Costs Are Up 7.1% in a Year. Don't Let Your Spring Bids Eat the Difference.
The July numbers are in, and they're not friendly. AGC's latest read on the producer price index shows input costs for nonresidential construction up 7.1% from a year ago. Diesel is up 44%. Liquid asphalt is up 45%. Aluminum mill shapes are up 40%, steel mill products 22%, copper 18%. And it's not just materials. Construction wages grew 5.2% over the same stretch, the fastest pace since early 2024 and well ahead of the 3.2% average across the private sector.
Here's the part that matters for your P&L: if you bid work in February or March at February or March prices, the gap between what you priced and what you're paying right now doesn't come out of the owner's pocket. It comes out of yours. And JLL's mid-year forecast says cost escalation is expected to pick up speed through the back half of 2026, not slow down.
Why a 7% cost move hurts more than it sounds
Say you're running a $2 million fixed-price job you bid at a 6% net margin. That's $120,000 of planned profit. If materials and subs make up 60% of the job and your remaining buyout drifts up even 5%, you can watch $40,000 to $60,000 of that margin disappear without a single thing going wrong in the field. No rework, no schedule blowup, no bad super. Just a bid that aged badly.
That's the trap with fixed-price work in a rising cost market. You price the job once, then spend six to twelve months buying at whatever the market charges. The contractors who protect margin in stretches like this aren't the ones with the best crystal ball. They're the ones with the tightest process. Here's what that process looks like.
Five moves to make before your next bid goes out
1. Get escalation language into every contract you can
An escalation clause shifts some price risk back to the owner when a defined material moves past a set threshold, say steel rising more than 5% between bid and purchase. Private owners will push back, but plenty will accept a clause tied to a published index because it cuts both ways. If you can't get escalation, shorten the validity window on your bids. A number that's good for 90 days in this market is a gift to the owner and a liability to you. Thirty days is a reasonable ask right now.
2. Buy out fast, and know what early buyout does to cash
The best hedge against rising prices is locking them in. When a job lands, buy out the volatile trades and materials first: steel, aluminum, electrical gear, anything with copper in it. AGC's survey data shows shortages and slower deliveries in aluminum, steel, switchgear, and wire and cable, so early orders protect your schedule too. Just go in with eyes open on cash. Early buyout often means bigger deposits and stored materials, and that cash goes out months before the billing comes in. Model it before you commit, and make sure your line of credit can carry the gap.
3. Shorten your job costing cycle
If you're finding out a job went sideways at month-end close, you're finding out four to six weeks after it happened. In a market moving this fast, that lag is expensive. Move to a weekly cost-to-complete review on active jobs, and make sure committed costs (signed POs and subcontracts) are in the picture, not just invoices that have hit the books. The question to ask every week is simple: at today's prices, what does it cost to finish this job, and is that number still smaller than what's left to bill?
4. Re-price your estimating database now, not at year-end
Most estimating databases get a serious refresh once a year. This year, that's not often enough. If your unit costs are six months old, they're quietly understating jobs by several points. Same goes for labor. With wages up 5.2% and Utah's market still tight for skilled trades, check that your fully burdened labor rates reflect what you're actually paying today, including the raises you handed out this summer to keep your best people from walking across the street.
5. Price change orders at today's cost, not the bid's
Change orders priced off original bid unit costs are a slow leak. Every CO should be built from current material quotes and current labor rates, with markup applied on top. It feels small on any one change, but across a season of work the difference between bid-day pricing and today's pricing on COs can be a full margin point.
Busy isn't the same as profitable
Along the Wasatch Front, most contractors we talk to have plenty of work. That's the good news. The risk is that a full schedule hides margin problems until tax time. Revenue climbs, everyone's running hard, and then the year-end numbers show you worked more and kept less. Rising input costs are exactly the kind of slow, quiet pressure that does that. The fix isn't working harder. It's knowing your numbers weekly, pricing at today's cost, and having the discipline to walk from work that only pencils at last spring's prices.
Worth watching this fall: the monthly PPI releases (the next one lands in mid-September), any movement on the 50% metals tariffs, and whether wage growth keeps outrunning the broader market. If input costs keep running ahead of what bid prices can absorb, the contractors who adjusted early will be the ones still holding their margins in December.
Sources: AGC analysis of July 2026 PPI data (ConstructConnect) | AGC Data DIGest, August 10 to 14, 2026 | JLL 2026 Construction Cost Report | AGC Construction Materials data
