How can Contractors address the rising construction material costs?
July 1, 2021
Tyler Riddell
Rising cost of construction materials

We are facing a crises as construction material costs have dramatically increased. The effects of reduced production during the pandemic, climate events including the Texas freeze and utility crises, increase housing demands being felt worldwide. It’s been reported that plywood and lumber prices have risen 156% in the last year, brass and copper over 30%, steel over 10%, and precast concrete over 4%, according to several sources

In addition,  The Wall Street Journal reported crude oil, “a starting point for drain pipe, paint, flooring and roof shingles” was up 10 percent. Piling on the situation production bottle necks and supply chain issues are exacerbating the problem. 

While there many ideas about if and when prices will drop, it appears for certain material costs will continue to rise or hold steady for the rest of 2021. With no immediate relief near term, below are a few best practices for handling the inevitable material cost increases on your project.

Best practices for addressing the rising construction material costs. 

Controlling Overall Project Costs

One obvious way to reduce the impact of increased material costs is to trim costs elsewhere. One consideration is work with the contractor to partially absorb material cost increases through labor rate adjustments or reducing fees. Collaboration across several stakeholders, from owners, contractors, and design professionals, is required to make this work. 

Alternative Materials for projects

Consider using alternate materials, which have experienced smaller price increases than other more common available materials. Sourcing options is a vital consideration. More readily alternative materials: Alternate materials, which are more readily available, may lower overall costs than more common but difficult-to-find materials.

Contractual Safeguards

Contract terminology lends to protections for unanticipated cost increases. Owners should consider the possible inclusion of provisions that shift risk to other stakeholders or contract language that places limitations on change orders for material cost increases. Another possible option is using contracts to set an overall guaranteed maximum price. 

Prefab and Modular Construction

Modular building methods such as prefabrication have proven to streamline the construction process and reduce costs associated material and labor. In addition, modular construction and prefabrication is much more efficient than tradtional “stick building” and can be used on single trade or multi-trade projects as well as substantially reducing material waste. However, this will require a sign-off from unions in some larger metropolitan markets, which may be a challenge.

Advanced Technology

An exception option to counteract material cost increases is using new technologies to increase efficiencies and collaboration on projects. StructShare material management software, drones, and BIM and other field-first software programs provide construction firms greater visibility as well as business intelligence to reduce costs. Better coordination amongst trades, a thoroughly evaluated design that identifies possible issues, and more effective material estimates and management are crucial for the project. Field-first technology is important for improving communication between the field and back office and allow the parties to make immediate decisions on design changes, materials and preventing costly mistakes. Keeping the project and construction teams in sync can reduce rework, delays, inventory tracking, and other issues related to the need for additional materials.

Preconstruction

Preconstruction work is an important phase for every project where all stakeholders can collaborate more effectively to ensure the construction of a project is better planned and successfully delivered. Newly developed software can help contractors get control of preconstruction. Some of the inherent benefits of pre-construction work are:

Increased project knowledge, accuracy of estimates and understanding of specific goals amongst parties

Thorough development of the project early on. Early detection of possible issues and roadblocks.

Better coordination.

Transparency of options and decisions.

Increased project planning and development.

Although the preceding is by no means an all-encompassing list of benefits, pre-construction work makes your project more efficient, cost-effective and reduces unecesssary material costs. 

Think Outside the Box

Collaboration is crucial during these uncertain times and stakeholders need to be flexible in terms of scope and profits. Owners, general contractors and subcontractors need to leverage technology and develop solutions that work for all sides to produce successful projects.