Navigating Surging Materials Costs in 2021
Record High Materials Costs
As the world slowly reemerges from the COVID-19 pandemic, record high materials costs promise to threaten the anticipated rebound of the construction industry in the latter half of 2021. Steel, softwood lumber, and even iron and steel scrap have each seen dramatic price increases over the past year, with the steepest increases having occurred between December 2020 and January 2021. In the final quarter of 2020 alone, the price of iron and steel scrap spiked by 46.4%, and the cost of softwood lumber has increased by 170% over the past year.
These dramatically high material prices can be traced back to several factors that have interrupted the supply chain of construction materials. Exploding demand for single-family residential buildings, combined with high tariffs and patchy production due to logistical supply chain issues with shipping and manufacturing shutdowns due to positive COVID tests, has caused the demand for softwood lumber, steel, concrete, and liquid asphalt to far outweigh the available supply, sending prices through the roof.
New Challenges for Contractors
Contractors, already reeling from a year of cautious project funding, are bearing the brunt of these high prices. Combined with owner uncertainty over potential new outbreaks and variants of COVID-19, as well as shortfalls in labor availability and project funding, it has never been more difficult for subcontractors to navigate fluctuating materials pricing.
According to Ken Simonson, Chief Economist for the Associated General Contractors of America, “Material availability is best managed through ongoing communications with manufacturers and distributors starting at the earliest design stages of a project.”
Well said, Ken. We couldn’t agree more.
Using Design-Assist to Optimize Pricing
Design-assist is a collaborative delivery method that capitalizes on the benefits of the early engagement of a subcontractor with the construction manager and design team bringing pricing, fabrication, and installation expertise to inform the design at the beginning of a project to improve constructability and reduce the overall time and cost. Synergi’s design-assist methodology already includes several mechanisms and checkpoints built into its process to optimize project cost, value, and construction efficiency and offset surging materials prices through early procurement, the exploration of cost-effective design, and alternative materials to ensure the design remains within the budget.
Extensive analysis of the design and intended materials ascertains the achievability within the budget, solidifying decisions on materials and finishes and allowing the early release of critical pathways and long lead-time items or the investigation of alternate materials. The solutions most in line with the design direction are selected, and long lead-time items are identified and pre-ordered if there is a risk to the schedule. Early procurement of materials eliminates the possibility of paying surging prices down the line that can represent a savings opportunity of 30%-50% in a volatile market.
For more than 35 years, Synergi has worked with premier designers, developers, general contractors, and architects using its empirically developed design-assist methodology to collaboratively optimize design features with engineering or budgetary constraints. Additionally, Synergi has decades of experience working with prefabricated and modular construction techniques, which can greatly improve efficiency and quality control while allowing small, agile installation teams to operate with reduced time on site. The price of building materials promises to remain volatile for the foreseeable future, and it has never been more important to manage the impact of volatile prices and material availability to avoid budget and scheduling problems. Addressing design issues, value-engineering, and the exploration of design and material alternatives allows for more accurate estimates and improved constructability, mitigating high material costs.
Contact us to see how we can help you control the rising cost of materials on your next project.