Price Escalator Provision Survey
Tuesday, August 01, 2006
Continued price volatility at the pump and MDOT’s recent advertisement of a $70 million project (I-94/US-131 in the SW Region) with a 2½ year progress schedule has prompted discussions about price escalator provisions. In response to inquiries made at the pre-bid meeting for that project, MDOT leadership expressed a willingness to consider the use of a price escalator provision for fuel, and potentially other construction materials (steel, asphalt cement, portland cement, etc.), if industry came forward with that request.
As many in industry will recall price escalator provisions are not a new concept here in Michigan. Price escalator provisions were previously utilized in the late 70’s and early 80’s in reaction to significant volatility in the petroleum products market due to ongoing global unrest. The industry experiences with those previous price escalator provisions were generally much less than positive resulting in the long-standing industry position of not promoting or supporting the implementation on new price escalator provisions.
Although some states have implemented and currently maintain price escalator provisions that are supported by their contractor communities, the majority of our Michigan contractors have not been supportive of the types of price escalator provisions that would require the contractor to “pay back” the owner when the price protected drops below the price included in their bid. MDOT has indicated they would only consider price escalator provisions that protected them when prices fall.
Considering industry’s long standing position, the input of several members recently contacted, and our desire not to react in an ill conceived way in the limited time available, MITA has communicated to MDOT that industry will not request that price escalator provisions be included in the I-94/US-131 project or any other project at this time.
In an effort to gauge and better understand the industry position on price escalator provisions we are requesting that you complete and return the short survey below. Completed surveys can be faxed to the MITA office at 517-347-8344, or returned by e-mail to Glenn Bukoski , or Doug Needham.
Telephone #: ___________________ E-mail: ____________________________
1. Do you support price escalator provisions? ______________________________
2. If you do, for which: Fuel ___ Steel ___ AC ___ PC ___ Other _________
3. On what projects should price escalator provisions be used? ________________