Construction has always carried material cost risk. But the current environment is compressing the window between when a project is priced and when that pricing becomes unreliable. For project teams managing fixed-price contracts, that compression is creating exposure that did not exist when the ink dried.
Here is where the pressure points are showing up.
Input costs are rising at the fastest pace in years. According to Associated Builders and Contractors, nonresidential construction input prices surged at a 12.6% annualized rate in early 2026, the fastest pace since the supply chain disruptions of 2022. Steel and aluminum tariffs are sitting at 50%, pushing aluminum building products up 33% year-over-year and steel products up more than 20%. For projects with significant structural steel, mechanical systems, or aluminum-intensive scopes, the gap between estimated cost and current cost is not a rounding error.
Most contractors are already feeling it. The AGC 2025 Workforce Survey found that only 24% of contractors reported being unaffected by tariffs. Two in five firms have raised their bid prices in response, 35% have passed most or all tariff costs through to owners, and nearly 40% expect materials costs to keep climbing. Subcontractors who submitted bids before the latest rounds of tariff changes are executing work at margins that no longer reflect reality. That pressure surfaces as change order disputes, procurement delays, and in some cases, requests to renegotiate scope.
Fixed-price contracts offer no automatic shelter. A standard lump sum or stipulated sum contract assigns material cost risk entirely to the contractor. Without an escalation clause, a force majeure provision broad enough to cover tariff-driven cost changes, or a specific material allowance, there is no contractual mechanism to recapture costs that move after signing. Accounting and finance teams reviewing contract documents should know exactly what protections, if any, exist before a project breaks ground.
Procurement timing has become a financial decision. Early procurement of at-risk materials, particularly steel, aluminum, and mechanical equipment, is increasingly being treated as a budget protection strategy rather than a scheduling one. Projects that lock in material costs before they escalate avoid the problem entirely. Projects that don't may find themselves managing a budget shortfall that was visible months before it became a crisis.
A contract that doesn't account for material volatility isn't protecting the project. It's assigning the risk to whoever absorbs the cost when it moves.
The response to this environment is not panic. It's precision. Project teams managing well right now are doing a few things consistently: reviewing contract language for escalation provisions before committing to fixed pricing, flagging at-risk material categories early in preconstruction, and bringing accounting and finance into procurement decisions rather than treating cost increases as a field-level problem.
For accounting teams, project managers, and finance leaders, the practical question is whether your current project portfolio has been stress-tested against where material costs are today, not where they were when the budget was set. If that review has not happened recently, it is worth doing before the next pay application cycle surfaces a shortfall that could have been anticipated.
