Three  Strategies to Cope with Rising Construction Costs 

1. Finance material purchases
   If you want to purchase all your project materials when your contract is signed, you’ll likely experience a gap between when your suppliers expect to get paid by you versus when you’ll get paid for the project. Using material financing, your material finance partner will pay your supplier upfront for materials and then allow you up to 120 days of credit, therefore relieving cash management pressure and giving you extra time to make your payments. It also lets you lock in pricing on materials to avoid future price increases.

2. Increase your margins
   To offset cost increases, you may consider raising prices accordingly. However, with intense competition for projects, you may be bidding against contractors who are not keeping pace with pricing increases, and you could lose a bid based on a higher cost. That’s not necessarily a bad thing. Taking a low or no-margin job may be an effective way to get your foot in the door with a GC or developer, but it’s not an effective long-term strategy. Instead, focus on the value that your company brings to the job.

3. Consider an escalation clause
   Including an escalation clause in the contract allows you to recoup costs caused by price increases. The clause usually stipulates a percentage increase that costs must exceed before it kicks in and then you have the right to request additional funds from the owner. This can protect both the contractor and owner alike by allowing for a more competitive bid without having to include an additional margin for risk.
   
   With construction costs only continuing to rise, these strategies may help alleviate some of the burdens of managing your costs and protecting your bottom line.