The good news … construction activity is ramping up. The bad news … so is the price on a bunch of the stuff you use on a job site, from diesel to softwood lumber prices. 

In an open letter to President Biden in February, Stephen Sandherr, AGC’s chief executive officer, urged domestic lumber producers to up production to address growing shortages and craft a new softwood lumber agreement with Canada. 

Suppose your bid didn’t include cost recovery for unanticipated material price increases. In that case, you have to eat the price hike, chewing away at any profit margin you may have wanted out of the job. 

It’s gotten so bad that national media report on the problem, and national trade associations send pleas to the White House to do something, anything, to rein in costs. 

There another problem lurking in the shadows. The specter of inflation, fueled by trillions of dollars in government spending to combat the impact of Covid shutdowns on the economy, creates a classic inflationary spiral of too much money facing too few goods. We hadn’t seen this syndrome in America since 1980 when Jimmy Carter was facing an 18 percent increase in the cost of almost everything. Ronald Regan was elected that year, a thought crossing political minds in Washington as you read this.

In an open letter to President Biden in February, Stephen Sandherr, AGC’s chief executive officer, urged domestic lumber producers to up production to address growing shortages and craft a new softwood lumber agreement with Canada.

“The extreme runup in recent months for the price of all categories of lumber has created a hardship for contractors that were called upon earlier in the pandemic to create spaces vitally needed for the care of patients, social distancing of workers and the public,” Sandherr wrote. “AGC believes the White House can play a constructive role in mitigating this growing threat.” At press time, there was no response to the letter. Fortune Magazine covered this story from the consumer perspective in a March article that said, in part:

“As of the week of March 11, the price of lumber per thousand board feet is at $1,044, according to //www.randomlengths.com, an international website that covers the lumber industry. That’s an all-time high and up 188% since the onset of the pandemic. The National Association of Home Builders calculates that current lumber prices add at least $24,000 to the price tag of a typical new single-family home.” 

“This price shock is a classic example of the supply and demand curve. On the one hand, supply has fallen due to COVID-19 restrictions hampering sawmills while quarantining Americans pursuing home renovations or do-it-yourself projects to increase timber demand. The matter is made worse by low interest rates and tight existing home inventory, which has caused new home builders to ramp up production. The demand for new homes is so high that even during an economic crisis, we hit a 14-year high in new housing starts in December.”

According to the Bureau of Labor Statistics Producer Price Index (PPI), number 2 Diesel rose No. 2 diesel fuel rose 71 percent from October 2020 to February 2021. It went much higher in California, of course, but that’s the topic of another story. Other construction price inputs from the February PPI report for the same period, which roughly covers the Age of Covid, include asphalt, up 73 percent; structural steel about the same.

It’s something to keep in mind when you bid…and while you are busy on the job.