Agenda - 09-27-2004-1 - Laserfiche WebLink

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Shared Pain Plenty of school construction contractors have felt the pinch as well Some say that the bidding process forces them to choose between factoring in cost increases for materials, thus creating a higher bid that might cost them the job, or gamble on a lower bid based on current prices. "This absolutely has had a very negative affect on contractors' profits," said Ken Simonson, the chief economist for the Associated General Contractors of America, a national group located in Alexandria, Va. Because contractors submit bids based on current prices for materials, any price increases between the bid and actual construction, which can take place months or years later, usually must be absorbed by the contractor. Nationally, steel prices have risen more than 30 percent in the past year. In some cases, Mr. Simonson said, "the steel -price run -up has been sufficient to wipe out contractors' profits." Lin Redden, the vice president of the Atlanta -based construction and design firm Heery International, said: "Costs [for' steel] have gone up 30 to 40 percent in some areas, and that has definitely caused an impact because a lot of budgets were put together before the spike." Shortages of materials pose another problem, Mr. Redden and others said. In one case, Mr. Redden said, a school project was under way when his builders discovered they could not get steel joists delivered on time. That delay put the project several weeks behind schedule. Now, most of Heery's contractors order those materials well ahead of the time they will need them, he said. Mr. Redden said he had seen some contractors go out of business because of the higher costs. Demand in Asia Analysts say several factors are driving up the costs of materials. Mainly, though, the explanation lies in Asia, where countries such as China, Japan, and India have been undergoing massive building booms in recent years, thus increasing demand. That surge overseas has been matched by a robust construction market in the United States, fueled by low interest rates. "We gained ground because interest rates were so low, but may lose ground because steel prices and concrete prices are going up," said David A. Sneed, the chief of architectural services for the New .Jersey Building Authority. The state agency oversees the Garden State's $8- billion, multiyear school renovation and construction project.