REAL ISSUES. REAL ANSWERS: Guaranteed Pricing and Quantities

REAL ISSUES. REAL ANSWERS: Guaranteed Pricing and Quantities
Since it can take a year or longer to go from quote to project completion, it’s becoming more common for builders to seek protection from pricing volatility by asking their LBM dealer to guarantee prices and materials for longer periods of time. Given the unpredictability of commodity pricing over weeks or months, such guarantees have the potential to take a big bite out of an LBM dealer’s already thin margins. Then again, the margin is always zero on a sale that goes to the competition.

While the new construction and remodeling markets are growing stronger in most areas of the country, the battle for business rages on for many dealers. In an industry known for razor-thin margins, this issue can have significant consequences for a company’s bottom line. Here’s the suggested question from a Minnesota dealer: “Our issue has to do with guaranteed material quotes. More and more contractors expect the lumber dealer to hold the pricing and quantities on their bids to build the project. This is an alarming trend that has no end in sight. How are other dealers managing this challenge?”

As we do each month, we sent a brief survey to the LBM Journal subscribers who’ve opted in to receive our email communications. Thank you to the 128 dealers who took time to share their insights. If you’d like to participate in future surveys, please drop me a note at


When your company quotes a project for a builder, for how long are the prices and quantities guaranteed? First, we wanted to benchmark how long respondents typically guarantee product prices and quantities. As you’ll see in the chart at right, 30 days is the most common answer at just over 50%, with 10 days a distant third at just over 13%. Interestingly, nearly one-quarter of respondents checked “Other (please specify).” As you’ll see in the sample responses below, most of these answers are situational—with fewer hard and fast rules.

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