Though the pandemic related disruptions and associated rising costs of materials peaked in 2022, analysts recommend contractors “keep their seatbelts fastened,” as demand is likely to make estimating material costs feel like a roller coaster ride: unpredictable.
Permanent Shift
Construction industry sources say: “More upward pressure on the cost of building products will lead to a permanent shift in prices.” In fact, “The rollercoaster ride of construction material prices is lining up to throw contractors for another loop.” More specifically, as Sebastian Obando reports:
Although prices for key input commodities should continue to fall in 2023 and 2024, ….the level still remains greatly elevated compared to pre-pandemic. About 82.5% of construction materials experienced a significant cost increase since 2020, with an average jump of 19%, according to a…report from…Gordian.Despite the rising costs of certain materials, some prices this year have begun to show signs of softening, said Sam Giffin…at Gordian. But don’t expect materials prices to sustain that falling trajectory ….“Although we’re in the middle of a downswing from historic pricing peaks in 2022, it’s likely that increasing demand for construction will sustain materials and labor pricing through 2024 and 2025,” said Giffin. “… Although our models show concrete material decreasing 1% to 2% per year through 2025, we anticipate materials like wood, plastics, composites, plaster, gypsum and thermal protection to hit average increases up to 6.5% per year in the same period.”
Competitive Advantage for Bidding?
With the roller coaster ride of materials pricing comes an extra challenge for contractors: when the deadline for bidding approaches, what’s the intel on material prices? How to possibly know? A helpful strategy is to wait until the last possible minute to finalize the bid, but how can you do so and still secure the bond? Easy: with Colonial Surety on your side, you can always be ready to bid—and bond too. Once qualified for The Partnership Account® for Contractors, you can issue your own digital bid bond, in minutes, giving you the power to keep an eye on materials pricing until right up to the deadline.Plus,qualified,contractors position their companies to bid and win more than ever, as they leverage:
- a surety line of credit—in writing;
- a private digital dashboard;
- a daily snapshot of single and aggregate limits
- the ability to update work on hand—and increase the aggregate.
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What Does The Future Hold?
If nothing else, these last few years have reinforced the lesson that none of us really know what lies ahead. Nonetheless, it’s important for business owners to continue plotting a strategic path forward. Toward that end, analysts specializing in construction offer these insights:
New additional upward pressure on materials prices will come from the cost of energy transition and the ongoing scarcity of construction labor … .That will ultimately lead to a permanent shift in materials prices, said Andrew Reynolds, global chair at Rider Levett Bucknall….“It comes as no surprise to us…that macro events will mean a new higher norm of prices globally influenced by long-term forecast costs of energy and materials.”Construction input prices posted a 1.1% annual decline in April, which marks the second consecutive month that the cost to build a given project decreased compared to the same period in 2022, according to an Associated Builders and Contractors analysis of government data. Nevertheless, that level is ultimately expected to rise back up, said Adam Raimond,construction index manager at Gordian.
The challenges related to pricing and securing materials make it extra important for contractors to exert ever greater diligence during project takeoff and estimation. As Kendall Jones of Construct Connect reminds us:
If you rush to put a bid together, it’s going to lead to mistakes. You need adequate time to read through and understand the plans and scope of work….Don’t fall into the trap of thinking that if you’ve done similar work in the past that you can just slap a bid together without doing your due diligence….Omitting scope items, inaccurate measurements, or using the wrong units of measure can spell trouble. Take the time to carefully review your work….
Rushing…will only result in mistakes that will cost you in the end. So, take the time to get it right the first time. Failing to fully complete the bid form and submit all required documents is a surefire way to get what might otherwise be a winning bid rejected. Required documents and paperwork can be anything from bid bonds to acknowledging receipt of any addenda.
A simple and useful best practice to incorporate when preparing a bid is to make a checklist of everything required. As you develop your bid package, follow the checklist and make sure you have attended to each requirement. If possible, ask someone else to look over the proposal before submission, double checking that all required elements have been included. It’s also a great idea to pre-qualify for The Partnership Account® from Colonial Surety. With this unique and complimentary service for contractors, in addition to a surety line of credit, you’ll be able to issue your own, digital bid bonds, in minutes, giving you the flexibility to work on your bid right up until the deadline. Get an edge with The Partnership Account®:
Pre-Qualify and Get Free Scores Here.
Founded in 1930, Colonial Surety Company is a leading direct seller and writer of surety bonds and insurance products across the USA. Colonial is rated “A Excellent” by A.M. Best Company and U.S. Treasury listed. Let’s connect today: Colonial Surety.