2023 Project Cost and Schedules

Remember how easy it was to find a contractor willing to look at your project?

Remember what the cost of a 2x4 was 5 years ago?

Now that the pandemic is behind us, have you dusted off improvement and capital project concepts?

Are you shocked at the cost escalation and the extended schedules?

Recently and over the past couple of years, I know of many residential and commercial customers that have or want to start a construction project. I hear many of the same comments, which includes:

  • High price and material escalation.

  • Contractors are busy and not returning phone calls or doing follow-ups after an initial meeting.

  • Finding enough contractors to look at a job to be able to compare pricing.

  • If you can get past the sticker shock, you better not be in a hurry.

  • Pricing is held for 2-3 weeks.

You are not alone.

While there is some stabilization, it is not what it used to be. Coupled with interest rate changes that affect the contractors “lines of credit,” many contractors struggle to find the labor pool that was once saturated. Some projects, regardless of size, have a tough time attracting enough qualified bidders. This has been an issue since early 2020, and it is likely to continue.  

I’ve gleamed the following information from a few articles that I have read and some excerpts from the American General Contractors Association and various trade publications:

  • In 2021-2022, contractor bids were nearly 30% higher than 2019 and 2020 averages.

  • As we close out 2022 and move into 2023, some sectors and locations have seen slight decreases, but nothing has decreased significantly.

  • In general, pricing today is around 25% higher than it was 3 years ago.

 Below is a snapshot of some common national averages:

 So, is there any good news in all of this?

In general, overall construction costs are more predictable and have stabilized approximately 25% above what they were pre-pandemic (2019).

Lead times are horrendous, but at least they can be planned for.

If you believe in what the FED is doing with interest rates, spending is supposed to slow, which is supposed to make material and labor supply more available. Thus reducing, or at least stabilizing the cost. We’ll have to wait and see if this happens.

  • Be flexible, and/or consider alternative approaches to overcome some of the obstacles.

  • Consider pre-buying and/or early bid packages for long lead items.

  • Make sure that your team bases their design around what is available.

  • Consider different project delivery methods such as Design-Build teams over traditional design-bid-build delivery methods.

The construction industry has been overwhelmed the past few years by:

  • Severe material cost instability.

  • Supply deficiencies, and long lead times for certain components.

  • Fewer high school students attend trade schools, which has shrunk the labor pool.

Material Cost:

  • Concrete is $30 more per yard, and still volatile.

  • Wood/Lumber prices are closer to “normal” ranges and have stabilized at approximately 10% higher than what they were two years ago.

  • US Steel mills underwent plant upgrades during the pandemic which reduces our reliance on foreign materials, but that does not mean it is cheap. Prices are approximately 25-30% higher than pre-pandemic levels.

  • Pre-Engineered Metal Buildings used to be “cheap”. Like standard building steel, the increases are anywhere from 20-50%, but seem to be plateauing.

 Labor Cost:

  • You used to be able to count on an increase of 3 - 4% a year.

  • With the labor pool thin, workers move around based on better pay and what the company will offer them.

  • Some sectors are up 20 – 30%, with the national average up 15% from 2021

Lead Times:

  • Because of increased demand for many more infrastructure projects and the lack of delivery drivers, concrete suppliers have had to place customers on allocations in some regions.

  • Steel lead times have returned to normal time frames with more steel mills producing in the US. Typically expect 4-12 weeks for delivery depending on size, shapes, manufacturer, and location.

  • Pre-Engineered Metal Buildings are in the 5-month range for simple buildings, with the larger and more complex buildings pushing 8 months.

  • Roofing and Siding Components are stable at 4-6 weeks.

  • Glass and Aluminum Products are a little extended due to some supply issues. What was 4-6 weeks for delivery has doubled.

  • Piping materials and sizes are all over the place. Many contractors and projects are looking towards polymer-based options to save this time.

  • With the complex computer logic in HVAC Equipment the leads times are longer. Standard or basic equipment is 5 – 6 months. Just like the car industry, manufacturers make what is easy to produce and sell. The more complex and specialty HVAC items can easily take 8 months to arrive at the job site once they are ordered.

  • The biggest impact on the schedule is still the Electrical Gear/Equipment. Lead times have not gotten better, and most gear takes 11 to 12 months from approval to delivery. For specialty transformers and switch gear, 14 months is not uncommon.

We can all grasp that things are not what they used to be pre-pandemic, and the uncertainty of the banking industry, stock market volatility, political fighting, and the current global conflicts does not help. Navigating a project is trickier these days, as such I offer the following suggestions: