|(Photo courtesy of American Bridge)|
Although the initial shock of this years historic spike in steel prices is starting to ease somewhat, contractors, transportation departments and fabricators expect to contend with its re- percussions on bridge projects for a long time to come. The 40 to 50% jump "created a path of damage like a tornado, and were still trying to clean up that mess," says Pat Loftus, president of High Steel Structures Inc., a Lancaster, Pa.-based fabricator.
"Basically, [higher steel prices] are going right to the bottom line because theres no way to absorb them," says Dennis Hirschfeld, president of Hirschfeld Steel Co. Inc., San Angelo, Texas. "The whole fabrication industry is struggling right now, and its a serious situation. Its unprecedented."
Fabricators and others regard retroactive relief as key to averting disaster. Unless adjustments are forthcoming, "you may see a number of defaults yet to come on projects that have already been awarded," Loftus adds. On more than one job, "weve had to tell the contractor that we cant execute [our contract] on that basis."
Some states plan to offer price indexing. "Were going to allow contractors to mark the bid documents if they want to use indexing," says Ralph Anderson, engineer of bridges and structures for the Illinois Dept. of Transportation.
But more state DOTs appear to be leaning against escalation clauses. The Pennsylvania Dept. of Transportation developed an escalation clause but scrapped it because "the industry felt that were now back to some level of normality," says Gary Hoffman, its deputy secretary for highway administration.
"Since prices seem to be stabilizing, were probably leaning toward not indexing," says Dean Van De Wege, project development branch manager for Colorado Dept. of Transportation. "You dont want to have every piece of work where youd have specialty clauses in the contract for decreases and inflation."
Short of indexing or offering retroactive relief, DOTs are taking other steps to provide breathing room. Under Texas usual procurement rules, "you cant bill for a girder until it [is] completely finished and stamped off by the inspectors," says Hirschfeld. Now, the state is allowing vendors to submit invoices as soon as raw material is delivered, "so youre able to improve your cash flow and time a little bit better when you buy the ma-terial," he says. "Its not an escalation clause," but it gets cash through the door faster, Hirschfeld adds.
Washington state is using a similar strategy. "For large-ticket items, when a contractor orders and materials are delivered on site, well pay the invoice cost," says Kevin Dayton, state construction engineer. "We dont pay the bid price for it but we pay the materials invoice. We dont expect them to bankroll it for the duration of the job."
To give contractors and fabricators a break, PennDOT is modifying contract provisions that include liquidated damages. The agency is now waiving those penalties for delays triggered by late steel deliveries. PennDOTs legal staff is also reviewing "Buy American" contract provisions for steel, Hoffman says.
Contractors, too, are adjusting. "We are trying to make sure that our suppliers quote us for the duration of the contract," says Mac Cianchette, vice president of Cianbro Corp., Pittsfield, Maine. "If weve got up to 90 days for the owner or DOT to award, were asking vendors to honor quotes for up to 90 days." Cianbro is relying heavily on tried and true suppliers. "Weve been more cautious not to necessarily go with the low quote if it isnt coming from a supplier we love to do business with," he says.