Construction contractors aren’t more exhausted than usual, but they may be tired of dealing with high diesel prices. “Absorbing it and just being less profitable” seems to be the only option we have, says Shrock Premier Custom Construction Founder Joseph Shrock. But there are some ways to deal with it.
What Construction Contractors Can Do
Keep your clients on top of timely and credible information about diesel and other material costs. Notify them immediately of supply chain snafus that may impact turnaround time or expenses. And investigate if contract changes would be beneficial to you both.
Associated General Contractors of America Chief Economist Ken Simonson says, “Nobody welcomes a higher bill, but the alternative of having a contractor go out of business because of impossible costs or timing is likely to be worse….”
It’s difficult to predict price increases. But construction contractors and project owners need to adjust their bidding processes to reflect more realistic expectations. In today’s climate, the likelihood of increases in material prices is high. Another idea is to add an if-I-pay-you-pay surcharge in contracts.
Shrock says historically, material and fuel prices increased about five percent/year. But over the last two years, they’ve increased 30%+. His clients have covered only 15%-20% of the price increases, so his company is absorbing 10%-15%. “We can’t raise our prices…because we would price ourselves out of the competition,” says Shrock.
Business Survival in a Tough Economy: Implement Business Development
You know the basics: Up your inventory management skills; keep your credit scores clean; reinforce teambuilding with employees.
One business site advised maximizing current customer relationships and wooing competitors’ customers. And also increase marketing rather than cut back. This is where Construction Monitor can be of help. We have the information you need to:
- Consider competitors’ customers
- Create business alliances
- Create mass mailings and/or other marketing programs
- Develop new customers