January/February 2023 - 103

RISK CORNER
Managing Procurement and Escalation Risk
In the deep foundations industry,
managing cost-related risk is part of our
day to day lives. A major risk that has
well and truly come to the forefront of
risk management in recent time is
ongoing and unpredictable inflation.
There are many construction cost
indices, and most agree that we saw a
14% year-over-year increase in construction
costs for 2022. Most of this
cost increase came as a result of
skyrocketing prices in the construction
materials markets, further contributed
to by higher fuel and labor costs. This
has left many of us asking the question,
how can we better manage this risk?
The industry is seeing companies
taking different approaches to this issue,
including setting baseline rates for key
materials and including appropriate
language in the contract for inflation/
deflation adjustments or attempting to
remove the risk entirely through
exceptions in proposals and contracts.
Whatever your strategy, now is the
time to think about being increasingly
open with clients regarding this risk. As
businesses in an industry where so
many risk-related assumptions are
made when competitively bidding
work, this isn't always the easiest call
to make. However, unpredictability of
cost fluctuation is maybe the biggest
risk to all of us and having an open
dialogue with clients and agreeing the
best strategy together should provide
best value while mitigating or sharing
inflation risk.
A regular column
from the DFI Risk and
Contracts Committee
Authored by:
Bryn Harris,
vice president,
contract and risk
management, Bauer
Foundations
DEEP FOUNDATIONS * JAN/FEB 2023 * 103

http://geoprofessionals.org

January/February 2023

Table of Contents for the Digital Edition of January/February 2023

TOC
January/February 2023 - Intro
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