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The Cause and Effect of Construction Material Shortages and Price Increases

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The Associated General Contractors (AGC) published its latest Construction Inflation Alert that offers insight on the most recent construction material shortages and price increases. There’s a lot to unpack in the edition, so we’ve highlighted some of the most important key points for you.

Seismic Pricing Fluctuations

This isn’t the first time that the construction industry has faced rapid material shortages and increased costs. In 2004, materials rose from 3.6% to 10.0% and “remained above a 5% annual rate for a total of 31 months, before subsiding to a 3.2% rate in October 2006.” Other dramatic increases came in 2008 and 2017, however, COVID-19, natural disasters, and transportation issues have caused the most significant disruptions.

From May 2020 to May 2021, the price of:

  • materials and services used in construction skyrocketed 24.3%.
  • lumber and plywood rose 111%.
  • steel mill products climbed 76%.

While some material prices have come down since mid-May, they are still higher than what prices were a year ago.

If Only Construction Projects Were Like Buying a Car

When you buy a car, the cost to build it is already factored into the total price. In construction, the cost of work isn’t realized until after material purchases are made or the work is completed. This presents a huge risk to commercial general contractors and business owners, especially when large material price increases happen after committing to a project.

If you are an owner considering a new build, addition, or renovation, here are some things to keep in mind:

  • reserve funds for additions or modifications to your project’s scope of work to mitigate risk. This can be accomplished through an owner contingency fund.
  • ask your GC about an early procurement strategy for materials such as structural steel, reinforcing, and roofing.
  • be mindful of oil prices as oil and its by-products are used in manufacturing steel, PVC pipe, roofing material, and more. When oil prices go up, so do materials and the cost to transport them.

While we cannot control the global supply chain, we can ensure your experience remains positive through open, honest, and transparent communication. Our team strives to keep clients informed of fluctuations in pricing due to forces beyond our control.

If you have any questions on how today’s pricing fluctuations might impact your project, feel free to contact us using the form below.

To read AGC’s report, click here.

Michael Patterson of the Mississippi Valley Surgery Center and COVID-19

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We had the pleasure of speaking with Michael Patterson, President and CEO of Mississippi Valley Surgery Center (MVSC), in a recent podcast. Our conversation with Michael uncovered so many new discoveries, including COVID-19 procedures MVSC has implemented to ensure the health, safety and well-being of its patients and staff, how software has sped the intake process and the rise in popularity of ambulatory surgery centers.

MVSC’s Response to COVID-19

MVSC’s Medical Plaza encompasses two surgery centers – an endoscopy center and a surgery center. MVSC’s initial response to COVID-19 was to close the endoscopy center for two months and only perform urgent surgeries at the surgery center. Like most healthcare providers, gaining access to personal protective equipment (PPE) and responding to staff concerns about treating patients in a COVID environment were top priorities.

In addition, MVSC immediately adopted new screening and surgical procedures to increase the safety of its patients and staff, including:

  • testing all patients for COVID prior to surgery. If a patient tests positive, they wait 30 days from when they were first tested before undergoing surgery.
  • scheduling urgent surgeries at the end of the day. This happens when a patient requires surgery without delay, but there isn’t enough time to test the patient and receive results before surgery.
  • modifying their waiting room to reduce the number of people standing in line to check-in. All patients, staff, providers, and reps now enter through a dedicated room where they are screened for temperature, complete a questionnaire, and a patients’ pulse ox is taken.
  • restricting visitors unless the patient is a minor. If the patient is a minor, only one visitor can accompany the patient in the facility.

Turning Challenges into Opportunities

MVSC is physician-driven, which means patients must consult their doctor before scheduling their procedure. While MVSC is operating five days a week, patients have been choosing to wait longer to make an appointment with their provider as they are more cautious about scheduling elective surgeries. As a result, MVSC has experienced a downturn in the volume of surgeries performed.

