Builders push for more price escalation clauses

Area construction companies and steel suppliers are working to get clauses written into building contracts that help protect them against dramatic increases in steel prices.

The first such clause showed up in the recently awarded contract for the Mills B.

Lane Justice Center being built by the City of Reno and Washoe County, and construction companies are hoping to place the same kind of clauses in their work for commercial and residential construction as well.

"Q&D is drafting similar language for escalation clauses on our private work," said John Breternitz, executive vice president at the Sparks-based construction firm.

"Q&D has asked us to create a generic clause that doesn't only apply to steel," said Paul Georgeson, partner and chairman of the construction law practice group at McDonald Carano Wilson in Reno.

In addition to steel, Q&D is worried about price increases for fuel, wood and cement, said Breternitz.

These so-called escalation clauses allow builders to recoup additional costs of steel or other designated materials if prices rise above a certain threshold.

The clause in the contract for the justice center, for example, says that the county and the city will pay more for structural steel and other steel-based materials if prices jump by 20 percent, as long as those increases amount to $5,000 or more.

It also allows the public entities to be reimbursed if those prices drop by 20 percent or more, according to Roger Van Alyne, director of the county's capital projects division.

The justice center contract, awarded to Clark & Sullivan last month, is so far the only northern Nevada project to include an escalation clause, said Justin Potter, communication director with the Nevada Chapter of Associated General Contractors.

But the AGC is working with the state's public entities to get the clauses routinely included in contracts for public works projects.

The association has met with Gov.

Kenny Guinn, who said this week that the state would consider the clauses for various projects.

"We were ecstatic to get word back that the governor is doing something about it," said Potter.

Potter said that in southern Nevada the Nevada Department of Transportation has written such a clause into work being done to widen U.S.

Highway 95.

AGC has also organized meetings between county and city officials and builders and local steel suppliers.

Those meetings resulted in the justice center contract, said Alyne.

Alyne said the county will continue to look at including clauses on a projectby- project basis, but he expects prices to stabilize before other large capital improvement projects, including the new baseball stadium and the animal services center, begin construction.