The Supply Chain Lag

Estimating in Volatile Markets

Category: Operations / Procurement

Meta Description: Government procurement cycles are slow, but material prices change weekly. Learn how to protect your HVAC business from price escalation risks.

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Government contracting operates on a slow timeline. A bid submitted in January might not be awarded until June, with a Notice to Proceed (NTP) in August. In today’s volatile HVAC market—where copper prices, steel, and equipment availability fluctuate wildly—this time lag creates a massive financial risk.

The Fixed-Price Trap

If your bid from January utilized spot pricing for chillers or handlers, and the manufacturer increases prices by 12% in March, you must adhere to the January price. Government contracts rarely allow for price adjustments after the bid closes unless specific clauses were included. Small businesses often end up absorbing this cost, destroying their margin.

Defensive Estimating

To survive, you must treat your suppliers as strategic partners, not just vendors.

Price Protection: Negotiate with distributors for price locks contingent on award dates.

Escalation Clauses: Where regulations allow, include escalation clauses in your proposals.

Communication: Be transparent with the Contracting Officer about lead times and supply chain volatility during the RFI phase.

Don’t let the government’s slow process bankrupt your fast-moving business.