Q2 2021 Summary: As the construction industry emerges from the pandemic, material shortages abound; and the cost of labor and materials, particularly steel, continues to escalate. Here are a few ideas to mitigate these issues on your projects.
Pent up demand for new construction and a shortage of materials has caused a steady rise in market prices. As trade contractors secure more work, they no longer need to discount their fees. Some markets are experiencing worker shortages as borrowed workers return to their local markets. Our estimators are budgeting five percent cost escalation through mid-2022. Some market experts are projecting as much as eight percent escalation through late 2022.
Following are our predictions for cost escalation in each market:
The short supply and rising cost of steel, including rebar, will have considerable impacts on projects through the rest of 2021. We have identified several strategies below to alleviate possible schedule and budget impacts. Ask your construction manager to perform a time and cost analysis, to help you decide whether any of these strategies are right for your project.
Use Steel Beams Instead of Long-Span Trusses
Steel fabricators are reporting hefty lead times for shop drawings and fabrication:
During the preconstruction phase of a new project, we discovered the lead time for joists and long-span trusses would extend the project schedule by three months. The project was time sensitive, so the structural engineer replaced all the long span trusses with structural steel beams, shaving three months off the lead time. Normally, this change would result in significant cost increases due to the tonnage increase. However, the escalating costs of long-span trusses negated any budget impact to the project.
Issue an Early Steel Bid Package
Work with the design team to issue an early elevated structural steel package separate from the typical foundation package. This approach allows your contractor to lock in pricing and shield the project from further cost escalation. For example, the University of Houston-Downtown’s Student Wellness and Success Center project required over 600 tons of steel. We bought out the steel while the design team completed the elevated structural steel construction documents. Through this approach, we expedited our steel buyout by four weeks, lowering our price by $150,000, approximately five percent.
Use Concrete In Lieu of Steel
Rising steel prices have made concrete structures more competitive because:
The Texas and Human Services, San Antonio State Hospital is using concrete structures after a detailed analysis was done during preconstruction to evaluate steel structure vs a concrete structure.
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, Houston, Lubbock, San Antonio, and the Texas Medical Center (Houston).