A clause I reviewed in a recent contract protects the design-builder against having to incur cost overruns due to changes in (1) laws, (2) new tariffs that increase prices for materials, and (3) labor shortages due to deportation of undocumented workers).
“A Change may include, without limitation, any of the following events occurring after the establishment of the Contract Price, CGMP or GMP (as applicable) and provided that such events are not within a Design-Builder Responsible Party’s reasonable control and could not have been avoided by a Design-Builder Responsible Party or mitigated through the exercise of reasonable skill and care: (i) a change in Applicable Law as set forth in Section 1.4 of the Agreement, (ii) the implementation or proposed implementation of new tariffs or modification of existing tariffs that increase Design-Builder’s cost of materials and equipment, or (iii) regional labor escalation or shortages that cannot be reasonably foreseen and estimated at the establishment of the Contract Price, CGMP or GMP.”
COMMENT: I believe projects are going to cost more and take longer to construct due to the changes being enacted by the new Presidential Administration. Guaranteed Maximum Price (GMP) contracts should be revised to reflect that the contractor may be unable to meet the GMP if supply prices skyrocket due to new tariffs. Immigrant labor on construction projects is vital to the projects. If there is a “mass deportation” as proposed, contractors need to be protected against delays caused by the loss of their workers.
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with ConstructionRisk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk Report, Vol. 27, No. 1 (Jan 2025).
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