How Rising Lumber Prices Affect Your Bids

Read This First

You lock in a bid, buy the lumber three weeks later, and the framing package costs more than you quoted. [That gap comes out of your margin, and if your margin is already thin, that gap is your paycheck](/articles/why-you-keep-underpricing-jobs). Lumber prices in 2020 climbed 130 percent between April and September alone, with some dimensional lumber up as much as 158 percent in the same stretch.^[3] A struggling shop does not survive a swing like that on a fixed-price bid. This article is about the mechanics of that problem and what actually protects you from it.

Why a Fixed Bid Is a Bet You Can Lose

When you hand a client a fixed price without an escalation mechanism, you are generally agreeing to absorb cost increases between signing and purchasing the material. On a stable material, that is a reasonable promise. On lumber, it is a bet. Framing lumber has already demonstrated how extreme the swings can be: prices surged more than 300 percent during the 2020–21 spike and were still trading about 20 percent above 2019 levels at the end of 2023 before easing in 2024.^[7] As of October 2024, the Random Lengths Framing Lumber Composite had risen to $411, its third straight weekly increase and its highest level in months, as buyers reported supplies were tightening.^[8]

That volatility is why material cost is the number contractors lose sleep over. In the Associated General Contractors' 2022 outlook survey, 86 percent of contractors named material costs as a top concern.^[1] You are not overreacting. You are reading the same market they are.

The Damage Doesn't Stop at Margin

[A blown material number does not just shrink your profit. It can kill the job.](/articles/break-even-point-formula) About 43 percent of contractors reported that at least one project in the previous six months had been canceled, postponed, or scaled back because of higher costs.^[2] When your bid comes in high because you padded it against a price swing, you lose work. When it comes in low and the price swings anyway, you lose money. Either way the volatility is running your business instead of you.

A 10 percent lumber increase does more damage to your bottom line than it looks like on paper. Say your lumber package runs $25,000 on a $100,000 job with a targeted $20,000 gross profit. A 10 percent increase adds $2,500 in cost, straight out of that profit — dropping it from $20,000 to $17,500, a 12.5 percent hit from a 10 percent price move.

And lumber is not the only material moving. Steel and aluminum tariffs were raised to 50 percent in June 2025, and a 50 percent copper tariff took effect that August.^[2] If your framing package leans on fasteners, connectors, or wiring alongside the lumber itself, more than one line on your estimate is exposed at the same time.

What to Change

Stop pricing volatile materials the way you price your labor. The tool built for this is a price escalation clause, a contract provision that lets you recover some or all of the cost increases that hit over the life of a project.^[3] Its whole purpose is to shift the financial risk of a price swing off your back and onto a shared framework instead of your margin.^[5] There are two common shapes: a delay or event clause that triggers on a specific circumstance, and a percent-change clause that adjusts the contract price when material costs move past a set threshold.^[3]

If you want a ready-made version instead of writing your own, ConsensusDocs publishes a standard material price escalation amendment, its Document 200.1, which gives you a baseline price and a built-in calculation method for adjustments.^[4][6] Know what you are working with on the other contracts too: standard force majeure provisions usually buy you an extension of time, not extra money, when materials get scarce.^[6] Time does not cover a price spike. Only an escalation mechanism does.

One caution for anyone hiring out framing. Escalation clauses in subcontracts are not typical.^[6] If you carry an escalation clause with your owner but your framing sub does not carry one with you, you have only protected one link in the chain. Push the same protection down the line, or you will absorb the difference yourself.

Bottom Line

A fixed lumber bid is a promise to eat every price swing between signing and buying, and that market has swung by triple digits before. Put an escalation clause in the contract so the price you quote can move with the material, instead of coming out of your pocket.

Sources

1. Associated General Contractors of America: Materials prices soar 20 percent in 2021; most contractors list costs as top concern in 2022
2. Associated General Contractors of America: Construction material costs continue to accelerate in August amid extreme price hikes after new tariffs
3. Construction Executive: Protect the bottom line with a price escalation clause
4. ConsensusDocs: Price escalation clauses in construction and tariffs
5. Procore: Escalation clauses in construction contracts, when and how they apply
6. Woods Aitken Law Firm: Six ways to manage the risk of material price escalations and supply-chain delays
7. NAHB: How soaring prices for building materials impact housing
8. Fastmarkets: Framing lumber prices continue to climb as supplies tighten