cost increases

be restricted to the cost of labour, or subcontractors, or materials, or any combination of them. And assuming you are allowed to make the adjustment, then what you are entitled to adjust for, is the difference between the rates and prices that applied when you originally accepted the order, and the rates and prices that apply when it comes time to invoice for your goods and services. So you will have to have some way of proving what the difference is. That means having written records of what you based your original price on – wages and salaries, and quotes or estimates from subcontractors and suppliers – and then similar records of what those inputs cost you now.

Sometimes an ability to pass on cost increases is subject to those cost increases not being reasonably foreseeable at the time the Contract is signed. If your cost fluctuation clause is qualified in that way, then whether you are caught out by the no-foreseeability requirement will depend on how widely-known the current supply shortage was when you signed your contract. If it was widely known, then your customer is likely to argue that you took the risk of price increases that you knew were likely to eventuate. You would have to argue in response that although you knew there was a global pandemic, you were no better equipped to foresee what the Government response would be or how global supply chains would be affected, than anyone else.

Finally, you might be obliged to do what you can to resist any price increases and procure subcontracts and materials on the basis of fixed prices that cannot be increased during the course of the your work. In that case you would argue that it simply isn’t feasible to obtain fixed supplier and subcontractor pricing in the current market. You would need to get statements verifying that from your suppliers and subcontractors, if you are put to the test.