Global construction prices are skyrocketing due to inflation.
Inflation is wreaking havoc on the construction prices and the global market as much as it is on the rest of the economy. The Associated General Contractors of America (AGC) analyzed government data and found that construction material costs jumped 20% between January 2021 and January 2022.
Raw materials and construction prices in the industrial sector are indeed growing rapidly, aggravated by substantial supply-chain disruptions and a scarcity of available workers—a combination that threatens the financial sustainability of many construction firms.
Government authorities, owners, and contractors can all take action to mitigate the impact of the crisis, but no one solution will be found.
Import taxes and quotas can be eliminated at any time by federal trade policy authorities.
To temper, the overheated pricing spiral, importing more goods at lower rates from countries like China and India will allow many customers of goods in short supply to avoid layoffs and shutdowns.
Officials at every level of government should analyze any rules, policies, and enforcement actions that may be unduly pushing up prices and stifling the importation of raw materials, components, and finished products into and out of the country.
The owners of projects that were awarded or started before the pandemic should be aware that major price or delivery date revisions are likely to be necessary.
As for new and planned projects, owners should expect a wide range of pricing options and may want to consider including more design flexibility, a more flexible timeline, or cost-sharing arrangements.
Contractors must keep an eye on costs and delivery schedules for materials and communicate with owners throughout the construction process, both before and after they submit bids.
Prices for raw materials eventually level off. It’s a win-win situation for everyone involved if that happens.
The damage can be minimized while waiting for a solution to be found through cooperation and open communication.
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