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The widening gap between construction input costs and ‘bid prices’ puts trade contractors’ businesses at risk. The AGC’s Cost Squeeze Chart, which calculates the year-over-year change in materials costs vs. ‘bid prices,’ shows that the cost squeeze for contractors is the most it’s ever been since AGC began tracking the metric in 2004. If a contractor submitted a fixed-price bid in late 2019 based on the estimated cost of materials at that time, the entire job is now at risk of being unprofitable.
Ben Worley, VP of Business Operations at a mechanical contractor based in Waco, Texas, has first hand experience with this. “We received a letter from the CEO of one of our preferred vendors that they’ll be putting a 9.5% increase across the board on all their materials going forward. So, whatever we didn’t buy out at the start of the job, we now are immediately going to see a 9.5% increase” said Worley. “We bid this work on a flat price and we can’t pass these increases onto our customers.”
With no control over material prices and availability, firms need to find internal cost savings to protect profit margins. How? Optimize for what can be controlled. Here are a few tips:
- Streamline communication between the field, office, warehouse, and suppliers.
- Simplify quoting and material sourcing processes.
- Keep better track of existing inventory.
- Make it easier and faster for field teams to order materials.
To learn more, on exactly how companies implemented these process changes download this free guide.
Or see how Kojo is helping hundreds of trade contractors across the country overcome supply chain challenges through their one-stop shop materials procurement solution.
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Kojo is trusted and utilized by thousands of construction professionals across the country every day. As the construction industry’s leading procurement platform, enables trade and self-perform general contractors to take control of their margins by consolidating the procurement process onto one, all-inclusive digital platform.