A Guide for Implementing Price Adjustment Clauses to Balance Risk Sharing in Construction Projects

Prices of highway construction materials have fluctuated considerably since the start of the COVID-19 pandemic. This trend, previously observed with petroleum-intensive materials such as asphalt concrete, has extended to other materials such as steel and Portland cement. Consequently, construction contractors have elevated their project bids as a risk-mitigation strategy. These elevated costs hamper the ability of state departments of transportation (DOTs) to deliver on their programmatic objectives in a timely and cost-conscious manner. One strategy to mitigate this uncertainty is the use of price adjustment clauses in highway construction contracting. Contractual thresholds triggered by rising or falling material prices lead to adjustments in contractor payments. When administered properly, price adjustment clauses can lead to more equitable highway construction contracting practices. Price adjustment clauses are not applied consistently by state DOTs. Research is needed to determine the state of the practice of price adjustment clause administration, assess the availability of pertinent tools and resources, develop strategies to effectively administer price adjustment contracting practices, and suggest enhancements and refinements to current practices. The objective of this research is to develop a guide to help state DOTs craft or update material price adjustment clauses for highway construction contracting. At a minimum, the guide should identify appropriate resources and material price indices, offer effective practices for managing contractual risk stemming from price fluctuation throughout the project lifecycle, identify opportunities for further refinement of the practice, and be accompanied by decision support tools and resources.

• Record URL:
  http://apps.trb.org/cmsfeed/TRBNetProjectDisplay.asp?ProjectID=5532
• Supplemental Notes:
  • Contract to a Performing Organization has not yet been awarded.

Language

• English

Project

• Status: Proposed
• Funding: $450000
• Contract Numbers:

  Project 19-24

• Sponsor Organizations:

  National Cooperative Highway Research Program

  Transportation Research Board
  500 Fifth Street, NW
  Washington, DC  United States  20001

  American Association of State Highway and Transportation Officials (AASHTO)

  444 North Capitol Street, NW
  Washington, DC  United States  20001

  Federal Highway Administration

  1200 New Jersey Avenue, SE
  Washington, DC  United States  20590
• Project Managers:

  Brooks, Mike

• Start Date: 20240311
• Expected Completion Date: 0
• Actual Completion Date: 0

Subject/Index Terms

• TRT Terms: Budgeting; Construction projects; Contract administration; Cost estimating; Risk management; State departments of transportation
• Subject Areas: Construction; Finance; Highways; Planning and Forecasting;

Filing Info

• Accession Number: 01889424
• Record Type: Research project
• Source Agency: Transportation Research Board
• Contract Numbers: Project 19-24
• Files: TRB, RIP
• Created Date: Jul 31 2023 4:40PM