How Labor and Materials Can Affect Construction Costs

One of the challenges of accurately estimating construction costs is the fact that there are so many variables that can impact the final budget, including the frequently-shifting prices for labor and materials. While the price to rent construction equipment may stay relatively stable, the cost for labor and materials can vary from project to project, and even day to day.

 

While demand plays a large role, there are other external factors that can impact the cost of construction materials. One major issue the construction industry is grappling with today is tariffs. As the current administration seeks to create a more equal playing field in terms of how much the U.S. is paying in tariffs vs. other major countries, it is creating uncertainty in several industries, such as steel and lumber.

 

Not only can fluctuating tariffs affect the cost of materials that are being imported into this country, it can also impact locally-sourced materials as U.S. manufacturers are forced to adjust their pricing to compensate for the impact the tariffs are having on their bottom line.

 

While this situation plays out it is difficult to predict what the long-term impact will be on the cost of various building materials. However, it is a construction management issue that project managers and estimators will need to continue to watch in order to properly factor material prices into their estimated construction costs.

 

Another external factor than can drive up the cost of materials is severe weather. Hurricanes can be particularly disruptive to the supply chain, and can cause the price of items such as lumber to temporarily spike up until manufacturers and the supply chain return to normal. If a construction project is taking place near hurricane season, estimators should keep in mind that they could potentially face rising prices if a weather event impacts the building materials they need to complete a project.

 

The cost of labor can also have a significant effect on the price of a construction project. In 1913, labor made up 38 percent of the total cost of a construction project. In 2013, that number had risen to 65 percent. As unemployment continues to fall and the labor market becomes more competitive, it is costing construction companies and project managers more and more to find and hire qualified workers.

 

What this means for construction management estimators is the need to factor in the likelihood that the cost of qualified workers will likely continue to rise – particularly if it is for specialized workers, such as plumbers and electricians.

 

While you can’t control how much labor and materials will ultimately cost, a good construction estimate will take all of these factors into consideration to estimate construction costs that will be as close to the final project price tag as possible.