Check price exposure before the next purchase order

What the new releases show

The Bureau of Labor Statistics reported on October 15 that its final demand Producer Price Index rose 1.3% in September, seasonally adjusted. Within processed goods for intermediate demand, diesel fuel prices increased 21.0%. BLS also identified higher prices for fabricated structural metal products. These are national price measures, rather than quotations for a specific construction project. ^[1]

A separate BLS release on October 16 reported a 1.1% September increase in U.S. import prices. Import prices for nonfuel industrial supplies and materials rose 1.4%, while imported capital goods rose 0.9%. Both releases describe monthly changes. They do not establish what a particular supplier will charge or whether an existing project contract permits an adjustment. ^[2]

Stone Oak perspective: locate the remaining exposure

Our interpretation is that the next cost review should focus on purchases still open to repricing. An owner with substantial buyout completed faces a different set of decisions from an owner still working through equipment selections and trade awards. A single escalation allowance applied to the entire budget can obscure that difference. Start with the remaining scope and identify where the current estimate lacks a firm, usable quotation.

Ask the contractor to classify each major package as awarded, quoted but unawarded, or still estimated. Record the quotation date, expiration, included delivery terms and unresolved exclusions. Confirm with the appropriate contract administrator which costs are fixed and which remain subject to adjustment. That review should precede an assumption that a market headline automatically changes the owner's obligation.

Compare the delivered scope

For an exposed purchase, request a comparison between the previous allowance and the current offer using the same quantity and specification. Separate equipment or material cost, freight, unloading, storage and installation where those items apply. Confirm what the proposed price includes. A lower product price can still produce a higher installed cost when the supporting scope is different.

If the team recommends ordering early, compare the potential price benefit with the deposit, storage arrangements, insurance, cancellation terms and design readiness. Establish who owns the material at each stage and what documentation the capital provider requires. Early ordering should be a deliberate procurement decision supported by the project team, with clear responsibilities and sufficient information to assess the consequences.

Make change requests traceable

A proposed change should explain its cause before presenting its total. Identify whether it arises from changed scope, a design clarification, a previously excluded item or a requested price adjustment. Attach the relevant quotation and supporting quantity or labor breakdown. Refer contractual entitlement questions to the parties responsible for contract administration and legal review rather than treating a price index as proof of entitlement.

Show the schedule consequence alongside the cost. If a substitution is proposed, obtain the appropriate design review and address compatibility, performance, warranty and maintenance. Record the decision deadline and practical alternatives. Keep a pending request visible in the forecast while distinguishing it from an approved commitment; that separation helps the owner understand both the current contract position and the potential exposure.

Protect the cost-to-complete forecast

Reconcile the procurement register, change log and project budget at each reporting cycle. When an allowance becomes an award, remove the superseded estimate from the remaining-work calculation. When an approved change is incorporated into a commitment, remove its separate pending provision. Consistent treatment reduces the risk of counting an amount twice or losing it between reports.

Keep contingency visible after each proposed use. Ask whether the remaining balance is appropriate for unresolved design, site conditions and purchases still ahead. An available contingency balance does not by itself answer whether a particular change is justified. Present the recommended funding source, the remaining reserve and any further owner or capital provider approval required under the project's arrangements.

Set the next review around decisions

For this week's owner meeting, bring the largest unawarded packages, expiring quotations and unresolved changes into one concise decision list. Give each item a responsible person, supporting documents and a recommended action. Project and construction management should make the choices understandable enough for the owner to decide, then carry the approved decisions into procurement, scheduling and the next cost forecast.