How to Manage Construction Inflation Risk

Build with confidence, even when prices shift.

The Cost of Uncertainty

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The construction industry has experienced unprecedented inflation in recent years, with materials, labour, and energy costs all subject to volatile spikes. For clients, this means budget risk is no longer hypothetical. It’s real, immediate, and can undermine a project’s viability. Although inflation cannot be avoided, it can be managed.

At DQS, we help clients plan for volatility through smart procurement strategies, accurate forecasting, and agile change control processes.

Understanding Inflation Risk in Construction

Inflation risk refers to the potential for increased costs during a project caused by external market forces, including:

Price rises for materials (steel, timber, concrete, etc.)
Labour shortages and higher wage demands
Fluctuations in fuel and energy prices
Currency exchange volatility (for imported goods)
Disruptions in the global supply chain

These risks can lead to higher tender prices, programme delays, and erosion of margins, especially on longer-term or fixed-price projects.

How DQS Helps You Mitigate Inflation Risk

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We adopt a proactive approach, working closely with clients to:

Develop cost plans with contingency allowances tailored to sector volatility
Schedule procurement strategies to secure prices early where feasible
Use inflation indices and BCIS data to forecast probable uplifts
Structure contracts to include provisional sums or remeasurement
Support tender analysis that considers stability and risk exposure beyond just the lowest cost

The aim is not to eradicate risk but to prepare for it, account for it, and safeguard project value.

Practical Steps to Stay Ahead

To lessen the impact of inflation on construction projects, consider the following measures:

Set realistic programme durations to reduce the risk of delays that can cause additional cost escalations. A carefully structured timeline gives more certainty to all stakeholders and helps avoid unnecessary financial exposure.
Engage suppliers at the earliest opportunity and build strong, long-term relationships across the supply chain. Early engagement creates more room to negotiate favourable terms, secure availability, and lock in pricing where possible.
Review fixed-price contracts with caution, paying particular attention to clauses relating to inflation and material cost fluctuations. Understanding contractual risk allocation is essential to avoiding unpleasant surprises later in delivery.
Factor in lead times when specifying materials or systems, as shortages or delays can result in costly programme changes. Selecting options with reliable availability reduces exposure to inflation-driven price hikes and schedule disruptions.
Closely monitor market trends and industry data rather than relying on historic cost information. Prices can shift rapidly, and assuming last year’s rates will apply may lead to inaccurate forecasting and budget pressure.

At DQS, we don’t just highlight these principles; we work with clients to embed them into every stage of project planning and delivery. By applying robust cost management frameworks, we help turn insights into actionable strategies that safeguard budgets and improve financial certainty.

FAQ

      Is inflation risk higher for certain project types?
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      Yes — longer-term projects, those with high material content, or those relying on imported goods are especially exposed.
    
      How often should inflation allowances be reviewed?
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      They should be reviewed at key project gateways or whenever major design or procurement changes occur.
    
      Can inflation be passed onto contractors?
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      It depends on the contract type. Some forms (e.g. NEC with X1 clause) allow for fluctuation adjustments; others do not.
    
      Are there tools to track inflation trends?
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      Yes — we use BCIS indices, ONS data, and trade body updates to inform live forecasts.
    
      Does DQS offer inflation tracking as a standalone service?
      ⌄
    
      Yes — we provide standalone reporting and inflation advice for clients who want market insight before formal project launch.

Discover more

We offer a comprehensive range of quantity surveying services, helping you push the boundaries of sustainability in construction.

Protect Your Budget — Even in Volatile Markets

Inflation doesn’t have to derail your project. With early planning and expert guidance, you can build confidently even in challenging conditions. Contact DQS to manage cost risk in today’s construction climate.