BONITA SPRINGS, FL – Negotiating construction contracts in an era of tariffs, immigration crackdowns, and political unrest is particularly challenging. A five-person panel will tackle these issues on day one of Construction Super Conference.
Third Thursday sat down with panelist Levi Barrett, partner and chair, Construction Contracts & Risk Management, Peckar & Abramson, to get a preview of what attendees can expect to hear.
Third Thursday: How have tariffs impacted contract negotiations?
Levi Barrett: If you’re entering into a construction contract, particularly in the private sector, it’s difficult to get an owner to agree that if tariffs are enacted after the signing of the contract, the contract will get an adjustment based on the price associated with those tariffed products or pieces of equipment.
Third Thursday: What are some of the associated issues caused by tariffs?
Barrett: If the price of steel from China increases, there’s also an effect on the domestic market for steel. Steel suppliers in in the United States may opportunistically increase prices, or they may increase because of demand shifting to domestic steel from foreign steel. There may be a demand-driven increase in price.
If you have that clause in your contract relating to tariff relief, that might get you the tariff relief in the event there’s a tariff. However, it’s going to be more difficult for you to make the case for relief in the event of domestic price increases that may be related, but in some ways separate, from the pure tariff pricing. At CSC, we will definitely want to talk about; What is the distinction between tariff relief and escalation relief?
Third Thursday: Are tariffs covered by change-in-law provisions?
Barrett: If there’s a potential for gray, we want to address it in black-and-white. I would make the case that it is a change in law, but I would also include a tariff relief provision in my contract to make it abundantly clear that I get compensation for tariffs that are enacted after the formation of the contract.
Third Thursday: What’s a guiding philosophy when it comes to pricing in risk?
Barrett: We want to own the risks that we can control. We want to try and shift the risk that we can’t control. When it comes down to material price escalation, we will stand by the material prices. When we’re talking about tariffs or escalation-based price risks, we can’t control those, so we want to work with owners to try and come to a reasonable solution on how we can price risk in that respect. In the event that there’s a pricing issue outside of our control, we’re going to be looking for an adjustment for that. We can only give reasonable prices on construction projects when we are confined to the world as we understand it, and as it exists at the time that we enter into the contract.
We’re not just talking about tariffs. We’re going to be talking a lot about project delivery methods and how those project delivery methods are going to play a large part in how we address and shift and wear risk as contractors.
Session takes place on Tuesday, Dec. 9. at Construction Super Conference in Bonita Springs, Florida.
Third Thursday: Why are you spending the time, money, and effort to attend CSC?
Barrett: I vastly prefer in-person learning. There’s value in webinars, but there’s really no substitute for in-person events like CSC. It’s difficult to respond to the audience in a webinar when you’re not seeing that person’s face. You’re not able to react in real time and address that perceived concern or point of disagreement the way you can in person. It’s more difficult to present to a room where you don’t get that initial visual or verbal feedback from people. At CSC you’re trying to really create a dialogue and that’s what super conference does so well. It allows you to become immersed with peers and colleagues and have real dialogue about these relevant issues.
