Skyrocketing construction materials costs have become a constant companion to an economy that by some measures appears anxious to break free from pandemic-induced stressors. Materials shortages, supply chain disruption and the rising costs of building materials are acting as a huge drag on the construction market and are a major concern for contractors as we move into the busy 2022 construction season.

Contractors have yet to react by adjusting their bid prices to keep pace with the dramatic runup in materials costs. As noted in the most recent edition of AGC of America’s Construction Inflation Alert, the 2022 producer price index (PPI) for material and service inputs to new non-residential construction increased 21% yr/yr while the producer price index (PPI) for new non-residential building construction (bid prices) rose just 17% yr/yr. Additionally, predictions are that year-over-year changes in materials costs may exceed the change in bid prices for another 2 years or longer!

In a recent letter to public contracting authorities, AGC of Minnesota called for immediate action and pressed the major public contracting authorities to engage in meaningful dialogue with the hope of identifying possible shared accommodations to help mitigate the impact of unbalanced materials pricing stressors. It is both ironic and illogical that contractors building publicly-funded work should be saddled with absorbing unprecedented materials price increases while the state sits on a record budget surplus exceeding $9 billion! What’s at stake is the future of many small-to-medium sized firms and disadvantaged business that will not be able to sustain operations. This reality will have daunting consequences for both the future public competitive bidding market and the broader social goal of increasing the presence of diverse and disadvantaged construction businesses.

Practical and justifiable accommodations have been implemented in other markets where adjustment clauses for specific material inputs have been developed. To date, Minnesota’s public owners have been either reluctant to entertain similar options or seem intent on holding to a rigid adherence to the contract terms and conditions regardless of impact or outcome. If specified materials are genuinely unavailable or if those materials have incurred super-sized cost increases since bid award, it should be a shared risk that both parties strive to mitigate.  

While we cannot predict, dictate, or direct market related challenges that affect business models and operations, we can work with owners to help them better understand how such factors affect the short and long-term health of the industry.  In response to our industry letter, a meeting with state officials has been scheduled to discuss these important matters. We remain hopeful our efforts will bear fruit. If you have specific examples of other shared risk accommodations that have been discussed or provided in contract language, please share those examples with Laura Ziegler or myself.

The best way to stay on top of urgent legislative issues that need your input is by signing up to receive AGC of Minnesota's action alerts.

Please take a few minutes to answer the survey if you have experience currently or in the recent past: (1) working as a federal construction prime contractor or as a subcontractor to a prime directly for a federal agency (i.e., not on a federally funded state or local government project) or (2) using a PLA for any type of owner.

Congratulations to Hunt Electric and ECSI on their CHASE Level 3 Project at Winona State! Click the photo for a larger image.

The Construction Health And Safety Excellence (CHASE) program is a partnership with MNOSHA, recognizing AGC member contractors for superior safety programs and jobsite

MNDOT is developing an Electric Vehicle Infrastructure Plan to access $68M in federal dollars to build out the state’s electric vehicle charging network.

The used equipment market is hot and showing no signs of cooling off. The demand for quality, used equipment is strong, with dozers, excavators, and loaders the top three most sought-after machines in the market. If you’re looking to move machines out of your fleet, RDO Equipment Co. can be a great partner in the process. Here are five reasons why working with RDO is the best way to sell equipment. Learn more

Students pursuing a secondary degree in a construction related field are encouraged to apply for an AGC of Minnesota Foundation scholarship!

Click here to apply, and direct all potential students to the AGC Foundation web page!

AGC of America and Procore Technologies, Inc. a leading global provider of construction management software, announced this week that they have met their initial fundraising goal of $500,000 for a new scholarship to support minority students studying construction at the nation’s Historically Black Colleges & Universities (HBCUs). Students will begin receiving the scholarship starting in the 2022-23 school year. Read more

Women Building Success is designed to recognize, celebrate, and promote the success of women in union construction trades. This year, the Women Building Success Awards Ceremony will be held in person on Wednesday, June 1 at the Kellermans Event Center in White Bear Lake. If your company would like to nominate at least one woman in the trades, please submit a nomination form. Nomination deadline: May 18, 2022

El Paso’s Veliz Construction was named as the 2022 Diverse Business of the Year award winner by the Associated General Contractors of America.The association also awarded Diversity and Inclusion Excellence Awards, which are sponsored by WTW, to Austin Commercial, Hensel Phelps, Millstone Weber, LLC, and Central Builders. Read more

Congratulations to Sellin Brothers, Inc. on celebrating 75 years in business! View their anniversary video here.

It may not quite feel like spring yet, but summer is on the way, and registration is open for the 2022 AGC golf tournament, which will be held Friday, August 5 at Keller Golf Course.

Last year's tournament sold out quickly, so reserve your foursome or sponsorship today!

Registration is now open for the 2022 Sporting Clays Fundraiser, held on Wednesday, September 14! Proceeds go to the AGC of Minnesota Foundation, which provides scholarships to students pursuing a career in the construction industry.

We'll be sold out in no time, so sign your team up today!

Join the Chief Economists of the Associated General Contractors of America, the American Institute of Architects, and ConstructConnect on Tuesday, May 10 for an in-depth discussion on what’s in store for the construction industry for the remainder of 2022 and beyond. We'll also get an update from ConstructConnect's Content Team on the latest Project Intelligence.

This free webcast is open to anyone interested in the North American Construction Economy.