Have you seen the cost of plywood recently?
Dang!
I spent the past weekend in my garden redoing our garden boxes. Forty years of wear and tear (the boxes predated when we bought the property) can make even the best constructed wooden boxes fall apart. Our repair was at least five years overdue. Anyway, I’d previously priced out the materials but hadn’t been able to do the project a few years ago. Imagine my surprise when getting materials for half the job burst my budget!
Building supplies, toilet paper and a host of other items have massively increased in cost over the last year. If I’d hired someone to do the work for me, and between when we signed the contract and when that company bought the materials, the costs vastly increased, who’d be paying for the added expense? Likely my contractor.
Why?
If your contract is silent on this issue – who pays increased costs – then you (as the performing party) will likely pay those additional costs. These expenses can include increased cost of materials like my lumber; personal protective equipment; cleaning supplies; physical barriers; signage; and Covid compliance officers… among other things. The small business lawyer Fairfax, VA residents trust can help you determine if your contracts offer sufficient protection.
So, how do you plan for unexpected costs?
By having a contract provision that addresses the problem.
Even before Covid, unexpected costs could crop up. For example, you contract to dig support piers down to the bedrock where the average depth is 18 feet and price accordingly, but the bedrock on this property is at 25 feet. Without a contract clause that allows you to pass on the extra costs from drilling down 7 more feet, you’re going to be eating that dirt.
If you make certain assumptions in your contract (the bedrock is 18 feet down, or the lumber you need is $5.00 per board), it’s best to spell that out and what happens if that expectation is busted. So, while this article discusses Covid-related costs, it applies to any project where there is potential for material or other costs overruns. If you can get specific like “the pricing is based on drilling to a depth of no more than 18 feet and additional fees will apply if drilling exceeds 18 feet” that’s even better.
You can plan for the unexpected with the help of a small business lawyer.
Top 5 Steps to Plan for The Unexpected.
- Identify the assumptions you make in your business and when you price a service;
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Determine what could happen to make those assumptions false and what is the result of that happening;
If you hit bedrock at 10 feet or find someone with lumber at $5.00 per board, then you’re in the profit zone. But if the bedrock is actually at 25 feet and your lumber is actually $10 per board, then you have a problem. - Determine if the event is beyond your control (like shipping delays reducing the supply so the prices can be higher due to the demand) rather than a miscalculation on your part.
- Decide if you are going to request your client to pay more for these additional costs; and
- If yes, then have a contract that clearly states the possibility for these additional expenses and what happens if they are incurred.
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If you would like assistance with this or any other compliance matter, please contact Nancy at N D Greene PC by clicking on schedule an appointment.
SCHEDULE AN APPOINTMENTBy having your client acknowledge the possible problem and planning for it, you are making for a better client experience and fewer problems if you do have to issue a cost overrun invoice.
You can plan for “unexpected” cost. Cost overrun clauses are a useful tool in your contract toolbox. If your contracts don’t have cost overrun causes, if you are unsure if the one you have protects your interests to the fullest extent possible, or if you would like assistance with any other business matter, please follow the link below to request an appointment.