Trying to cope with rising cost of construction

Local universities, others alter plans as prices of building materials climb

December 01, 2006|By Jamie Smith Hopkins | Jamie Smith Hopkins,Sun reporter

The people who manage construction for Baltimore's public universities are getting used to cost-cutting on the fly - changing roofing, flooring, even the design of the building itself in a mad race against time.

It's been nearly three years since building costs began shooting up unusually quickly nationwide, pinching future owners and their contractors alike. And they're not seeing relief yet.

"It's been difficult," said Ron Brown, associate director for architecture, engineering and construction at the University of Maryland, Baltimore, who handles projects at institutions across the metro area. "When costs go up, you either find a way to do things smarter, or you buy less."

A drop in oil prices this fall helped, because petroleum fuels the trucks that move the products and is also a key ingredient in some of the products themselves, such as asphalt.

But a federal index tracking the wholesale cost of construction materials and components still jumped 6 1/2 percent in the past year, far outpacing inflation, said Ken Simonson, chief economist for Associated General Contractors of America. Brown, who has seen price estimates jump 25 to 30 percent in the past two years, says the true escalation nowadays is in the double digits.

Simonson doubts the problem will fade soon, even with homebuilders hitting the brakes. U.S. nonresidential construction is going strong, he said, and must compete with China and other fast-developing countries for materials.

In Baltimore, where nonresidential construction is particularly robust, local industry leaders gathered yesterday to strategize ways to cope. Even if building material costs stop rising so quickly and unpredictably, construction employers have another headache: labor shortages. They fear that will worsen when demand spikes for new buildings in the next few years to handle the thousands of jobs expected to come to the region with the national military base consolidation.

"Construction has to be built here - we can't outsource it," said Thomas P. McCracken, vice president of Henry H. Lewis Contractors LLC and a panelist at yesterday's event, sponsored in part by the local chapters of the Associated Builders and Contractors and the American Institute of Architects. "We need more skilled labor, and it's very difficult to get."

Managers are in short supply, too, pushing up salaries. "Headhunters are running rampant through the streets," McCracken said.

And to top it off, subcontractors are plenty busy enough to pick and choose.

"If you have an unattractive project or an owner that people don't want to work for, you're just not going to get the response and you're going to see the prices escalate because people don't need the work," said Ron Knowles, president of J. Vinton Schafer & Sons Inc., a construction management firm in Abingdon.

Some future building owners can swallow hard and take the extra cost of construction. Others can't.

The state's universities are limited to annual escalations of 10 percent this year, Brown said in an interview, which is why he's had to get creative. One building now under construction at Coppin State University would have worked best as a four-story structure but was redesigned to be taller and thinner because that was cheaper. And many parts had to be rebid to deal with cost overruns.

Meanwhile, contractors and subcontractors working with fixed-price contracts have to eat any further cost increases.

And architects are being forced to go back to the drawing board when price estimates come in over budget, said Glenn Birx of the architectural and planning firm Ayers/Saint/Gross, another panelist at the building event.

"That causes us loss of money," he said. "It's not been good."

Suggestions thrown out yesterday by panelists and some of the roughly 50 people in the audience ranged from contracts with escalation clauses to the advantages of ordering materials early.

The event was the brainchild of Polly Bart, president of Greenbuilders Inc., a Butler-based general contractor that specializes in straw bale construction.

Bart said she's sick of seeing green elements "immediately eliminated" from projects when the total construction estimates go way over budget.

Mike Henderson, president of the Baltimore metro chapter of Associated Builders and Contractors, understands the frustration of cost increases on a personal and professional level. His Towson church is planning a sizable addition.

"The price you're quoted 12, [even] six months ago has changed," he said.

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