September 8, 2008

Fuel cost survey could support price escalation clauses in contracts

In a world of volatile oil markets a fuel escalation study for sewer and watermain construction will support the drive for fuel price escalation clauses in contracts, says an industry official.

The Ontario Sewer and Watermain Construction Association (OSWCA) and the Greater Toronto Sewer and Watermain Construction Association (GTSWCA) recently came together to undertake a joint study to look at fuel escalation. KPMG was brought on board to help administer a survey to collect concerns and feedback about fuel consumption for sewer and watermain projects.

The study helps support the two associations’ efforts to persuade municipalities and property owners to include a fuel price escalation clause as a standard contract term for sewer and watermain construction work.

Frank Zechner, executive director of OSWCA, says that some kind of protection would help industry members because the price of fuel is so volatile and so often “depends on political climates or the next hurricane.”

Survey responses were collected throughout the summer and the survey was made accessible via the Internet. The final report is expected some time this September. Even though prices may drop, contractors should not think that any dip in fuel prices mean stability, adds Zechner.

“It usually goes up faster than it comes down,” he says.

— VINCE VERSACE

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