OCA Message to Industry
Following a recent industry roundtable of 40 industry contractors and suppliers on the ongoing challenges in material supply and price escalation, the OCA wishes to communicate in an open message to all in the construction building process but especially to the BUYERS and DESIGN consultants some key messages:

  • Ensure your project budget and expectations are in alignment with current reality before tendering. The cancellation last week of the $100 million Ottawa Police Services South Facility is a case in point. The market is so turbulent presently that unfortunately OPS may have missed an opportunity to lock in pricing. The challenge now is to complete a significant redesign to capture potential savings while at the same time material prices are escalating. BUYERS and design consultants now more than ever need to work up-front with builders on budgets to reflect current market prices.

  • Do not seek a 60 to 90 bid validity period to approve a project. The shorter the bid approval time line the better as anything more than a 30 days is unworkable given that suppliers and subcontractors are in many cases offering 7 or 14 day terms on their pricing.

  • Consider a material payment adjustment clause in your project tender to deal with price fluctuations of certain materials. There are precedents out there to deal with certain product price volatility in the past. For instance the City of Ottawa as well as the Ministry of Transportation have clauses for fuel or asphalt cement volatility. Contractors are given a credit should the price index rise by more than 15% from the month when the contract was signed. BUYERS will similarly receive a credit should the price index go down by more than 15%.

  • Plan your project with all parties in the subcontractor and supply chain as early as possible - order in advance - pay for materials when it arrives.

  • Communicate early and regularly.

  • Stay calm and let's work together - there is a light at the end of the tunnel.
What was heard on the OCA Roundtable Call
Bid validity period is a real challenge with quickly changing prices. Trade contractor supplier pricing is good for only 7 to 14 days due to supply chain.

Shortages and tight supply along with frequent price increases is seemingly happening across all aspects of building and infrastructure construction.

Here is what we heard at our roundtable as to some of the reasons behind supply delivery and price volatility challenges.

  • Texas is a world leader for petrochemical manufacturing supplying to other industrial manufacturers including automotive and construction. The winter storm early in 2021 has had a devastating impact on production because of emergency shut-downs and damage from burst pipes, damaged equipment necessitating several plants to be rebuilt from scratch. PVC products, additives, firestopping affected. Expect to see paint shortages shortly.

  • World-wide shortage of shipping containers.

  • Port congestion is delaying unloading and delivery of materials

  • Government stimulus programs in Asia are driving heightened demand for construction materials thus keeping materials in those regions.

  • Drywall - North American market is sold out. Suppliers are on allocation. There have been 3 or 4 instances in Eastern Canada where the distribution network had no inventory of 5/8" drywall to sell to suppliers.

  • Lumber is very limited. Suppliers buying blind as to price. When supply arrives in 6 to 12 weeks the price is when lumber is delivered. Plywood costs doubled - $100 a sheet. OSB 7/16" is now more expensive than plywood.

  • Steel - At beginnng of Covid the steel industry closed or reduced capacity significantly from around 87% utilization to less than 50%. Capacity is slowly increasing in North America. Canam Steel is a major buyer and used to be able to buy 6 months in advance and now being limited to less than 30 days. Pricing has doubled from November 2020 from $600-$700 per metric tonne to $1,300-$1,400 per metric tonne. Used to be able to guarantee quotes upwards to 2 to 3 months - now 15 days. Steel mills advising that they won't see stability until Q1 or Q2 2022. Interesting to note that the large distribution centres for AMAZON, KMart, etc is forecast to consume 65% of steel produced in North America in next 24 months with a construction program estimated at $100 Billion.