MEMO to Buyers and Design Consultants on Material Supply and Price Escalation
April 27th, 2021
MEMO to BUYERS and DESIGN CONSULTANTS on material supply and price escalation
CANB-Moncton Northeast held a special roundtable discussion with contractors and suppliers on the ongoing challenges with the supply of material and price escalation happening in the construction industry.
CANB-Moncton Northeast is advising BUYERS (developers, owners, and construction clients) as well as the DESIGN COMMUNITY (architects and engineers) on the impacts of the evolving supply chain and how to work together with the construction industry to move forward in this climate:
1) Ensure your project budget and expectations are in alignment with current reality before tendering. Buyers and design consultants now more than ever need to work up-front with builders on budgets to reflect current market prices.
2) Do not seek a 60 to 90 day bid validity period to approve a project. The shorter the bid approval timeline the better as anything more than 30 days is unworkable given that suppliers and subcontractors are in many cases offering 7-14 day terms on their pricing and in some cases only up until the material has arrived.
3) Plan your project with all parties in the subcontractor and supply chain as early as possible. Order in advance and pay for materials when it arrives. In some cases, consider paying upfront for material to avoid further price hikes. Certain material has seen price increases of 35% with no indication of staying there.
4) Work with contractors to secure realistic timelines and schedules. Flexibility is needed in delivering building infrastructure as pressures from the supply chain and availability of workers hampers contractor’s ability to work within already unrealistic timelines. Certain material that would take two days to ship are now taking 6 to 8 weeks or more many months.
5) Communicate early and regularly.
Price increases are occurring across all aspects of building and infrastructure construction due to:
a. World-wide shortage of shipping containers
b. Port congestion
c. Government stimulus programs in Asia driving demand for materials in those regions, hampering export
d. Drywall market across North America is “sold out”
e. Lumber is very limited and suppliers are buying blind as to price.
f. Steel industry closed or reduced capacity at start of pandemic and is slowly increasing, but pricing has doubled per metric tonne. Prices can only be guaranteed 15 days vs usual 2-3 months. Steel mills are advising they won’t see stability until first half of 2022