Despite several years of recovery, construction inflation is still feeling the impact of the recession that reduced the number of subcontractors and, in turn, still is pushing up bids. “There is plenty of demand out there, and we see a lot of general contractors, but they are all chasing the same subcontractors,” says John Moreno, chief estimator for the cost consulting firm Sierra West.
This pressure can be seen in selling price indexes when they are compared to the general building index, which mostly measure the input costs of materials and labor (see table, p. 42). For example, in its latest report, the materials component of Sierra West’s general building index was up 0.7% for the year, while the labor component was up 1.6%. In contrast, the firms’ in-place subcontractor costs was up 10.8% for the year.