing

Point out to your client that you are providing them, within the limits of your control, with a firm price. You are not doing their project on a cost plus or time and materials basis, which puts all this potential risk on them.

As long as we are in boom times, price increases from trade contractors and vendors will be a possibility. By addressing the issue as I suggested, you position your company as a partner of the client, not an adversary.

Doing that with your clients makes them love you all the more and it gives you a good night’s sleep, too!