Contractors’ bid prices in May reached historic highs, according to a new report just issued by the Washington-based Associated General Contractors of America.
That increase, says the AGC, is the result of the “soaring costs for materials and service” continuing to confront contractors nationally.
Overall, the producer price index for nonresidential construction was up by nearly 2% in May, following an unprecedented 18.9% for the year to date. Meanwhile, what contractors say they would charge to build a given structure has increased by 0.4%, after an equally big 19.3% jump over the spring of 2021.
In a statement, Ken Simonson, chief economist with the AGC, remarked: “After enduring more than a year of runaway increases in the cost of items needed to build projects, contractors have finally raised their bid prices by an equivalent amount.”
Simonson added that the “runup in materials costs appears likely to continue to pressure contractors’ profit margins.”
The largest year-to-year cost increases include diesel fuel, up by 84.9%; steel mill products and aluminum mill shapes, with increases of nearly 33% and 31.2% respectively; and paint, up by 31.6%.
At the same time, plastic construction products have increased by just under 30%; while gypsum building materials have gone up nearly 24%.
With trucking costs everywhere skyrocketing for a variety of different industries, it should be no surprise that the country’s builders have absorbed a 25.8% rise in such prices since the spring of 2021.
Ultimately, says the AGC in a press release accompanying the report, “ongoing materials costs will continue to threaten the profit margins of many contractors.”
“Higher construction prices run the risk of forcing public agencies and private developers to rethink planned projects,” remarked Stephen Sandherr, AGC chief executive officer.
Sandherr added that federal officials need to remove remaining tariffs, support a competitive materials market, and “take every possible step to support a supply chain struggling to restart after the pandemic.”
By Garry Boulard