On the upside, MVSC’s patient satisfaction scores are rising. MVSC staff believe this increase is due to their ability to spend more time on their patients and less time accommodating family members. However, to ensure a patient’s loved ones are informed of their progress through surgery, MVSC launched an application that allows approved individuals to receive a consistent stream of updates.

Technology has also changed the pre-op process. Before COVID, patients would typically visit MVSC’s facility before the day of surgery. The patient would then have the option to either complete a pre-op health history form online or with a nurse in-person.  Most preferred to answer questions in-person. Now, utilization of the online form is over 60% (up from 20%). As a result, MVSC is spending more time on the phone educating patients about what they can expect leading up to their surgery, how the day of their procedure will go and all the COVID safety measures the facility has implemented.

The Rise of Ambulatory Surgery Centers

Advancements in both surgical and pharmacological technology have allowed ambulatory surgery centers (ASCs) like MVSC to perform advanced procedures in an outpatient setting. For example, total joint surgeries that were once done in a hospital and required a multiple-day stay can now be performed in an ASC, and the patient can go home within a 24-hour period. Another industry trend has been to transition cardiology from the traditional hospital setting to an ASC. With a complete cath lab onsite, MVSC can perform these procedures at their complex.

Convenience and cost savings are additional benefits to patients. At the MVSC, patients can park and be just steps away from the front door without having to navigate through a complex hospital facility. And while hospitals are vital to the nation’s healthcare, Medicare reimburses ASCs 50% of the amount a hospital receives for performing the same procedure. A study conducted by the Ambulatory Surgery Center Association found that ASCs save employers and consumers tens of billions of dollars a year.

Preparing for the Future

To accommodate for innovations in healthcare, MVSC has made significant transformations to its complex. For example, bay areas that were once wide open are now private recovery rooms. MVSC also modernized the flow of its buildings to maximize the efficiency of its staff and the patient flow. Bush Construction has had the honor of being involved in several of these projects.

About Mississippi Valley Surgery Center

Mississippi Valley Surgery Center was founded in 1996 by a group of physicians and has grown exponentially into one of the preeminent surgery centers in the Midwest. Currently, MVSC is the only advanced certified AAAHC Orthopedic and Spine ambulatory surgery center in the state of Iowa. MVSC specialties include orthopedics, ENT, gastroenterology, pain, ophthalmology, cataract surgeries, plastic surgery, general surgery and more.

COVID-19 & Higher Education: Our Conversation with Mike Poster of St. Ambrose University

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For college students across the country, March 2020 will forever be imprinted in their memories. Classrooms shifted from in-person to online overnight, dormitories went from bustling to vacant, and fine arts and athletic schedules were postponed indefinitely. The Coronavirus outbreak caused seismic disruptions to student life and higher education operations.

When St. Ambrose University, a private institution grounded in the liberal arts, committed to academic excellence, social justice, and service transitioned to distance learning halfway through the second semester, they fully refunded students for their room and board even though it meant losing approximately $3.3 million in revenue.

We had the privilege of sitting down with Mike Poster, Vice President of Finance at St. Ambrose, to discuss how the university has handled COVID-19 challenges. In this podcast episode, we talk to Mike about how classrooms have been configured to meet social distancing guidelines while also safely supporting personal, in-class interactions. And why, amid a global pandemic, St. Ambrose experienced a peak in recruitment and enrollment.

Listen on Apple podcasts badge.     

Tune in to our conversation and learn:

  • What student life looks like this fall.
  • How St. Ambrose has been able to differentiate themselves through COVID-19.
  • Tips for high school students evaluating higher education institutions.

For more information on St. Ambrose’s Fall 2020 plans, visit https://www.sau.edu/.

Five Ways to Increase Project Efficiency

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One of the most important aspects of construction management is creating and maintaining an effective schedule. Construction operations, big and small, include troves of interconnected elements that must work cohesively and sequentially to maintain the project schedule.

