1. The 2021–2024 materials crisis: lessons for future projects
The materials crisis triggered by the post-pandemic recovery in 2021 was a systemic shock without precedent in French construction since the oil shocks. In under 18 months, steel prices rose 40 to 80 %, structural timber 30 to 60 %, insulation 20 to 40 %. The crisis exposed three structural fragilities in the industry.
- Dependence on imported raw materials: steel, aluminium, copper, PVC, whose prices are set on world markets beyond any local influence.
- The concentration of supply chains: the pandemic revealed that many materials were produced in a handful of global plants whose simultaneous shutdown created massive shortages.
- The absence of revision clauses in many private contracts: unlike public contracts, where revision is virtually obligatory beyond three months, private contracts negotiated before 2021 often carried firm prices, exposing contractors to outright losses and pushing them to claim variations with no contractual basis.
Projects contracted in 2019–2020 at firm prices over 24 months saw their contractors either file massive non-contractual variations or absorb losses that precipitated failures. Clients who had provided revision clauses were protected, at the price of a budget revision but without contractual rupture.
2. The national cost indices: the basis of all contractual protection
The building cost indices published each month by the national statistics institute are the official instruments measuring the movement of construction costs in France. They are organised by trade and form the legal basis of revision clauses in French works contracts.
| Index | Scope | Volatility 2021–2023 | Principal components | Contractual use |
|---|---|---|---|---|
| BT01 | Masonry and structural work | ★★★ Moderate, +12–18 % | Cement, steel, aggregates, labour | Structural and external works contracts |
| BT05 | Structural steelwork | ★★★★ High, +25–45 % | Rolled steel, fixings, labour | Steel frame and metalwork contracts |
| BT12 | Aluminium external joinery | ★★★ Moderate, +15–22 % | Aluminium, glass, ironmongery | Façade and external joinery contracts |
| BT20 | Internal painting and finishes | ★★ Low, +8–12 % | Resins, pigments, labour | Painting and finishes contracts |
| BT28 | Thermal insulation | ★★★ Moderate, +14–20 % | Mineral wool, polystyrene, polyurethane | External insulation and loft insulation |
| BT33 | Zinc and slate roofing | ★★★★ High, +20–35 % | Zinc, lead, natural slate | Roofing and flashing contracts |
| BT40 | Building electrics | ★★★ Moderate, +12–18 % | Copper, cable, accessories | Power and data contracts |
| BT50 | Heating, ventilation, plumbing | ★★★ Moderate, +10–16 % | Copper, stainless steel, radiators | Mechanical and plumbing contracts |
| TP01 | Earthworks and external works | ★★★ Moderate, +12–20 % | Fuel, steel, aggregates | External works, earthworks, roads |
Each index is calculated from a basket of costs representative of the trade concerned: raw materials, energy, labour, transport. Monthly publication allows the price revision to be calculated precisely between the base date of the contract and the date the work is carried out.
ℹ How to read a revision clause The standard formula reads: revised price = initial price × (0.15 + 0.85 × the index at the month of execution / the index at the base month). The 0.15 coefficient represents the fixed part of the price, not revisable, covering the firm's fixed costs. The 0.85 coefficient represents the variable part, revisable against the index. The base month is generally the month the offer was submitted. That formula is standard and can be adapted to the context of each contract.
3. The four types of protective clause
| Type of clause | Mechanism | Advantage for the client | Drawback | Recommended for |
|---|---|---|---|---|
| Firm price, not revisable | The price is fixed at signature, with no revision | A certain budget, no surprise | The contractor builds an inflation premium of 3–8 % into its price | Short sites under 12 months in a stable period |
| Firm price, indexable | Updating between offer and notification against the official index | The price updated before commitment, and equitable | A slight calculation complexity | Recommended systematically once notification is more than three months away |
| Revisable price | Periodic revision during construction against the indices | The contractor does not build in an inflation margin, so prices are more competitive | An uncertain budget if inflation is strong | Long sites beyond 18 months; mandatory on public contracts beyond three months |
| Revisable with a cap | Revision limited to a percentage of the initial price, for instance 10 % | Protection against extreme inflation | The contractor may claim if the cap is exceeded | Periods of strong uncertainty; a cap at 8–12 % is recommended |
| Advance procurement | A clause allowing at-risk materials to be bought early | Material costs frozen at order | Storage risk plus early funding | Steel, copper and zinc contracts on sites beyond 24 months |
The general recommendation is this: for sites lasting more than 12 months, or where more than six months separate the design estimate from contract signature, the firm indexable price is the indispensable minimum. For sites beyond 18 months, a periodic revision clause is recommended. A firm non-revisable price is acceptable only for short sites in a period of price stability, which, since 2021, has been a rare window.
