, Building
You quoted the job in February and started buying in June. The timber had moved, the insulation had moved, and the difference between the two prices was almost exactly the margin you had priced in. The contract said fixed price. It was fixed for the client.
Every contractor who has traded through the last few years knows this feeling. The years around 2021 and 2022 produced sharp movements in timber, steel, insulation and anything with a large energy input, and while the pace eased afterwards, the lesson stands: a fixed price quotation is a bet on a market you do not control.
A fixed price is a bet you are making
When you give a fixed price, you are absorbing three risks: quantity, productivity and price. The first two are within your influence. The third is not.
The size of the bet is set by two things, the value of materials as a share of the job and the time between pricing and buying. A kitchen fit priced on Monday and bought on Friday carries almost no exposure. A groundworks and frame package priced in January for a site starting in September carries a great deal, and on a job where materials are 45% of the cost, a 10% movement is 4.5% of the contract value. If your margin is 8%, you have lost more than half of it without doing anything wrong.
Work out that exposure before you price, not after. It tells you where to spend your effort.
Fluctuation clauses exist, and are usually deleted
Standard contracts have always had a mechanism for this, and the industry has spent thirty years pricing it out.
JCT contracts offer fluctuations provisions. Option A covers only changes in contributions, levies and taxes, and it is the usual default, which is why so many contractors believe there is no protection. Option B covers changes in labour and material costs. Option C uses price adjustment formulae with published indices. Options B and C are commonly struck out at tender stage, because a client comparing two prices prefers the one that cannot move.
NEC4 handles it through secondary Option X1, price adjustment for inflation, which uses a defined index and a base date.
You are entitled to propose one of these. You are also entitled to price the risk if the client refuses, and it is worth saying so plainly in your tender: the price assumes fluctuations are not recoverable, and includes an allowance for it. Clients accept that argument far more often than contractors expect, because the alternative is a contractor who goes under mid-job.
Where you need evidence, it exists and it is public. The Department for Business and Trade publishes monthly statistics on building materials and components prices, and the RICS Building Cost Information Service publishes cost and price indices used across the industry. Both are better conversation material than an assertion that prices have gone up.
Quote validity is the cheapest protection you have
The single most effective and least used control is the validity period on your own quotation.
Merchants and suppliers give you prices valid for a stated period, often somewhere between 7 and 30 days, sometimes shorter on volatile commodities. If you then give a client a price valid for 90 days, you have taken on the difference yourself, deliberately or otherwise.
Match them. State the validity on the face of the quotation, state which supplier quotations it is based on, and say what happens if the client instructs you after it lapses. Where the programme means a long gap between acceptance and purchase, ask for a mechanism: a price re-fix at order stage for named materials, or a fluctuation allowance on a defined list of items with an index attached.
Keep the list short and specific. A general right to increase the price is a clause clients will not sign. A named-item adjustment for structural timber, steel reinforcement and insulation, indexed to a published series, is a much easier conversation.
Forward buying is a warehouse problem
The obvious response to rising prices is to buy early. It works, and it brings a set of costs that are easy to forget.
Cash goes out months before the valuation that recovers it. You need somewhere dry and secure to keep the goods, and site theft of materials is a live risk on every open site. You take the risk of damage, of specification change, and of buying the wrong quantity because the design has not been finalised. And unless the contract has an off-site materials or vesting clause, usually backed by a bond and specific requirements about ownership and marking, you will not be paid for materials you have bought but not yet incorporated.
So forward buying makes sense in a narrow band: high-value items, long lead times, confirmed specification, secure storage, and a cash position that can stand it. Outside that band, a firm supplier order with a price held to the delivery date achieves most of the same thing without the cash.
Better still, ask your suppliers for back-to-back terms on the jobs where you have real volume. A merchant who wants your account for the year will often hold prices for a named project when they would not hold them generally.
When the increase arrives mid-job
Sometimes it happens anyway. The response that works is procedural rather than emotional.
Check the contract first. If there is a fluctuations provision, use it and follow its notice requirements exactly. If there is a variation because the client changed something, price the variation at current rates, because a change instructed today is valued today.
If there is no mechanism, you are asking rather than claiming, and the case you make matters. Bring the supplier's old quotation and the new one, bring the published index, and bring an option: a specification change, a different product, a revised sequence that lets you buy earlier. Clients respond better to a problem that arrives with two solutions attached.
Do it in writing and do it immediately. A cost increase raised in month five, about materials bought in month two, reads as a claim being constructed. The same increase raised the week it happens reads as a contractor running the job properly.
And record the outcome. The most valuable output of a bad year is an estimating file that knows what actually moved and by how much, so that next February's quotation is priced by someone who has read it.
Where this shows up in the game
Construction arrives in Business Baron with the Property & Construction Track, an add-on to the full game. Supplier costs move as the years pass, and a career in the 1970s will let you quote a job in March and buy the materials in June. The margin between quoting and buying is where a lot of well-run firms quietly lose their year.