It’s no fun being an estimator these days.
The adjective “volatile” now seems super-glued to the word “price.” To contractors living in a fixed-bid world – with a gap between bid submittal and project completion usually measured in months – the situation is especially precarious. Heck, the guy who mows my lawn can raise his prices a lot easier than a number of contractors can.
Contractors are being hit with fee-increase notices on all sides, says Ken Simonson, chief economist, Associated General Contractors of America. Simonson likes to collect contractor stories that add zing to dry data. Here’s some of what he’s hearing from his members:
Memphis: “Our asphalt cement prices went to $550 per ton and we were told to expect $600 next week. We’ve also heard that we should be bidding $700 per ton for the rest of the year.”
West Palm Beach, Florida: “Right now my rebar costs have risen $352 a ton since January.”
Virginia: “The prepainted steel coils we use to fabricate roof panels have increased 16 percent through May, jumped another 29 percent on June 1st and will be followed by 8 percent increases on July 1st and August 1st.”
Cincinnati: “We price diesel out daily from three suppliers and buy whichever is cheaper. We no longer hold quotes for more than 10 days, when we used to hold them for 30 to 60 days.”
Idaho: “I just got a steel guardrail increase of 40 percent since February. My rebar for concrete barriers jumped 23 percent in the past 30 days.”
One plumbing contractor gave Simonson a spreadsheet with more than 50 examples from suppliers that listed increases up to 25 percent for metal and plastic plumbing parts, effective May 28. Highway and street contractors have been especially hard hit, according to AGC’s analysis of producer prices. Since December 2003, prices road contractors pay for their materials have risen by 66 percent, with additional costs assured the rest of this year.
We’re in for quite a ride this summer, one that for the most part is out of our control. Added to the high-price mix are supply concerns, especially after the Midwest June floods closed the door on some aggregate operations for more than a week.
I know you’ve had an eagle eye on costs for the past year, but these conditions require even more diligence. Don’t suffer alone: let your entire company know what’s happening to your bottom line and solicit their cost-saving ideas. Rather than concentrate on what you can’t control – China, India and OPEC – zero in on the efficiencies that can occur in your corner of the world. If you’ve been around this business for any length of time you know that this, too, shall pass. This is an opportunity to ensure your company is stronger when it does.