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Construction Advisory_Q2 2020

Q1 2021 Summary: Recent shortages in steel, lumber, and piping may have considerable cost implications on projects. Long term, projects may experience more success through an in-sync testing plan and a strong safety culture.

How Material Shortages Are Impacting Project Delivery

According to the U.S. Chamber of Commerce’s commercial construction index, the short supply of building products and materials, like steel, lumber, and piping have had considerable cost impacts on projects.

Steel prices have soared in recent weeks, including rebar and structural steel increases of $185 per ton or more. Manufactured steel products like raised access floors, electrical panels, and glazing systems are also experiencing sharp increases. Market volatility and the potential of another 10 percent increase have caused vendors to hold their pricing no more than 30 days. Supply chain issues, international policies, and tariffs will continue to influence steel pricing throughout 2021. We expect these issues also to delay production and delivery.

Similarly, a boom in residential construction since the pandemic began has heightened demand for lumber. Lumber prices have doubled from the pre-COVID average and continue to ride an unpredictable rollercoaster.

We have also received news of an eight percent increase in the price of piping material this quarter.

With material prices rising and trade contractors accumulating a backlog of work, the industry may soon see higher bids and price escalation in estimates.

02_2021_HMTWH S Tower Steel
Steel structure at the Houston Methodist The Woodlands Hospital, South Tower Expansion project.

4 Pitfalls to Avoid When Hiring Third-Party Agents

Planning to hire a third-party testing agent for your next project? Before doing so, take time to evaluate how the testing scope aligns with the contractor’s scope and the project schedule. An out-of-sync testing plan could duplicate efforts, delay the project schedule, or generate unnecessary expenses.

When Owners hire third-party testing firms, the following issues can occur:

  • Overlapping testing. Sometimes the required testing may already be covered by the trade contractor or manufacturer. For example, since most flooring manufacturers require alkalinity and adhesion tests, they are typically included in the flooring contractor’s scope.

  • Not enough site visits budgeted. Before soliciting a proposal from the testing company, ask your contractor how many trips to the site will be required for cover-up and envelope testing. The number of visits should reflect the number of phases in the contractor’s schedule. If the testing firm isn't aware of the number of visits needed, it will impact the contractor’s ability to maintain the project schedule.

  • Unnecessary tests. Ask your contractor to verify whether certain types of tests are relevant for the type of project you are building. For example, floor flatness testing may not be necessary for elevated steel structures.

  • Document conflicts. Ensure the required testing is included in the construction documents. During constructability reviews, we often see conflicts between the Owner’s requirements in the contract and what is specified in the construction drawings and specifications, particularly for concrete, MEP equipment and building envelope systems.

Reviewing the testing requirements with your contractor will ensure you purchase the proper testing scope without misappropriating dollars or causing undue schedule delays.

02_2021_UTRGV SOM Neurosciences
The University of Texas Rio Grande Valley, School of Medicine Institute of Neurosciences project is on schedule due to successful early coordination of the project schedule and number of weld inspection trips.

What Do the Safety Numbers Mean?

A contractor’s good safety record has numerous benefits for a project. Generally, Owners ask for the OSHA recordable incident rate (RIR) and experience modification rate (EMR), but what do these numbers mean? Additionally, do these safety numbers show a strong safety culture?

The RIR and EMR are lagging indicators that demonstrate the contractor’s past safety performance. The OSHA recordable incident rate (RIR) represents the number of employees out of 100 who suffered a recordable injury. A recordable rate of 1.0 means for every 100 employees, one employee experienced a recordable incident. A lower number equates to fewer injured employees. The EMR is based on the number of claims/injuries a company has had in the past year which corresponds to their insurance costs. An EMR of 1.0 is the industry average. If a contractor’s EMR is less than 1.0, the workers’ compensation insurance premium is lower than average.

While statistics like the EMR and RIR demonstrate past safety performance, they do not illustrate the full picture of a contractor’s current safety culture. A better way to anticipate future safety performance is to evaluate a contractor’s leading indicators. Ask the firm to provide measurable data about the execution of programs and practices which demonstrate a proactive approach to preventing incidents and injuries on its job sites.

A final item to consider is whether the general contractor has a self-perform force of craft workers. General contractors with no craft workforce typically have lower recordable rates since their limited supervisory staff doesn't perform the risky work. A general contractor who self-performs a significant amount of work and has a low recordable number is strongly committed to safety.

02_2021 Life Safety Board
We implement our "Safety First - Every Task, Every Day" safety culture at our projects utilizing the life saving commitment board.

About Vaughn Construction

Vaughn Construction is a Texas-based construction company that specializes in new construction, renovations and additions to civic, healthcare, education and research facilities. The privately-held company has offices in Austin, Bryan/College Station, Dallas/Fort Worth, El Paso, Galveston, Houston, Lubbock, San Antonio, and the Texas Medical Center (Houston).