By Rich Der Aris
October 28th, 2021
Prior to starting employment at Sullivan Engineering, A Rimkus Company, I was part of a medium-sized building envelope construction firm. Over the last 28 years in this industry, change has always been a constant. Changes such as insurance, inflation, material costs, regulations, and safety training protocols, have caused increased pricing within the construction industry, especially over the last couple of years.
COVID-19 regulations have greatly affected the industry throughout our city, as the mandates relate directly to contractors who have to enter the personal space of building occupants. Daily health checks and additional regulations are likely to be requirements for the foreseeable future. Often, current projects, that were bid pre-pandemic are subject to change orders, in order to pass the cost of the additional requirements to the building owner.
The most significant cost increases that the industry has encountered over the last 2-3 years are related to insurance policies. Several of the larger liability insurers have moved away from the New York market, which leaves smaller “boutique” insurance companies to provide policies to contractors. Now, contractors are responsible for the annual double-digit premium increases. Limitations/exclusions have become normal to read in policy fine print as contractors try to avoid the spike in overhead costs. Rate quotes for umbrella policies have also increased since the pandemic. Some firms have elected to lower their policy limits to help curb increased costs effectively, which leaves the clients with less protection.
The building envelope industry is currently dealing with long material lead times and supply chain problems due to raw material shortages, production delays due to state and federal COVID-19 regulations, labor disputes, labor shortages, global trade interruptions, and shipping delays. These delays have resulted in frequent and unpredictable increases in material cost. Contractors are struggling to keep up and are often forced to request change orders from their clients in order to offset the volatile market.
The industry is also impacted by the additional mandatory educational requirements in the workforce in some particular states as well as federal agencies. These continuing education requirements are aimed at decreasing workplace injury and deaths; daily logs, record keeping, and safety meetings are required, in the name of keeping workers safe.
The NYC Department of Buildings has implemented new programs for resident/tenant safety by pushing new regulations and recordkeeping requirements. Additional controlled inspections have been added by the NYC DOB to help ensure specification conformance and quality assurance. The additional oversight should improve safety and quality of work but also adds time to the overall project.
There are also price increases in the more monotonous factors of the construction industry in the NYC Metropolitan area, such as parking fees, parking fines, and eventual congestion pricing in the busier city zones. Contractors are forced to add these contingencies into their budgets as a “cost of doing business.”
The aforementioned factors include some of the driving forces that currently impacting bid pricing; these factors will continue to influence and push prices upward in the building envelope industry, just as they have in the past. When building owners are negotiating project pricing with contractors, it is important that they understand what they are getting for their money. Proper vetting is critical in choosing the “right” contractor. Making sure the contractors have properly bid the project can avoid undue delays, rushed and improperly performed work, and overall stress between the Building Owner and the Contractor.