AGC COVID Survey Shows Lingering Symptoms for Construction

“The survey results make it clear that the construction industry faces a variety of challenges that threaten to leave many firms and workers behind, even as some parts of the economy are recovering or even thriving,” said Simonson. “The pandemic has left the supply chain for a range of key construction components in tatters and undermined demand for a host of private-sector projects.”

Costs have increased significantly for materials, parts and equipment. Most notable are record breaking prices for lumber and steel. Curt Hellen, president of Tulsa, Okla.-based Stava Building Corp., described a long delayed retirement community project that just recently broke ground. Pandemic uncertainty along with soaring lumber costs for the wood-frame-based buildings led clients to a “wait-and-see” approach to begin construction. Even now with the project under way, supply shortages and high lumber pricing have resulted in Stava Building purchasing lumber in small packages, hoping for prices to plateau in June.

“The impact of COVID really was pretty stark and, honestly, pretty quick,” said Hellen during the AGC webinar on Thursday. Projects awarded and contracts signed were shelved, he said, particularly in multi-family, retirement, retail and event-style construction. Designers and architects in the area did relatively well during the pandemic retrofitting some existing facilities to make them safer for occupants.

Positive tests for workers could shut down a work site or supplier, adding to disruption all along the supply chain. Firms in Oklahoma fared better than those in some states due to Oklahoma’s classification of construction work as essential, said Hellen.

On a year-over-year basis, all private construction categories were down, many substantially, said Simonson. Those categories that performed best were distribution facilities, cold storage and warehouses at or near airports, as well as renovation of facilities related to health and safety. 

Ali Mills, executive vice president of Plum Contracting, Inc., a Pittsburgh-based highway construction company, said Pennsylvania contractors were shut down completely. As Plum Contracting was just beginning what promised to be a good year in 2020, the pandemic hit and most businesses in Pennsylvania were ordered closed. Plum laid off 127 workers on March 16, including management personnel. Travel restrictions prevented workers from taking jobs in other states where work restrictions were less strict. The company worked with AGC to convince the governor’s office that as “outdoor” construction, workers could do their jobs safely with social distancing. Said Mills, “We were doing social distancing before it was cool.”  When the restrictions were lifted in May, work was scarce and slow to start. The company followed a 50-page manual to keep employees safe, adding to company costs.

Mills said the company was hopeful that 2021 would be better, but when in November, December and January there were no lettings, it meant no work for employees this summer. Bidding just began to pick up in March, but projects won’t start for a few months.

Pennsylvania is facing cuts in highway funding due to the high costs of the pandemic. “We employ so many people,” Mills said, “and having them sitting home in March, April, and May will be devastating to our employees and our state.” He added that they are hoping for a highway transportation bill to pass in Congress that will bring funds to the state.

Highway construction is also facing supply shortages. The resin used in highway material is also used in PPE, making the commodity scarce and pricey.

Construction remodeling and new builds are beginning to incorporate building strategies inspired by COVID precautions. HVAC systems that are more efficient at filtering air are being requested, as well as wider hallways and changes to interior space to allow social distancing.

Hellen speculated on whether the $1.9 trillion COVID relief bill will drive additional demand in the marketplace putting even more pressure on scarce resources like lumber and steel. He agrees with AGC’s call for the administration to ease tariff restrictions on lumber from Canada as well as scaling back tariffs on steel imports.

Brian Turmail, AGC executive vice president of public affairs and strategic initiatives, said AGC is working on a number of initiatives for the construction industry in 2021. One of the most pressing is liability reform that will protect contractors from needless litigation over coronavirus infections. He stressed that companies that took appropriate precautions and incurred costs to protect workers should be protected from liability suits.

AGC is also concerned about labor changes in the proposed PRO ACT that would significantly change how the industry and unions interact. The PRO Act is designed to make it easier for workers to organize and affiliate with organized labor, but the problem is that it “does more than advertised,” said Turmail. The construction industry has both union and open shop contractors, and AGC said the act could negatively impact both by changes to picketing rules, labor suits and independent contractors.

The Biden administration has been asked to help provide solutions for supply shortages and shipping delays including backups at the nation’s ports. Easing of tariffs and changes to hours of service in the trucking industry are some of the proposals.

More information on the survey results can be accessed at AGC.

By Sandy Williams, Sandy@SteelMarketUpdate.com