Even three years out, the construction industry is still seeing the effects of the pandemic. Widespread disruption of supply chains and the housing market became the new norm, creating an environment of scarcity and price instability. The trends on pricing have unfortunately skewed toward large inflation spikes. This has come about largely due to factory shutdowns or decreases in capacity, as well as a breakdown in shipping lines.
Though some material costs declined in the final months of 2022, this January saw yet another increase. With several manufacturers announcing coming price hikes, including producers of steel, tile, and insulation, the forecast does not look positive for the coming months.
Now, factors such as the extreme weather events across the United States, inflation, extreme weather events across the United States, inflation, the Ukraine war, and China’s reopening are only compounding the issues introduced by the coronavirus. Experts are predicting a new wave of inflation, raising prices in the construction materials market by another 4% in 2023.
Such volatility has created much trepidation among projects with limited budgets. Home and building owners are hesitant to commit to builds when market dynamics have the potential to bloat material costs with little notice. So what can be done?
Smart Planning and Scheduling
Avoiding a budget blowout in this economy requires some thoughtful strategy. As we’ve navigated projects through these past three years, we’ve adjusted our practices to ensure our clients can keep costs in line with their original projections. Below are some of our top recommendations for maintaining price clarity and preventing runaway expenses.
Order FF&E Early
Certain materials should be purchased as early as possible in order to secure the best prices. FF&E (fixtures, finishes, and equipment) are some of the most important. Submitting orders for these pieces as soon as selections are finalized will protect you from price increases that can come at a moment’s notice.
Furthermore, you’ll be able to learn earlier which materials may need to be swapped for more affordable alternatives. If one of your FF&E materials turns out to be too expensive for your budget, you will have ample time to find and plan for something different. Ordering too late, on the other hand, can leave you without the time or flexibility to accommodate changes. You may be stuck with a material that is too costly, or chance delays and rework.
Seek a Firm that Prices Your Project Early and Often
It may seem like the best way to manage costs is to get the final price estimate for your entire project ASAP. However, it’s no longer feasible in today’s market. Subcontractors such as plumbers, electricians, tilers, etc. are only able to guarantee bid prices for up to 30 days. After that, their quotes will need to be reassessed. Basing your idea of project pricing on outdated quotes will only lead to disappointment, and has the potential to disrupt your plans.
This is why we recommend that you work with a firm that takes a more logical approach to pricing. Ideally, they should provide preliminary pricing at certain milestones in the planning, giving you a general picture of what costs you may expect as you refine your plans. Final pricing should be submitted only after reaching the build-ready phase.
For example, at Letter Four, we provide pricing at 3 key points in the project. The first comes after forming an Action Plan based on the conceptual design, then the second after the Design Development phase, when engineering is complete. The final pricing is worked through when it’s time to prepare for construction, after permits have been approved. You’ll get clear, accurate quotes, allowing you to avoid confusion and plan ongoing budgeting accordingly. Our firm takes care to price projects conservatively so that potential increases can be absorbed without derailing finances or cutting your scope dramatically.
Find a Team with a Strong Network
Finally, working with the right team can make all the difference in managing material costs. Specifically, choosing a team that has strong relationships with material suppliers.
If a team already has established partnerships with key sources, they will be able to obtain favorable pricing and stay aware of any coming fluctuations. You’ll have the advantage of a preferred connection, giving you the most opportunities for savings.
Letter Four Helps You Effectively Mitigate Costs
Thanks to deep ties in LA’s construction community and a conscientious workflow, Letter Four is poised to offer the best possible management of construction costs. We leverage our insights and expertise to find the right balance of quality and affordability, helping you get the design you want within a fair and reasonable budget. Should changes need to be made, our knowledgeable staff will be able to recommend alternatives that preserve your intended aesthetic, function, and price range.
Our team has boots on the ground every day, keeping a pulse on market changes and anticipating fluctuations before they have a chance to affect your project. Communication is prioritized to keep you informed and prepared. Through every step, you’ll have total transparency regarding your project’s progress and budget expectations.
These times are challenging, but Letter Four has proven to be adaptive and resourceful. We’re ready to help you navigate the ever-changing construction climate with full confidence in your project’s success. We invite you to set up a consultation, or select one of our Project Action Plans to help you estimate preliminary pricing. Contact us today to get the guidance you need.