The shift from labour to materials risk
Materials cost is now cited as the biggest concern behind the five-year building cost outlook, overtaking the labour cost pressures that dominated recent years. This changes where contractors should be focusing their margin protection effort when pricing new bids.
Why fixed-price bids are riskiest right now
Bids priced on current materials cost with no review mechanism are most exposed if inflation continues at pace over a multi-month build programme. Contractors who absorbed this risk without adjustment in past cycles have seen it erode margin faster than any other single factor.
Margin protection tactics that work
- Lock key material prices with suppliers at bid stage where volume allows it
- Build materials price-review clauses into client contracts for longer programmes
- Track materials cost trend data continuously rather than reviewing it only at each bid