By / Stan Kolbe, Executive Director of Legislative and Political affairs, SMACNA
SMACNA’s national office has requested that the Department of the Treasury take expedited attention to address the critical issue of tariff-driven cost increases that are severely impacting subcontractors working under existing federal contracts. With support from more than 3,500 construction firms engaged in industrial, commercial, residential, architectural, and specialty sheet metal and air conditioning construction in both the public and private sectors throughout the United States, SMACNA asserts that this is an action that would boost public construction and represent greater fairness in federal procurement. The imposition of tariffs under Sections 232 and 301, along with frequent revisions to these tariffs, has resulted in significant and unpredictable cost increases for materials such as steel, aluminum, and other imported goods. These are costs that threaten any profitability reasonably expected on existing short or multiyear federal projects, especially contracts entered into before the wave of tariffs were announced in spring of 2025.
While the Federal Acquisition Regulation (FAR) provides Economic Price Adjustment (EPA) clauses, which allow for price adjustments in response to unforeseen cost increases, these provisions are often not made available to subcontractors. As a result, subcontractors are unfairly burdened with the responsibility of absorbing the rising costs caused by tariffs, which are outside their control. Therefore, SMACNA National is advocating for immediate administrative action by reaching out to key officials in the Trump Administration, particularly Treasury Secretary Scott Bessent, to:
Issue clear administrative guidance
Direct the relevant federal agencies to issue guidance permitting subcontractors to invoke EPA provisions for price adjustments due to cost increases arising from tariffs. This guidance should ensure that subcontractors are afforded the same protections as prime contractors when tariff-induced cost increases occur.
Clarify that tariff relief applies only to cost increases
Ensure that EPA adjustments are strictly limited to cost increases resulting from tariffs, and that such provisions cannot be used to reduce prices when tariffs are removed or lowered. Given the volatility of tariffs, it is essential that the adjustment mechanism be one-directional, protecting subcontractors from price increases without penalizing them when tariffs are lifted.
Standardize documentation and process for tariff adjustments
Establish clear guidelines for subcontractors to substantiate tariff-driven cost increases, including simplified documentation requirements such as supplier invoices, import duty records, and customs data. This will facilitate a transparent and efficient process for obtaining price adjustments.
While administrative action is the most immediate and effective solution, SMACNA National also recognizes the need for legislative remedies that would ensure that subcontractors are consistently protected from the impacts of tariff-induced cost increases. It has asked that the federal government consider the following legislative actions:
- Mandate the flow-down of economic price adjustment clauses to subcontracts: Require that prime contractors include EPA clauses in subcontracts when price increases are due to government-imposed tariffs, ensuring that subcontractors have the same ability to recover increased costs as prime contractors.
- Legislate the use of EPA clauses for tariff-driven cost increases: Congress should move quickly to pass legislation that explicitly authorizes subcontractors to seek price adjustments due to tariff-driven cost increases. This would provide clear, standardized procedures for how subcontractors can request and receive price adjustments, ensuring fairness and predictability.
- Ensure EPA clause protections for subcontractors against retroactive price reductions: Ensure that EPA clauses are not used for retroactive price reductions when tariffs are lifted. The increasingly unpredictable nature and direction of tariff impositions and removals means that subcontractors should not be penalized if tariffs are reduced after materials are already procured and work has commenced.
Subcontractors are essential to federal contracting, and the ability to manage tariff-driven cost increases is critical to maintaining the financial viability and competitiveness of these businesses. Without access to the protections afforded by EPA clauses, subcontractors face significant financial strain, and many may be forced to forego participating on or bidding federal contracts. More importantly, many federal contractors may not remain financially viable due to their federal contract tariff costs, costs that also threaten unrelated private sector project work.
SMACNA National advocates immediate action to relieve the cost burden of uncertain and unprofitable contracts resulting from unpredicted tariffs. It is also essential for Congress to advocate these and other necessary changes increasing federal contractor economic stability. Congressional leadership in raising this important tariff related contracting issue is crucial to guarantee that subcontractors are not harmed on existing and future contracts or left exposed to the risks of ongoing and unpredictable tariff-induced price fluctuations. It is also necessary that the federal procurement change order process be reformed to be fairer, more competitive, and highly transparent. ■
