By Christine Graf
\nEconomists and industry experts predict that the construction industry will continue to be plagued by rising material costs, material shortages and supply chain disruptions throughout 2021.
\n\u201cThe price increases are pretty drastic,\u201d said Sara Turoczy, manager of business development at MLB Construction Services in Malta. \u201cAlong with lumber, we are seeing steel pricing skyrocket.\u201d
\nMLB is a commercial builder. When the pandemic hit, they were working on projects for several customers including Saratoga Performing Art Center. The work at SPAC included construction of a two-story concession and venue space, as well as a smaller concessions building and an outdoor pavilion.
\nIn addition to continuing work on projects that were underway, MLB took on numerous last-minute projects.
\n\u201cWe\u2019ve been able to take on emergency calls in everything from medical to the hospitality industry,\u201d said Turoczy. \u201cIn the beginning, when no one really knew protocol or what needed to happen, healthcare was really scrambling to try to do the best that they could to section people in the right areas and keep everyone safe.\u201d
\nWhen company president Jim Dawsey received an emergency call from Wesley Health Care Center in Saratoga, he and a crew of workers were there the next day to build a space for the center to house COVID patients.
\n\u201cJim took the call on Friday, and he was up there on Saturday morning building it out himself with a small crew of people,\u201d said Turoczy.
\nMLB, a company with 66 employees and a second office in North Carolina, works in many different sectors of the construction industry and frequently bids on large projects. According to Turoczy, an increasing number of these projects are being postponed. She said state agencies are not currently awarding contracts.
\n\u201cThere is some uncertainty of whether some project will move forward at all. We haven\u2019t had any projects that have been specifically canceled. They have just all been postponed\u2014at least the ones we were looking at,\u201d she said. \u201cFor the most part, we are just being told that these projects are being postponed and reevaluated.\u201d
\nThese postponements can have major implications for companies that are bidding on jobs. If the owner of a project delays the awarding of the contract, there is the potential for material prices to increase dramatically during that time frame.
\n\u201cSince we have to hold our (bid) number, it becomes a challenge when the prices keep increasing between the bid due date and months later when the project gets awarded,\u201d said Turoczy. \u201cWe are nearing the third month of being asked by one owner to hold our price.\u201d
\nResidential home builders don\u2019t rely on the bidding process to secure contracts, but estimators face similar challenges. Some contractors incorporate escalation clauses into contracts to account for unexpected price increases. The clauses allow a contractor to be reimbursed for higher material prices if the rate of increase rises above a certain percentage, typically around 3 percent.
\nAccording to Jim Sasko, owner and president of Teakwood Luxury Building and Remodeling in Saratoga Springs, his company prefers not to use escalation clauses.
\n\u201cNobody ever wants to hear that there is an escalation clause in their construction contract,\u201d he said. \u201cWe as a company tend to avoid those and gamble a little bit with the market, which can be dangerous in some aspects. Lumber tends to be the biggest number that changes.\u201d
\nTeakwood is part of a market research group that uses data to forecast future lumber prices. They rely on these forecasts in the estimating process.
\n\u201cWe\u2019ve gotten lucky thus far,\u201d he said. \u201cWe tend to come out pretty darn close to where we need to be. It\u2019s rare in my industry to say we didn\u2019t spend all of our budget on lumber material. We usually find that number is quickly consumed with the homes we are building.\u201d
\nAlthough lumber prices have seen the biggest increases, material costs have been rising across the board. Sasko estimated that rising material costs have led to a 10-12 percent increase in the average price of a home.
\nDespite the rise in prices, sales at Teakwood are at record high levels in both new construction and remodeling segments.
\n\u201cOur business had never been stronger, and we are keeping 25 people employed,\u201d said Sasko. \u201cWe are planning for a very busy 2021 and are already booking in 2022.\u201d
\nSupply chain issues have impacted material availability and materials that aren\u2019t able to be purchased locally are sometimes taking many months to arrive. These delays apply to everything from appliances to bathroom faucets.
\nHilltop Construction owner Thomas Albrecht Sr. said his Glens Falls residential and commercial construction company has faced similar issues with material shortages.
\n\u201cExpectations of delivery are non-existent,\u201d he said. \u201cMy biggest challenge is educating our clients that you can have contracts and you can set dates, but we can\u2019t necessary meet them because of the challenges we are faced with. What you could get in 4 weeks max could now be out 8 to 12 weeks. That means our planning has to be much more extensive.\u201d
\nHilltop Construction has 30 employees, many of whom have had to quarantine due to COVID exposure. As a result, the company has to absorb additional labor costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
By Christine Graf Economists and industry experts predict that the construction industry will continue to be plagued by rising material costs, material shortages and supply chain disruptions throughout 2021. \u201cThe price increases are pretty drastic,\u201d said Sara Turoczy, manager of business development at MLB Construction Services in Malta. \u201cAlong with lumber, we are seeing steel […]<\/p>\n","protected":false},"author":196,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-35839","post","type-post","status-publish","format-standard","hentry","category-construction-planning"],"yoast_head":"\r\n