Price not right?

The rising price of scrap steel determines the price
of rebar. Credit: Oklahoma Steel

What’s going on out there with materials prices? Spring often means new—always higher--prices. I don’t hear lots of groaning from contractors, but Ken Simonson, chief economist for the Associated General Contractors of America (AGC) sent out an alert indicating that prices of petroleum, concrete, and metals are increasing, which implies that highway and other heavy construction are likely to experience some price jumps. He warns, though, that, “even building construction is at risk of much higher materials cost increases than the general rate of inflation.” Simonson also notes that fuel surcharges are becoming more common and labor rates seem to be rising, too.

Big materials price jumps can really hurt contractors who haven’t anticipated the spike. I know of contractors who have been driven out of business by price increases that an owner refused to allow an increase for in a fixed fee bid. There are ways around this, though. You can buy in advance materials that you think might be getting ready for an increase—although that’s tough with the custom work most decorative contractors do.

The best solution, though, is to have a real partnership with your suppliers. Obviously your material suppliers don’t want to see you getting killed by higher prices. Anything that hurts you as a customer ultimately hurts them. Develop strong relationships, even if it means going with one company exclusively. Sure there are some down sides to this in terms of selection, and the feeling that you have no choice, but if it’s the right company they will take care of you when things get tight.

Let me know what you’re seeing. Are prices going up? Labor? Do you have a great relationship with a particular supplier that you’d like to share?