6.3. Cost Escalation

Try these first

1. 1.

   Define cost escalation in your own words.

   Hint

   Think about how economic changes affect pricing.

2. 2.

   What is a price adjustment clause?

   Hint

   Consider what kind of situations would trigger a price change.

3. 3.

   What does cost escalation refer to?

   • Decreases in project cost
   • Adjustments in contract prices
   • One-time fixed pricing

   Hint

   Think about when values change over time.

4. 4.

   True or False: Price adjustment clauses ensure that any increase in costs can be adjusted in the contract.

   • True
   • False

   Hint

   Consider what clauses do in contracts regarding cost changes.

5. 5.

   During a project, costs unexpectedly rise. Create a strategy on how to manage this escalation considering all stakeholders involved.

   Hint

   Think about what steps promote transparency and cooperation.

6. 6.

   A cost escalation clause states that if material costs exceed a certain percentage, the contractor can request a price increase. If steel prices rise from $200 to$250 per ton representing a 25% increase, determine if this clause applies.

   Hint

   Use simple math to assess the percentage increase.