Readers Respond: How contractors deal with sticker shock
The cost of popular construction materials has skyrocketed since the start of the COVID-19 pandemic. About 82.5% of construction materials have increased significantly since 2020, with an average jump of 19%, according to construction cost data tracking firm Gordian.
Although prices for some commodities have leveled off this year, they remain for the most part way above their pre-COVID amounts.
Construction Dive readers say they are grappling with high prices on a variety of materials. In a Construction Dive survey last week, they listed some of the products that have soared in cost recently, including lumber, concrete, steel and electrical equipment.
Materials that readers say have increased in price since 2020
Source: Construction Dive Friday Feedback survey July 2023
Almost across the board, respondents said the rising prices have led to the cancellation of some projects. Customers want to “wait until the market calms down,” said Josean Terron of Houston.
Another reader, Gary Morgan of Fort Worth, Texas, said some of his firm’s hospitality clients have canceled jobs with no intent to go forward while other owners have redesigned jobs as larger projects to better able spread out costs.
“We’ve had several [customers] go out of development completely as they say they can’t make money at current costs for labor and materials not to mention interest rates,” he said.
With hardly any type of building material exempt from higher prices, respondents said they address the issues in several ways. Some said they adjust their fees while others look for alternative materials they can sub in for less money.
Others redo their contracts in order to protect their companies from escalating prices, even though clients and owners may hesitate to pay these premiums. Sometimes, additional costs get pushed down to subcontractors, said TJ Goloboski of Washington, D.C.
Carol Feeley from New York City said her company has considered reusing electronic equipment from decommissioned sites.
Many respondents said they work to procure materials months ahead of time, even though that can lead to additional storage costs.
“Locking in longer lead times is crucial,” said Mike Spanos, senior estimator at McHugh Construction in Chicago. “Waiting just a few weeks can result in cost and schedule increases.”
Effective communication among all parties can help alleviate some of the worst problems associated with inflationary prices, he added.
“The earlier subcontractors and vendors are on board and collaborating with the rest of the team, the better,” he said.