When stay-at-home orders rolled out in March, it was natural for our clients to ask, “Should we move ahead with construction, or postpone?” The answer has two parts. The first part of the answer has to do with impact the pandemic is having on giving, fundraising, and lending. Blueline will tackle this in a future post. The second part of the answer has to do with pressures that the pandemic is putting on construction costs.
Blueline asked seven contractors from around the country with whom we work three questions:
- What materials are likely to increase in cost over the next 12 months?
- How is disruption to supply chains affecting cost and lead-time of products?
- How are efforts to maintain worker safety and health affecting construction schedulesand general condition costs?
Key factors affecting cost of materials are the country of origin and disruptions to manufacturing. There was already price increases due to tariffs. David Lawrence of Forrester Construction in Rockville, MD cites materials coming from China and Italy, such as steel, light fixtures, glass, door hardware and stone as likely having near-term price increases due to shutdowns in those countries. Jeremy Stovall of Brookstone in Houston TX says that even pre-COVID 19 their company was planning on a 6% increase in material costs over the next 12 months. However, all the contractors noted that competitiveness in the labor market will result in downward trends on labor costs. Consensus is that reduced labor costs are likely to offset material costs for the next 6 to 12 months.
Lumber costs affect the cost of smaller projects more than large projects. Jim Monger of R. S. Monger and Sons says, “The lumber market has been left in a roller coaster of uncertainty.” Lumber pricing – for studs, plywood, OSB and trusses – has been volatile but is expected to stabilize later in 2020. Lumber mills and truss plants have had to shut down for cleaning and to reconfigure for social distancing of workers, creating recent spikes in costs and delays in getting materials. But Jim Herr of Herr and Company in Harrisonburg, VA says he doubts we will see the significant inflation in material costs builders experienced in 2010.
Supply chain disruption is impacting project schedules. Derek DeGroot of Aspen Group in Frankfurt, IL, says, “Material shortages and shipping delays are the ‘new normal’.” Derek also points out that collaboration between design and construction team members can facilitate early release of shop drawings and the ability to choose materials based on availability, thereby offsetting potential impacts on cost. Delays due to supply chain disruption are not just from foreign countries, John Scott of Scott Long Construction in Chantilly, VA, indicates with different rules in different states and challenges faced by truckers, his team pays attention to where the manufacturer or wholesaler is located in the U.S.
Worker safety is paramount for every contractor we contacted. Larger projects have advantages when the goal is to space out workers on a jobsite. Scott Whelchel of Edifice Construction in Charlotte, NC says that they are being proactive with proper PPE for workers and keeping jobsites clean. When there are delays for cleaning, they make every effort to make up lost time. For one contractor, getting the crew not to sit together at lunch has been a unique challenge. John Scott says they are seeing increased productivity because workers are getting to work on time and staying later, both to get their work done and to avoid other trades and workers. Brookstone Construction says, “As we learn the ‘new normal,’ productivity will increase as it always does when our industry strives to build faster, more cost effectively and SAFER.” While in the short term it is taking time to learn new habits, contractors always have incentives to find ways to do things safely and efficiently. This means that, long term, owners will not likely bear the cost of new safety measures.
In conclusion, the pandemic will not likely drive up material and labor costs. Projects may take longer, which means extended general conditions and, perhaps, some related additional cost. It appears however that most go/no-go decisions for churches will be driving by availability of funding. More on that in our next post.
As always, if there is question you would like us to research and address, please let us know. The following contractors and suppliers were generous with their insights. There was more wisdom they shared than we could include in this article. We encourage you to contact them directly with questions:
Aspen Group, Frankfurt, Illinois www.aspengroup.com
Brookstone Construction, Houston, Texas www.brookstone-tx.com
Edifice Construction, Charlotte, NC www.edificeinc.com
Forrester Construction, Rockville, MD www.forresterconstruction.com
Herr and Company, Harrisonburg, VA www.herrinc.com
R.S. Monger and Son, Harrisonburg, VA www.mongerlumber.com
Scott Long Construction, Chantilly, VA www.scottlong.com
Author: Randy Seitz: CEO & Architect