Karl Ginand, Timberline’s Executive Vice President of Preconstruction & Estimating, shares his thoughts on the current environment.
1. What’s going on?
You’ve likely seen the headlines on the pricing and limited supply of construction materials, but let me give you a quick backdrop. In just a few months from Q4 2020 into Q2 2021 pricing has gone haywire. A 325% surge in lumber prices, according to Market Insider, and according to Engineering News-Record construction costs in Boston have risen 7.8% since just one year ago, while materials have risen 16.2%. We are working with subcontractors that are concerned with the volatility of materials and equipment, which has resulted in pricing with very limited commitment times. We are seeing structural steel pricing that expires in just three to seven calendar days (not business days) versus the typical 30 days just a few months ago.
2. How did this happen?
It’s no surprise that the Coronavirus pandemic is mostly to blame. Production of raw materials, manufacturing and fabrication was slowed down significantly. Now with pent-up demand, the production facilities are struggling to catch up causing shortages. These shortages have resulted in cost escalation in several construction components most noticeably steel, metal stud, lumber, insulation, light fixtures and HVAC equipment.
3. What can you do about it?
We’ve seen this happen before and construction supplies are not the only shortage in the US as the world reopens after this pandemic. Just like every crazy period, we will get through this and things will regulate. However, in the meantime, this is what we are suggesting for our clients.
- Early planning has always been a winning formula for a successful construction project. It is now more critical than ever to carefully incorporate materials and equipment procurement into the planning of a project. We are advising our clients to fully prepare the team to immediately make commitments on critical items. Our preconstruction planning is hyper-focused on being able to pull the trigger on key, high-risk materials quickly.
- Even though market conditions are extreme across the industry there are still significant differences between each subcontractors’ abilities to get materials and equipment. We are letting our subcontractors and suppliers know that we will be fully making commitments immediately and that availability will be a key component of the selection process. This ensures subcontractors and vendors are putting their best foot forward in terms of pricing and using their relationships to procure materials and equipment.
While we are riding this wave together, planning with clients and communicating with subcontractors surrounding commitments has helped us navigate through this period. Let us know if we can help you navigate with your projects too.
Please feel free to contact Karl with any budgeting or preconstruction questions.