Construction Material Costs Are Up 6.6 Percent. Here Is How to Protect Your Bid in 2026.

# Construction Material Costs Are Up 6.6 Percent. Here Is How to Protect Your Bid in 2026.

By George Carrillo, CEO, Hispanic Construction Council | June 10, 2026

Construction material costs and energy prices rose faster in the first half of 2026 than at any point since the post-pandemic supply chain surge. An escalation clause -- a contract provision that allows a price adjustment when specified materials or fuel costs move past a defined threshold -- is no longer optional language for contractors in a volatile market. It is the difference between holding margin and absorbing a loss.

Diesel fuel prices rose 13.6 percent in April 2026 alone. Over the past twelve months, diesel is up 73.8 percent. Asphalt prices rose 18 percent year-over-year, with a sharp spike in the most recent reporting period. The producer price index for inputs to new nonresidential construction climbed 1.7 percent in April and 6.6 percent from April 2025. These are not projections. They are the published numbers from the Associated General Contractors of America as of May 13, 2026.

Here is the question those numbers raise: when you submitted your last bid, did you account for fuel costs that are running 74 percent above year-ago levels?

If you held a fixed price without an escalation clause, you did not transfer that risk. You absorbed it.

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What Happened to Construction Input Prices in the First Half of 2026

The AGC's May 13 analysis paints a clear picture of where cost pressure is coming from. Energy is the sharpest increase: diesel, which powers every piece of heavy equipment on a construction site and every delivery truck moving materials to it, is the standout. A 13.6 percent single-month increase in April means that if your fuel cost estimate was based on March numbers, you are already behind.

Asphalt is the second significant signal. Road and site work contracts that were priced in late 2025 or early 2026 against asphalt price forecasts are now running against a market that has repriced substantially. Road and heavy civil subcontractors are most exposed, but the impact extends to site preparation, parking, and utility work wherever asphalt is part of the scope.

The broader nonresidential construction input price index -- which includes materials, energy, and other direct project costs -- is up 6.6 percent from a year ago. That means a project that would have cost $10 million in direct inputs a year ago now runs approximately $10.66 million in the same scope. If the general contract was priced a year ago on fixed-fee assumptions, the prime contractor is looking for somewhere to absorb that difference -- and too often, the answer is pressure on the subcontractor.

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Why Small Subcontractors Absorb Disproportionate Cost Risk

Large contractors have tools that small subcontractors typically do not. They negotiate volume supply agreements with material suppliers, locking in prices for scheduled deliveries. They build escalation clauses into prime contracts, giving them a defined path to recover documented cost increases from owners. They have the overhead capacity to track market price indices, update bid models, and engage in price-adjustment conversations with owners and primes before a contract goes into execution.

Small subcontractors, and particularly small Hispanic-owned subcontractors operating in the specialty trade tier, rarely have those protections. They are often presented with scope packages and told to hold their price. In a market where diesel has moved 74 percent in twelve months, holding your price without a mechanism for cost recovery is not a bid. It is a commitment to absorb whatever the commodity markets do between now and project completion.

This is a structural problem HCC has documented in this industry for years. The Capacity Gap national study established that Hispanic-owned construction firms generate approximately $779 billion in annual revenue but capture only 7.1 percent of total construction industry revenue against a 34 percent workforce share. Part of that gap is bid access. Part of it is capital access. And part of it is that the risk structures built into contract documents are not designed with small subcontractors in mind -- and small subcontractors often lack the legal and financial capacity to push back on those structures before they sign.

When input prices move at the speed they are moving now, that structural disadvantage becomes a cash flow crisis in real time.

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Three Bid and Contract Practices Worth Implementing Now

Add escalation language to your proposals. An escalation clause does not have to be complex. At minimum, your proposal should state that fuel and material prices are subject to adjustment based on the published indices that govern your primary cost categories -- diesel fuel, asphalt, steel, concrete, or whatever drives your scope. Reference the specific index (BLS Producer Price Index for your category, FHWA fuel price tables, or the AGC Materials Price Index). If the prime or owner pushes back on your escalation language, you now have a documented basis to negotiate -- or to price the risk premium directly into your fixed bid.

Track the indices that govern your costs. The AGC Materials Price Index, the BLS Producer Price Index for construction inputs, and the Energy Information Administration's weekly diesel price report are all publicly available and free. If you are bidding work that will run six to eighteen months, and you are not looking at the 12-month trend on your primary cost categories before you price, you are estimating without the information the bid requires.

Bid the risk explicitly when you cannot transfer it. If you are working with a general contractor who will not accept escalation language, you have two options: walk away from the scope, or price the commodity risk into your bid. A 74 percent diesel increase in twelve months suggests that a 10-15 percent risk premium on fuel-exposed scopes is not irrational. That premium needs to be visible in your estimate as a line item, not buried in contingency, so you can defend it if the bid is questioned.

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What HCC Is Tracking

HCC monitors construction materials pricing, bid structure practices, and the financial conditions facing small and Hispanic-owned subcontractors as part of the research underlying the National Infrastructure Series and the NXT Infrastructure Database. Our Capacity Gap study documented the structural capital barriers that make Hispanic-owned firms more exposed to commodity price volatility than their non-Hispanic peers.

If you are navigating materials cost pressure on active projects and want data or framing for a conversation with your prime contractor or bonding agent, HCC's research is publicly available at hispanicconstructioncouncil.com. If you want to share what your firm is experiencing in the current materials market, contact us directly -- that field intelligence informs the policy and contractor-support recommendations we bring to Congress and to industry.

Construction costs are rising. The firms that build cost-tracking and risk-transfer practices into their bidding process today are the ones that can maintain margins, keep crews employed, and stay solvent through a volatile materials environment. The firms that absorb it silently are not.

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Frequently Asked Questions

How much have construction material costs increased in 2026? According to the Associated General Contractors of America (AGC), the producer price index for inputs to new nonresidential construction rose 1.7 percent in April 2026 and 6.6 percent from April 2025. Diesel fuel prices, which affect every equipment-dependent and delivery operation on a construction site, rose 13.6 percent in April alone and 73.8 percent year-over-year. Asphalt prices rose 18 percent year-over-year.

What is an escalation clause in a construction contract? An escalation clause is a contract provision that allows the contract price to be adjusted if specific materials, fuel, or labor costs change by a defined amount. The clause typically references a published index -- such as the BLS Producer Price Index for construction inputs or the EIA weekly diesel price report -- and specifies the threshold that triggers an adjustment and how the adjustment is calculated.

How can a small subcontractor protect against material price increases? Three practices provide direct protection: (1) include escalation language in your proposal that references the specific price index governing your primary cost categories; (2) track the AGC Materials Price Index, BLS Producer Price Index, and EIA weekly diesel report before pricing any contract longer than 90 days; (3) if you cannot transfer the risk, price it explicitly as a line-item risk premium rather than burying it in contingency.

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Sources: Associated General Contractors of America, "Surging Materials and Energy Costs Drive Construction Input Prices Sharply Higher in April," May 13, 2026; HCC, The Capacity Gap: How Hispanic Contractors Are Solving America's Construction Labor Crisis, April 2026; U.S. Bureau of Labor Statistics, Producer Price Index for Construction Inputs; U.S. Energy Information Administration, Weekly Retail On-Highway Diesel Prices.