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Amid rising construction costs, industry calls for tariff relief, help with supply chain

PMG FILE PHOTO - Although timber prices dropped somewhat in June, they are still higher than they were a year ago at this time. Increased costs have forced some developers to delay or cancel projects.Skyrocketing lumber prices have dominated construction industry news over the last several months and led organizations like the National Association of Home Builders to host webinars on alternatives to lumber in homebuilding.

While still steeper than this time a year ago, prices for some lumber products dropped slightly in June. At the same time, however, the costs of several other construction materials were on the rise, forcing some owners to postpone projects and others to bite the bullet and write a bigger check.

Associated General Contractors of America noted in a June 15 analysis that the cost of goods and services used in construction climbed by a record-setting 4.3% in May and 24.3% over the last 12 months. Materials with especially steep price increases over the past year ranged from lumber to metals to plastics.

The producer price index for lumber and plywood soared 85.7 percent from April 2020 to April 2021. The index for steel mill products climbed 67%, while the index for copper and brass mill shapes rose 49% and the index for aluminum mill shapes increased 20.5%. The index for plastic construction products rose 14.2% amid growing scarcity of items such as PVC pipe, vinyl siding and moisture barriers, and resins used in paints and adhesives. The index for gypsum products such as wallboard climbed 12.1%.

AGC said that some of the supply chain problems have resulted from the pandemic or one-time events such as the freeze in Texas last February that damaged plants producing inputs for construction plastics.

It added that federal policies, particularly tariffs and quotas on key building materials such as lumber, steel and aluminum, have exacerbated the price spikes, supply shortages and delivery delays. AGC has urged the PMG FILE PHOTO - When it comes to large projects, concrete and steel are still the primary building materials. Like lumber, prices for concrete and steel have also increased dramatically in the past year.Biden administration to end those import obstacles and explore ways to help uncork supply chain bottlenecks.

"The Biden administration must address these unprecedented lumber and steel costs and broader supply chain woes or risk undermining the economic recovery," said Stephen E. Sandherr, AGC's chief executive officer. "Without tariff relief and other measures, vital construction projects will fall behind schedule or be canceled."

Ken Simonson, the association's chief economist, said the producer price index for new nonresidential construction, a measure of what contractors say they would charge to erect five types of nonresidential buildings, rose only 2.3% over the past 12 months, as competition for a shrinking pool of new projects forced contractors to absorb most of the increases.

Zak Toledo, a principal and regional manager for Murraysmith's Portland office, said the increasing prices have led some of his firm's clients to explore deferring projects until prices stabilize.

Jim Ray, LEED AP, vice president of JE Dunn Construction and vice president of its Design Phase Services group, said that while his company doesn't do much wood-framed construction in its Pacific Northwest projects, lumber still plays a large role because it is needed for concrete forms."There is lumber in everything we do whether it's concrete or steel or the finishes in the interiors," he said. "We have been impacted and so has every project, whether you're building a home or a deck for your home or going to Home Depot to buy a piece of plywood."

JE Dunn Construction primarily uses concrete and steel for its large commercial and public projects, including the PDX Airport Parking Addition and Consolidated Rental Car Facility, a bus maintenance facility for TriMet, data centers and electronics manufacturing facilities.

RAY"If you think in terms of the spans you need for a manufacturing facility or a parking garage, the only way to achieve those spans is through concrete and steel," Ray said.

Joe Hughes, president and owner of Joseph Hughes Construction, said that steel is a commodity like many other construction materials.

"Commodities go up and down all the time. You only hear about it when it's dramatic," he said.

Hughes advised burgeoning general contractors to include escalation clauses in their contracts, which he admits he learned the hard way early on as a business owner. The clauses allow contractors to share the burden of cost increases with owners.

Ray said that one product helping contractors maintain some control over costs and efficiencies is offsite prefabrication of structures, which have gained increasing popularity over the last decade.

"The advantage of that is, from a safety perspective, a lot of this is going on in controlled settings like a warehouse and people are on the floor," he said, adding that workers can stay warm and dry during poor weather conditions. Prefabrication also reduces the number of craft workers on a job site when the structure is put in place.

In addition, prefabrication increases efficiencies because of its repetitive nature. The templates speed up production, the process increases quality because it allows more monitoring of quality control, reducing cost.

"The speed of schedule is a big advantage. We all know time is money and the faster we can get things done for our clients, the happier they are going to be," Ray said.


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