Tariffs on steel, aluminum, copper, lumber and some finished products changed several times in 2025 and 2026, and suppliers pass those changes through quickly. For a contractor, the risk is the gap between the day the bid is priced and the day the material is bought. Owners still want fixed prices for 2027 projects. The contractors who protect that gap keep their margin; the ones who do not end up paying the difference.
In this article
Where the risk comes from
- quotes from suppliers that are valid for only a few days or weeks;
- long gaps between bid, contract signing and purchase;
- tariff changes that suppliers pass through on the next order;
- long-lead items such as switchgear, steel and custom millwork.
Shorten the validity of your bid
State that your price is valid for 30 days, or less on volatile materials. If the owner signs later, you reprice. This is the simplest protection and costs nothing.
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Use escalation clauses
Name the materials covered, the baseline price or index, the threshold that triggers an adjustment, for example 5%, and the documents you will provide. Explain it to the owner before bid day, not after a price increase.
Allowances for volatile items
When the owner has not chosen finishes or equipment, use allowances instead of fixed prices. The owner pays the real cost when the choice is made.
Buy early
Release purchase orders for key materials right after contract signing, before tariffs or prices change. Ask suppliers about price locks for a defined quantity and delivery window, and confirm storage and insurance for material stored early.
Offer alternates
Price an alternate product or origin for the items most exposed to tariffs. Owners appreciate options, and an alternate can save the schedule as well as the budget.
Track and communicate
Keep a short list of the materials that drive most of your cost and check prices monthly. Share the trend with owners during preconstruction so a price conversation is not a surprise.
An example
A commercial contractor in Texas bid a $3.8 million retail project in March with a 30-day price validity and an escalation clause on structural steel and electrical gear. The owner signed in June. Steel had risen 9%, above the 5% threshold, and the clause covered $41,000 of the increase that would otherwise have come out of the contractor's margin.
Common mistakes
Holding prices for months, vague escalation language, buying late, ignoring long-lead items, no alternates and telling the owner about increases only after they happen.
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Frequently asked questions
Should I add an escalation clause to my construction bids?
On projects with long schedules or volatile materials, yes. A clear escalation clause names the materials covered, the price index or supplier quote used as the baseline, the threshold that triggers an adjustment and the documentation required. Many owners accept it when it is explained upfront and limited to specific materials.