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How supply chain disruptions can impact construction projects

On Behalf of | Jan 1, 2024 | Construction Law

In recent years, supply chain issues have become a particularly pressing concern for the construction industry. Problems obtaining structural steel and lumber have caused countless conflicts and impacted thousands of projects around New York and elsewhere in the United States. Some companies even faced litigation brought by disappointed clients who couldn’t afford higher-price materials or who resented delays in project completion.

Supply chain issues persisted into 2023 and will likely continue to cause some challenges in 2024. For example, concrete manufacturers continue to report shortages of crucial raw materials, including sand. Prices for other materials have continued to fluctuate as supply ebbs and wanes.

As a result, construction companies can benefit from acknowledging the two issues below in their contracts to prevent losses related to supply chain disruptions.

Delays in project completion

There are some scenarios in which there are no alternatives for the materials of business cannot currently obtain. Either the client is firm on needing particular finishes or the materials are so essential that no substitution is reasonable. Having enough cement to pour a foundation is a non-negotiable requirement. Contracts may need to include provisions acknowledging the possibility of a delay caused by supply chain disruptions.

Increases in cost

Estimates reflect what a business believes it will cost to complete a project. Material costs can factor significantly into the final figure. Especially if substitutions are necessary, supply chain issues could potentially increase the total project cost significantly. Construction firms need the flexibility to advise a client of a change in material costs to avoid a situation where the company must absorb those costs.

Including provisions acknowledging supply chain issues and other potential complications in construction contracts can diminish the likelihood of clients taking legal action over delays, costs or substitutions caused by supply chain concerns.