The coronavirus pandemic disrupted the supply and demand of steel in the United States and abroad. Now, as the worldwide economic recovery unfolds and steel demand increases, steel production is slow to come back online. This combination of increased demand against the backdrop of reduced production may lead to spikes in the price of steel.
This brief bulletin contains tips, suggestions, and advice on how you can prepare for such price increases and protect your company from these price increases.
Bid Protection Tips
- Keep bids open for less than 30 days with a designated sunset date:
- Keeping your bids open for less than 30 days can help protect you from sudden changes in pricing and help maintain your bids’ competitive status.
- If asked to extend time a bid is open, reconfirm prices before agreeing.
- Lock in mill prices and confirm agreement:
- Raw steel price increases certainly affect fabricators. Getting a signed, written agreement with your mill – that notes the specific price agreed to – will be extremely valuable.
- Consider Specific Proposal Terms:
- Make sure to include in your bids/proposals language such as: “Upon release by customer to proceed to purchase raw materials, this proposal becomes a binding agreement.”
- If you include this language in a proposal, make sure that the proposal is specifically incorporated by reference into the contract.
Contract Protection Tips
- Include an Escalation Clause in your contract: "Subcontractor's material prices, including construction materials, are based on current prices at the time of the Proposal. Any significant price increases (meaning a price increase exceeding 10%) in materials necessary to perform the work, that occur during the period of time between the date of this Proposal and Substantial Completion of the Project, shall cause the Subcontract price to be equitably adjusted by an amount reasonably necessary to cover any increase. Further, if material or equipment, which the Subcontractor is required to supply are not available due to shortage or unavailability or if the price to procure such material or equipment increases a set forth in this provision, then an acceptable substitute shall be found and an adjustment in contract price shall be made accordingly. Subcontractor shall be entitled to an extension of time for any delay in obtaining delivery of the item necessary for completion of the Work."
- Define unavailability of materials as an excusable delay or “force majeure” in your contract
- Try to get guarantees from your suppliers.
Supply Protection Tips
- Negotiate for release of funds to make early purchases when needed.
- Negotiate contracts that allow you to purchase materials in advance to avoid a price increase or product unavailability;
- Confirm product lead times in advance of project needs;
- Put a hold on material verified to be in stock;
- Make purchases early when feasible.