Jurisdiction(s):
United Kingdom

Tariff-driven materials price escalation in construction projects: contractual allocation, caps and contingencies, bonds, and procurement strategies

Published on: 03 April 2025

Published by a Law360 reporter

Legal News

Article summary

How can owners and developers protect themselves from tariff-related cost overruns and project delays?

Owners might start getting contractor demands for extra payment or more project time because of tariff impacts. The obvious first move is a robust construction contract. Wording on price escalation is crucial to reduce the chances of schedule slippage and greater financial exposure. Although the parties could tackle major cost rises later through a change order if the situation arises on the project, such orders are often mired in dispute and ambiguity. In contrast, escalation clauses offer a mechanism for principal project stakeholders to settle, in advance, how to handle higher costs before any rise and/or delay occurs.

Ideally, owners can insist on anti‑escalation terms that bind contractors to material prices fixed at contract execution and agreed at signing.
Failing that, an owner ought to limit its maximum liability for any escalation claim to preserve firmer overall budget certainty and retain clearer cost predictability.

Critically, provisions should address tariff‑driven increases for duties already in force when the contract is signed as well as those introduced afterwards, and should set out alternatives for both existing tariffs at execution and any tariffs coming into effect thereafter...

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