In order to survive in the construction industry, you need to have a flexible strategy in mind that can cushion you under any circumstances regardless of their magnitude. These circumstances could be financial or from within your company. When developing a construction plan, the prices of the items needed could be adjusted by prevailing market conditions which could alter your budget causing you to have a hard time navigating the project. In this piece, we are providing you with tips that will ensure that you have a better navigation of whatever price changes the market will throw at you.
- Procure Building Materials Directly
Procuring the materials you need for the project immediately after signing the deal will serve to cushion you from future changes. Immediately after signing the deal, you can consider purchasing the materials at the then market price in order to avoid future changes. This way the calculated procurement price of the moment of closing the deal will be secured.
- Use Commodity Features
If you cannot directly procure building materials or use a price escalation clause, we recommend using the commodity feature in order to cushion oneself from the changes in the market. Commodity futures provide a prediction for the future prices for the materials needed in order to run the project. We advise you to keep in mind that price futures may exist for some raw materials but not for the semi-finished products.
- Include a Price Escalation Clause
A price escalation clause in the contract includes a prediction for future changes in the prices of goods and services needed for the project. The clause usually stipulates a percentage increase that costs must exceed before the clause kicks in. this clause will cushion you as a construction company in case prices soar, you will be compensated.
- Better Balance the Budget for Materials
Have a better way of balancing the budget you have come up with. You can embrace technology like the building information modeling software that will give you the desired plan and budget. Be lean on material wastage and avoid purchasing more than you need.
Conclusion
Survival should be at the core of developing a good budget that will stand the test of time. We recommend cushioning yourself with the above tips in order to keep your company afloat.