From inception to completion, each of these details contributes to the overall success of the job. However, without effective schedule management, the project can easily experience delays. Avoid the chaos by implementing these five practices.

1. Develop a Complete Project Plan

A detailed and complete project plan is essential to developing a master schedule. If available to the project, use 3-D modeling technology, like BIM (Building Information Modeling) to develop a coordinated plan established to identify design conflicts, reduce waste, and eliminate problems.

Once completed, involve all decision-makers in the final approval of the project plan to reduce the need for changes later that may delay the schedule or lead to rework. The foundation of schedule management ties directly to the quality of the design and plan.

2. Create a Master Schedule

A solid and realistic master schedule provides the backbone for the total project execution. When developing the master schedule, divide out each part of the project by phase while ensuring the accurate sequence of the tasks. It is best to never have an activity that extends beyond 15 days.  Also, after finalizing the master schedule, communicate clear expectations to all parties.

3. Manage Supply and Supplier Schedules

The master schedule only works with accurate order processing and delivery of project supplies. Select trusted suppliers with a reputation for quality and reliability. Then, communicate the schedule and project expectations to each supplier. Define the roles for order management, including responsibilities for tasks and proper communication channels.

4. Identify Pitfalls and Challenges

Scheduling challenges can occur with any construction project, no matter the scale. However, the larger the project, the more likely delays, and issues become. World events, like we are experiencing now with COVID-19, lead to disruption. In addition, labor shortages continue as an issue in the industry.

Major weather events, supply chain problems, changes to the project plan and other issues may impact the project flow. Build in time for unexpected delays and develop a contingency plan from the start so that each person understands their role in the face of challenges.

5.  Monitor and Report Progress Daily

Daily reporting is vital for successful and effective schedule management. Without proper communication and reporting, issues may go unaddressed. In addition, pay attention to times where the project falls behind or moves ahead. This is accomplished by creating detailed three week look aheads for each trade contractor to better communicate the project expectations on a daily in a much more detailed fashion than the overall master schedule. Correct and update the schedule based on changes or delays. Ensure effective and consistent communication occurs with all decision-makers and managers on the progress of the project.

 

Effective Schedule Management Based on Experience and Excellence

At Bush Construction, we offer professional solutions based on years of experience in the construction industry. We prioritize relationships with our clients, our team and our suppliers. Trust and quality matter to us. Effective and accurate schedule management is a vital part of building trust. We manage each project to stay on schedule and on budget.

Contact us with questions regarding our construction schedule management solutions.

 

Author: Jerod Engler | Vice President of Construction | Bush Construction

COVID-19: A Message from Bush Construction’s CEO

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COVID-19 has turned many of our lives, businesses, and local economies upside down. My heart goes out to all those who are suffering as a result of this deadly virus.

While Illinois has issued a shelter in place order and Iowa has provided guidelines on social distancing, both states have deemed the construction industry an essential service. This means Bush Construction is open for business. We are here to help you in any way we can during this unfortunate time.

Bush Construction has always been committed to providing a safe working environment for our employees. In addition to our standard safety protocols, we are taking additional measures to keep our workers safe and do our part in stopping the spread of COVID-19.

  • We, along with our affiliate, McCarthy-Bush Corporation, have established a COVID-19 Response Team that meets weekly to share information and discuss best practices.
  • We are working closely with our superintendents and foremen to follow social distancing recommendations and ensure job sites are sanitary.
  • The majority of our office personnel are working remotely and using video conferencing tools to maintain the strength and productivity of our internal teams.

During this time of uncertainty, Bush Construction will continue to follow the recommendations of local, state and U.S. leaders. With that said, if you need us, we are here. Call, email or schedule a video chat with any of our team members. We’re here to support our clients and community through this time of crisis.

Sincerely,

A.J. Loss | President & CEO | Bush Construction

 

COVID-19 Resources

Centers for Disease Control

Iowa Department of Public Health

Illinois Department of Public Health

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