Public works contractors across Washington and the U.S. are grappling with a costly and unresolved question: when the federal government imposes new import tariffs after a contract has been awarded, do those tariffs entitle contractors to additional compensation?
The answer depends on the contract and the public agency. Some public works contracts tie relief directly to whether tariffs are considered “taxes.” Others frame their adjustment clauses more broadly, focusing on changes in law or government-imposed costs. For contractors, the distinction is critical.
WSDOT: The Tax Question
Under the Washington State Department of Transportation’s (WSDOT) Standard Specifications, it would appear that tariffs are reimbursable as tax changes made after contract award. Section 1-07.1(5)B (Changes in Law to be Observed – Taxes) provides that “the Contracting Agency will adjust payment to compensate for tax changes.” However, WSDOT has taken the position that a tariff is not a “tax,” and the contractor gets no adjustment. In official guidance, WSDOT declared:
“Tariffs are not considered a tax under Section 1-07.1(5)B and therefore no price adjustment will be made.” WSDOT, March 18, 2025 Guidance Memo.
That interpretation leaves contractors absorbing significant unanticipated costs. The only path to recovery under WSDOT specs is to show that tariffs are taxes—a point that case law and Governor Ferguson strongly support.
The Legal Reality: Tariffs = Taxes
Courts and commentators have long recognized tariffs as a form of taxation:
- Brown v. Maryland (1827): Chief Justice Marshall described “a duty on imports” as “a tax on the article.”
- Gibbons v. Ogden (1824): Duties on imports were treated as part of Congress’s taxing power.
- Comptroller v. Wynne (2015): The U.S. Supreme Court equated discriminatory state taxes with tariffs, treating the terms interchangeably.
Even Washington’s Governor, Bob Ferguson, has publicly called tariffs a “tax on Washington families,” acknowledging their real-world effect. (KOMO 4 News, May 21, 2025).
It is unclear why WSDOT refuses to recognize that tariffs are reimbursable costs under Section 1-07.1(5)B. Until this issue is challenged in the courts, contractors will be awaiting an answer on the proper interpretation under the WSDOT Standard Specifications.
Other Public Owners: Language Matters
Outside WSDOT, the analysis depends less on labels and more on the language of the contract. Some owners’ provisions allow recovery for any change in law, regulation, or government-imposed charge, which may naturally encompass tariffs. Others provide more flexibility under price-adjustment clauses or even under force majeure or change-in-law provisions.
King County’s Tariff Reimbursement Process
In response to escalating trade tariffs, King County implemented a tariff reimbursement process under its price-adjustment provisions. The County recognized that tariffs act as government-imposed costs no different than taxes and built a system to provide relief while ensuring accountability.
Key features of King County’s process include:
- Vehicle for adjustment: existing price adjustment clause, no new contract language.
- Threshold: must exceed $250 impact.
- Documentation: invoice showing tariff applied; if not itemized, provide pre- and post-tariff pricing.
- Attestation: contractors must attest they sought alternative sources, though no documentation required.
- Application: extends to additional federal laws and taxes.
- Concessions: Increased costs due to tariffs after bid but before invoicing must be repaid to the County.
This process balances fairness to contractors with fiscal accountability for taxpayers. By addressing tariff costs directly, King County has reduced the likelihood of disputes, preserved competitive bidding, and ensured projects move forward without disruption.
If King County can implement such a system, there is no reason other public owners including state agencies like WSDOT cannot do the same.
Why It Matters
Public bidding is based on existing conditions at the time of award. When tariffs are imposed later, those costs are beyond the contractor’s control. Tax- and law-change clauses are designed to protect both sides when government action shifts the playing field. Interpreting “tax” to exclude tariffs undermines that purpose and shifts the entire burden to contractors—raising the risk of disputes, defaults, and delayed delivery of critical infrastructure.
The Path Forward
Until courts or the Attorney General provide clear guidance, contractors should:
- Comply with contract notice and claim requirements even if an owner denies tariff claims.
- Document tariff impacts with invoices and supplier correspondence, with as much specificity as possible.
- Treat tariffs as taxes in claims to preserve rights under tax clauses.
- Check all relief provisions—change-in-law or force majeure clauses may apply.
Public works contractors deserve clarity. WSDOT’s rigid stance has created uncertainty, while other owners like King County have shown a practical path forward. Ultimately, post contract award tariffs are additional costs that should not be borne by contractors and public owners should reimburse contractors for documented tariff cost increases.