4. Inflation impact package by package
To make the risk concrete, here is a simulation on a programme with 1,200,000 € of works, 15 apartments, roughly 750 m² habitable, with inflation at 5 % a year over 18 months between the design estimate and handover.
| Package | Share of the contract | Volatility | Initial cost (€) | At 5 % a year over 18 months | Additional cost (€) | Recommended clause |
|---|---|---|---|---|---|---|
| Steel frame | 12 % | High | 144,000 | 155,700 | + 11,700 | Revisable, steelwork index |
| Aluminium façades | 14 % | Moderate | 168,000 | 180,600 | + 12,600 | Revisable, joinery index |
| Concrete structure | 25 % | Moderate | 300,000 | 322,500 | + 22,500 | Revisable, masonry index |
| Mechanical and plumbing | 11 % | Moderate | 132,000 | 142,000 | + 10,000 | Revisable, services index |
| Electrics | 9 % | Moderate | 108,000 | 116,100 | + 8,100 | Revisable, electrical index |
| Zinc roofing | 5 % | High | 60,000 | 67,500 | + 7,500 | Revisable, roofing index |
| Stable packages | 24 % | Low | 288,000 | 295,000 | + 7,000 | Firm price |
| TOTAL | 100 % | , | 1,200,000 | 1,279,400 | + 79,400 | A mix by package |
| Effect on the budget | , | , | Reference | + 6.6 % | + 6.6 % | A minimum 7 % provision |
The simulation gives three practical lessons. The packages with high metal content, steel frame, zinc roofing, are the most exposed, their volatility being structurally higher. The minimum recommended provision is 7 % of the total contract sums for an 18-month site with moderate inflation. And a mix of clauses, revisable on the volatile packages, firm on the stable ones, is the optimal strategy.
5. Advance procurement: when it is justified
Buying at-risk materials early, steel, copper, zinc, aluminium, is an advanced contractual strategy consisting of authorising or ordering the purchase as soon as the contract is signed, before work actually starts. It is justified in two precise cases.
Long contracts with very volatile materials
On a 30-month site with a substantial steel structure, buying the steel at contract signature, 18 months before it is used, freezes the price at the most favourable moment. The counterpart is a need for early funding and storage costs, which must be priced and compared with the inflation risk.
Periods of demonstrated market tension
Where market signals indicate certain tension on a key material, an announced shortage, a plant closure, a logistics crisis, advance procurement can avoid both the premium and the supply failure that would delay the site.
ℹ The limits of advance procurement Buying early creates new responsibilities: who insures the stored materials? Where are they stored? Who is responsible for theft, damage or a quality defect discovered at installation? These questions must be dealt with contractually before going down that road. Moreover, advance procurement protects only against a rise, not a fall. If the material's price drops after the early purchase, the client has paid more than necessary.
6. The economist's role
Protection against inflation risk rests on two complementary tasks.
- At design and tender stage, the budget provision: build into the budget a revision provision calculated over the anticipated interval from design to contract signature, multiplied by the expected sector inflation trade by trade. That provision appears in the budget alongside the contingency, distinct and traceable.
- At award, drafting the clauses: recommend the type of clause suited to each package according to its volatility and the expected duration; calculate the base index value at the date of the offers; and check, when analysing the offers, that contractors have not built an excessive inflation premium into their prices, a signal of mistrust towards the revision clauses.
In summary
Material and inflation risk is structural and foreseeable; it does not justify anxiety but demands a contractual answer. The national building cost indices are the legal basis of every revision clause. Four types of clause cover the spectrum: firm price for short stable sites, firm indexable price recommended systematically beyond three months, revisable for sites beyond 18 months, and revisable with a cap in periods of strong uncertainty. On a 1.2 M€ site with 18 months from design to handover at 5 % a year, the unprotected additional cost is 79,400 €, 6.6 % of the budget. The minimum recommended provision on that configuration is 7 %.
The nature of the figures quoted
The percentages and amounts quoted on this page are orders of magnitude for framing, not measurements. They illustrate mechanisms and proportions, and they substitute neither for a tender exercise nor for an estimate prepared on drawings.
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Sources: the BT construction cost indices published monthly by INSEE on its 2010 base, used to update the figures · construction cost statistics from SDES, the statistical service of the ministry responsible for construction · regulatory texts published in the Journal officiel and consolidated on Légifrance for the requirements cited.