How would you handle a situation where a vendor suddenly increases their prices mid-project?

This is becoming more commonplace sadly. If we were mid project and the supplier had suddenly increased their prices, the first thing I would do would be to contact them to see if there is any room to negotiate to maintain the original rate, based upon the fact that we had secured work using their prices, and therefore were unlikely to have any recourse. This is the reason we work very closely with our suppliers throughout a project, to stay ahead of any potential price increases, possibly purchasing materials on call off ahead of time, just to ensure that the client, and us, have no nasty surprises. In my opinion, it is so important to try to stay one step ahead and as much as possible, and maintain open, honest lines of communication

If a vendor unexpectedly increases their prices mid-project, I’d first assess the impact on the overall budget. Open communication is key—I'd discuss the situation with the vendor, negotiating for better terms or exploring alternatives that align with the original budget. Next, I’d inform the client transparently, presenting solutions to maintain the project’s financial integrity. My priority is to ensure the project stays on track without compromising quality or exceeding the agreed-upon budget.

Requesting a force majure letter would be crucial as well. If costs have increased, getting as much detail and back up for the owners will help in making decisions.

Analyze how this increase impacts the overall budget and check if there’s room to absorb the costs without compromising the project. Then, explore alternatives like renegotiating with the supplier or finding more cost-effective options. Communicate transparently with your team and clients about the changes and potential adjustments. Prioritize project continuity, maintaining quality and meeting deadlines. Flexibility and strategic planning are essential to mitigating the effects of this unforeseen situation.

To explore alternatives, start by identifying other suppliers who can offer the same products or services at a lower cost. Evaluate the feasibility of substituting materials or adjusting scopes without sacrificing quality. Another option is to review the project timeline to negotiate better prices with the original supplier, perhaps by offering higher volumes or long-term commitments. Consider the possibility of splitting the supply between multiple suppliers to reduce risks and costs. Assess all alternatives with your team to ensure that the chosen solution is the most effective for the project.

When negotiating terms, start by reviewing the original contract to identify areas where adjustments can be made, such as payment terms, minimum order quantities, or delivery conditions. Present the supplier with concrete data on the impact of the price increase on the project and seek solutions that benefit both parties, such as volume discounts or more flexible payment terms. Be prepared to compromise on some points, but stay focused on the project's sustainability. Transparency and a collaborative approach are key to reaching an agreement that maintains a positive relationship with the supplier.

When conducting a legal review, start by examining all contractual documents related to the price increase to ensure they comply with the agreed-upon clauses. Consult with a contract lawyer to assess the legal implications of the increase and check for any loopholes or clauses that could be used to negotiate better terms. Ensure that any new agreements or adjustments are formally documented and that all parties involved are aware of and agree to the changes. A legal review helps protect your interests and ensures that all modifications are within legal and contractual boundaries.