Price Escalation in Design–Bid–Build Construction Projects: A Contractual and Legal Perspective

Abstract

The construction industry has witnessed unprecedented disruptions in the supply chain (SC) for the past two years due to the impact of the coronavirus (COVID-19) pandemic followed by the conflict between Russia and Ukraine. Such SC disruptions have been associated with prolonged lead times, increased costs, as well as tight labor markets. Generally, construction contracts differ in how they manage the contractual consequences and remedies in relation to various project aspects including price escalation. To this end, there is a dire need for understanding the risk allocation and contractual implications of price escalation on project stakeholders. The goal of this paper is to fill this knowledge gap by offering a better understanding of price escalation provisions under the most commonly used design–bid–build (DBB) standard forms of construction contracts. To achieve this goal, the authors followed a multistep research methodology. First, price escalation provisions were analyzed and compared under various DBB standard forms of contract including the: (1) American Institute of Architects (AIA), (2) ConsensusDocs, and (3) Engineers Joint Contract Documents Committee (EJCDC). Second, the contract provisions in the United States were compared to those in international and UK-based standard contract forms including the (1) FIDIC Red Book 2017, (2) New Engineering Contract (NEC), and (3) Joint Contracts Tribunal (JCT). Third, legal cases of actual disputes arising from price escalations in the SC were examined. Fourth, based on the contractual and legal analysis, guidelines and recommendations were developed in order to be utilized by the contracting parties in planning, handling, and mitigating the contractual implications of price escalation-related issues. Ultimately, the results of this research shall promote more balanced contractual practices regarding price escalations in construction projects, particularly in light of the current market disruptions.

Department(s)

Civil, Architectural and Environmental Engineering

Keywords and Phrases

Contracting; Legal affairs; Price escalation

International Standard Book Number (ISBN)

978-303162169-7

International Standard Serial Number (ISSN)

2366-2565; 2366-2557

Document Type

Article - Conference proceedings

Document Version

Citation

File Type

text

Language(s)

English

Rights

© 2024 Springer, All rights reserved.

Publication Date

01 Jan 2024

Link to Full Text

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