As the tariff situation and national fiscal policy conversations continue to evolve, so do questions around the impact to commercial construction projects. While this situation is unique in that it is driven by US policy, price volatility is nothing new to our industry. HB has worked through major economic shocks, including the 2008 financial crisis and COVID-19 disruption. We apply a combination of bedrock principles and newer data analysis tools to guide owners through uncertain times. We’ve put together our ten top ways to address cost escalation

Honesty from the start. Too often, the seeds of budget disappointment are sewn from early conceptual estimates. In order to win work and fill backlog, builders will often generate an optimistic early estimate in order to win work and secure backlog. Or, a third-party estimating service may provide a budgetary estimate without factoring in local market conditions or even modest inflation. Both scenarios set unrealistic expectations that we often see carried forward into pro formas. With months and even years passing between conceptual estimates and market validated bids, this lack of foresight sets the stage for continual disappointment.

• In order to produce our early estimates, HB factors in recent median cost escalation with consideration of building type and dominant materials. We also consult with trusted subcontractors who take a similar, conservative approach, meaning we build budgets that start safe but steadily decline as more design, approval, and market certainty is introduced.
• In CMAR and Design-Build formats where opportunities for shared budget development exist, cost risk is openly discussed and budgeted as contingency. We have found that our partners appreciate this open approach, and we can jointly find ways to reduce this contingency through material selection, phased work packaging, and other approaches. We are constantly analyzing remaining risk and associated contingency, so by the time we get to a GMP, this risk premium has decreased significantly. Additionally, prime contract terms escalation terms should also be considered to offset the need for contingency. More on that below.

Price library. By ensuring that all project information—including financials—flows through Procore, we have developed the ability to filter budget results across CSI divisions, industry sectors, and time periods. This means when HB is asked to develop a conceptual or feasibility-level estimate, we’re not guessing—we’re anchoring that estimate in proven data.
Bidding Integrity. Another key factor in project budget protection, especially in tight labor markets, is bidding to the subcontractor market with clarity and consistency. This goes for public procurement agencies or Contractors bidding out work to subcontractors. Changing bid dates, short notice on due dates, multiple re-bids, lack of document clarity, and impersonal communication are all self-defeating habits common to our industry. Perception is reality, and any perceived unreliability or lack of information will bear out in subcontractor pricing.

• HB believes consistency in communication to the market is a critical element of project success.
• We use Procore to streamline ITBs well in advance of bid dates, expediently answer bidder questions, update documents as a single source of truth.
• Constructability reviews by our preconstruction team and senior operations staff add clarity and “bid-ability” to the documents.
• We take bidder questions and constructability input seriously.
• HB holds pre-bid conferences in person. This human connection and explanation of project purpose gives bidders a connection point.

Real Options Presentation. Through preconstruction services we can simultaneously price multiple layout or system options, giving owners several paths for major cost drivers like structural and HVAC systems. With steel and aluminum prices expected to rise by at least 5%-7% as a result of tariffs, one option is to explore mass timber, engineered wood, and steel alternatives from non-tariffed sources. Concrete and CMU designs can also be weighed against steel early in the design process under the guidance of builders.

• Value Analysis – Our preconstruction department is led by a registered professional architect turned contractor, who presents alternatives that still meet design and functionality intent. Rather than slashing scope broadly, finding alternatives that are both cost-effective and available is key. Reliability, long-term costs, and ease of maintenance are also part of this analysis.

Advance Purchasing. We have experience working with Owner funding/financing to explore early material purchases to get ahead of price hikes. This strategy can save precious months of cost escalation and ease project schedule risk. HB excels in the navigation of the owner approval process, providing procurement strategy, early release contracts, and pay application documentation that can move these orders forward. Notably, storage rights, duties, and insurance coverages should be in place for advance purchase or prefabrication agreements.

Buy America Build America Act. HB has experience with federal projects where domestic products are mandated, giving us useable insight into the feasibility of pivoting to US-based product alternatives across the whole commercial building supply chain. On a recent multi-family package, we succeeded in pivoting to a domestic structural material that had a negligible impact on the overall project budget. This is done through close coordination with subcontractor partners.

Procurement Department. HB has re-organized its estimating department as a more holistic group than is typical in our industry. We combine preconstruction services and bidding with subcontracting and purchasing services, with the goal of significantly shortening the risk window between the signing of the contract and securing all materials. This also allows our project teams to focus on the most cost and time sensitive submittals.

Prime Contract Protections. HB believes in allocating appropriate risks to the appropriate parties. We recommend price escalation clauses that make mechanisms for covering price hikes open and transparent. These clauses protect both parties: contractors aren’t forced to eat huge unforeseen costs, and Owners get transparency and a say in how cost escalation is determined. Most critically, Owners avoid paying a hefty risk premium up front. Importantly, contract language should be a part of early contingency discussions to create clear expectations of how escalation risk is allocated.

Staying Informed. It’s important to stay agile and well-informed no matter what type of market we’re in. As a company, HB stays immersed in construction forecasts, price indexes, industry peer groups, economic development forums, policy news, and direct supplier conversations. Staying informed means we can continue to act as trusted project advisors to our customers and partners.

Schedule Mastery. Project schedule risk gets lost in the discussion around tariffs but typically presents greater financial risk to project stakeholders, either in lost revenue, missed opportunity, or disputes. In addition to using experienced builders to ensure schedules are built correctly, HB uses schedule analytics software to ensure that our initial schedules are feasible and realistic. We then closely monitor daily schedule health through select metrics, including a quality grade, performance index, and a comprehensive project health index.