The Price Hike in Construction Costs and What You Can Do About It

Inflation, rising labor costs, and materials shortages are helping to drive up construction costs, which are creating challenges for both vendors and contractors as they push to get major projects done on time and under budget.

According to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics Producer Price Index data released in August, overall construction input prices are 1.1% higher than a year ago. Nonresidential construction input prices are 0.8% higher.

The greatest increases over the 12-month period come from copper wire and cable (13.9%), crude petroleum (10.4%), crushed sand, gravel, and stone (7.4%), switchboard and other industrial controls equipment (7.4%),insulation materials (5.6%), and brick and clay tile (4.8%).

The association reports that just 34% of contractors expect their profit margins to expand over the next six months, due to the increases.However, ongoing input price moderation, along with lowered interest rates, may bolster that sentiment by the end of the year.

According to Ken Simons on, chief economist at the AssociatedGeneral Contractors of America, rising input costs are likely to impact project expenses.

“Prices for construction inputs have risen faster than contractors’ bids every month so far in 2024,” said Simons on earlier this year.“In addition, persistently long lead times for electrical equipment are adding to the cost of many building and infrastructure projects.”

What you can do now

Getting what you need now to complete the projects on top of your priority list requires creative thinking. Here’s how you can start.

Consider group buying. Do find the greatest deals, research group purchasing organizations or constructing networking groups. By buying supplies together, and far in advance, you might enjoy unexpected savings and avoid market volatility.

Monitor the markets. When budgeting, be informed.Monitor the impact that local and international events, as well as gas prices and trade policies, may have on sourcing. That will help you strategize as to when to procure materials.

Plan ahead. The sooner you can source your materials, the better. Make it clear to your customers and subcontractors that you plan to streamline the estimating process for the entire project as early as possible to avoid any potential, and costly, delays in the supply chain.

Stock up. If you have access to warehouse space, stock up materials whenever you can access them for a reasonable price. Be strategic:Make sure you build a stock of materials you use on almost every project.

Conclusion

Lessen procurement services is one way you can secure deep marketplace discounts on a wide range of materials for any project. Contact us to learn more about how you can take advantage of partnerships we have with suppliers and what we can do to get you the best deal available.

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