Tariff Whiplash: A Contractor’s Playbook
Austin Principal, Shelly Masters, wrote an article for the November edition of Construction News magazine. In this article, Shelly covers how tariff volatility creates sudden cost and schedule shocks for construction, and explains why the best defense is prompt notice, disciplined risk allocation, and contracts with clear escalation, tariff, delay, and dispute-resolution clauses backed by practical bidding and documentation habits.
Tariffs have flipped on, off, and sideways; construction leaders feel it first. Steel, aluminum, specialty components, delivery calendars, and even bid validity dates all move with the headlines. It is not a replay of the pandemic, but it rhymes: sudden shocks, thin margins, and contracts that often say little about price spikes. The solution is not guesswork. Disciplined notice, clear risk allocation, and day-to-day habits match what your contract says.
Start with notice and triage. Most private contracts require written notice of cost or schedule impacts within days. Miss that window, and you can waive relief. On live jobs, issue prompt written notices reserving rights, even if you do not yet know the full impact, then audit the agreement: does it allow schedule extensions, price adjustments, or both? Force majeure typically buys time, not money, so plan on additional tools if you need dollars as well as days.
Five contract levers do the heavy lifting:
- Change in Law or After Imposed Tax. If tariffs are enacted after execution, some contracts treat them as a change order event. That can unlock time and price relief, provided you meet strict notice and proof requirements. Confirm whether your form includes this clause and how it defines “law,” “duty,” or “tax.”
- Material Price Escalation. Post 2020, many owners accept calibrated escalation language tied to objective triggers; for example, a 5 to 10 percent move in a published index or documented vendor quotes. This reduces the need to pad bids just in case, keeps both sides whole during swings, and limits disputes when the trigger is clear and the adjustment math is pre-agreed.
- Tariff Specific Riders. A narrower option: if particular imported components are hit with new duties, pricing adjusts by a formula, often the actual duty percentage applied to the affected material cost. Contracts can add thresholds to ignore minor blips and optional caps or cost sharing so owners see a bounded exposure.
- Delay Language. Tariffs create time loss, shipment holds, repricing pauses, and sourcing changes. Standard “no damage for delay” clauses convert those impacts into time only. Seek a carve-out making tariff-driven delays compensable, or pair force majeure with an express cost mechanism for extended general conditions, demobilization/remobilization, or re-procurement.
- Swift and practical dispute resolution. Build a realistic, cost-effective path that delivers decisions while the project continues. Use a tiered ladder that starts with prompt project-level negotiation on a short fuse, then executive escalation, then a standing neutral or dispute review board empowered to issue interim binding decisions within a defined period, such as 14 to 30 days. Provide for emergency or expedited arbitration for stop-the-job issues with tight timelines, limited discovery, remote hearings, and time-limited awards, and include a continuation of work clause so the field does not grind to a halt. Allow court carve-outs only for liens and truly urgent injunctions. For smaller disputes, consider document-only decisions with page limits and reasonable fee shifting against clearly unreasonable positions.
If your contract is silent, relief is still possible. Many parties now pre-agree that if tariffs change before purchase, a change order will equitably adjust the price based on documented vendor quotes. When owners resist open-ended exposure, propose guardrails: caps, share the first percent thresholds, or allowances for specific materials. Clear, bounded mechanisms beat inflated bids and mid-project standoffs.
Align operations with the paper: shorten bid validity, lock supplier quotes through acceptance with contemporaneous backup, and match quote windows to your bid validity. Explore approved substitutes or domestic sourcing that meet the spec to avoid tariffed items, engage the design team and owner early to pre-approve alternates. Memorialize any substitutions by change order to prevent scope ambiguity.
Pick delivery methods that share risk. Cost plus with a Guaranteed Maximum Price, paired with contingency and allowances for volatile items, rides price swings better than a bare lump sum. Unit pricing for materials can also help. If you must sign a fixed price, bake in escalation or tariff riders, targeted allowances, and realistic lead time assumptions so the schedule is not a hostage to procurement.
Owners and lenders rarely sign what they do not understand. Bring project math, not just principles. Show how a 25 percent duty on steel would move the GMP or consume contingency. Offer calibrated options: an index-based escalation clause, a tariff rider with a cap, or a split threshold cost share. When stakeholders see a bounded, data-tied solution, they are more likely to adopt it and less likely to demand worst-case pricing.
Finally, treat tariff announcements like any other claim event. Issue a written notice to every required party within the contract window. Track the but-for delta: retain pre and post tariff quotes, index printouts, supplier letters on lead times, and schedule fragnets tying material unavailability or repricing to specific activities. Follow claim procedures exactly.
Tariff policy will move, and uncertainty is the constant. Leaders who pair vigilant notice with smart clauses and disciplined bidding keep projects on track without turning every headline into a crisis. Expect the unexpected, and write contracts as dynamic as the markets you build in. Make it standard practice to review and update your templates and project-specific terms on a regular cadence, with a strong focus on reducing risks unique to your business, your supply chain, and your delivery model. Remember that change orders are contracts, and they should clearly document the compromise, scope, time, price, and conditions that the parties have agreed to.
About the Author
Shelly Masters is a Principal in the Austin office of Cokinos Young, a firm with over 30 years of experience representing the construction industry. A Texas-based trial lawyer, she litigates high-stakes construction, commercial, and product liability disputes, including complex delay, defect, and breach claims. She advises clients nationwide and trains teams on liens, bonds, and contracts. For inquiries regarding tariffs or related challenges, Shelly can be reached at (512) 615-1139 or smasters@cokinoslaw.com.
About Cokinos | Young
Cokinos | Young has led Texas construction and real estate law for over three decades. And today, our 100+ dedicated professionals operate coast to coast and proudly handle all aspects of construction law for owner/developers, project managers, general contractors, design professionals, subcontractors, sureties, and lenders. We provide both dispute resolution and transactional services to clients through all phases of commercial, industrial, pipeline, offshore, civil, and residential construction. Our reputation was built on relentless commitment to client service and the industries we serve, and that remains our primary driver. Dedicated. Resilient. Expertise. That’s Cokinos | Young. Learn more at cokinoslaw.com.