Best practices for dealing with price volatility in commercial construction

In the commercial construction industry, the problem of price volatility as it pertains to materials and labor is a consistent problem. The changing instability of market conditions presents a challenge for construction companies to accurately estimate and complete projects within budget. This volatility can lead to higher costs and more risk to suppliers, contractors, and owners which can cause financial distress for all parties involved in the construction process. Volatility in construction will continue to be a risk that participants in the construction industry will face. Price volatility can be economically dangerous when price changes affect the assumptions on which the contract is based. In an effort to identify the best practices being used by parties in the commercial construction industry for dealing with the risk of price fluctuation, panel members consisting of construction industry experts in the state of Utah were given rounds of questionnaires. This research report summarizes the responses of these industry professionals as to what they feel the best practices for dealing with the risks volatility creates in construction. Among the best practices given by the panel members were timely buyout, contract language, stockpiling materials, proposal time expirations, and good communication.