The overall U.S. construction market is starting to defuse three years of explosive materials price escalation. But the damage has been done, with higher costs for many materials taking on the air of permanence. Some state highway departments are exploring ways to deal with the new higher cost structure, while estimators are turning their attention away from materials and toward escalation stemming from other sources. These include lack of competition in the overheated nonresidential and civil works markets and corresponding labor shortages.
“The volatility of the materials market is settling down, which is helping escalation because people are not putting the fear factor into their bids,” says Karl Almstead, vice president of Turner Construction Co., New York City. “Escalation is now being driven by the extreme volume of work, which has given some pricing power to the vendors.”