Your material supplier has increased prices by 15% mid-project without prior notice, claiming market conditions. The contract contains no escalation clause. What is your best course of action?
Correct Answer
C) Negotiate with the supplier and document any agreement changes
The best approach is to negotiate with the supplier for alternatives (partial increase, extended payment terms, etc.) while documenting all communications. This may lead to a workable solution while preserving the business relationship and project schedule.
Why This Is the Correct Answer
Option B is correct because negotiation allows for finding mutually beneficial solutions while maintaining the business relationship and project continuity. Proper documentation protects both parties legally and creates a record of any modified agreements. This approach balances business pragmatism with legal protection, potentially leading to compromises like partial increases, extended payment terms, or alternative materials that work for both parties.
Why the Other Options Are Wrong
Option A: Immediately find a new supplier regardless of cost
Simply accepting the increase sets a bad precedent and may violate your fiduciary duty to the owner to control costs. Without negotiation, you miss opportunities for compromise solutions and may unnecessarily absorb costs that could impact project profitability.
Option D: Stop work until the owner agrees to pay the increase
Stopping work creates immediate liability issues, delays the project, and may breach your contract with the owner. The owner has no obligation to pay for supplier increases not covered in the original contract, making this approach legally and practically problematic.
Memory Technique
Think 'N&D' - Negotiate and Document - when facing unexpected cost increases from suppliers
Reference Hint
Florida Building Construction Standards - Chapter on Contract Administration and Change Orders
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