Materials disruptions worsening for Northern Nevada builders, contractors
For 29 years, Rick Reviglio, co-owner of Western Nevada Supply, has never worried about running out of raw material like a 4-inch PVC sewer pipe.
This year that changed.
“We have often run out of 4-inch sewer pipes in the past six months,” said Reviglio, whose wholesale distribution company is headquartered in Sparks. “Not only did we always have it, we had it in abundance — you’d find miles of it in our yard. And there have been several times when we haven’t worked it out.”
It is the result of resource shortages rippling through the United States economy as growing demand for housing, commercial construction, electronics and other goods collide with manufacturing and transportation bottlenecks.
“It’s the perfect storm of supply and demand dynamics,” Reviglio said. “Everyone is trying to get projects done, so you have too much demand and a lack of supply.
“Each of our segments — water, plumbing, HVAC, all of them — we have to tell our contractors, ‘we don’t have any materials.’ And our competition is in the same boat. So the contractors are on hold.”
As projects and orders pile up amid a recovering economy in Northern Nevada, construction companies are finding rising costs for materials — from PVC pipe to steel to lumber — increasingly difficult to predict and factor into bids, exposing them to potential losses. .
“Before the pandemic, it was a lot easier to look back at historical values when we conceptualized projects for clients,” said Mark Drahos, operations manager for the Nevada region at Alston Construction in Reno. “Now it’s much more difficult because you have some material suppliers who tell their subcontractors, ‘Here’s the price of your material right now, but you can’t lock that in; if we are going to deliver the materials to you, you pay the price that is at that time.’ So that is a huge challenge.”
For builders in northern Nevada, this means several months can elapse between when bids are submitted and when the actual work begins.
In the past, materials suppliers typically guaranteed prices for 60 to 90 days and often held to those prices if orders came in later, executives said. Now, suppliers only give up prices for a week or two, and many don’t follow through as prices rise steadily.
This is especially true for suppliers in the roofing industry, said Matt Cafton, senior VP and regional manager at Alston Construction.
“That’s the only industry we’ve encountered so far that doesn’t commit to their pricing,” he said. “Basically they say, ‘We’re going to quote you today, but when the material actually arrives at the job site and you take possession of it, we’ll let you know the cost at that time. ‘
“Of course that’s a little scary.”
After all, the bulk of a roofing contract — about 70% — is material, and the remaining 30% is labor, Clafton said, meaning fluctuations in materials can add a significant amount to the cost of a roof structure.
“If there are fluctuations on a $1 million roofer and $700,000 of that amount is subject to perhaps a 20% increase in cost, that’s a $140,000 delta that might hit that job,” Cafton said. “Someone’s going to have to cover it, be it the contractor, the subcontractor, or the owner.”
As a result, Clafton said the prices of Alston Construction’s roof structures have often “tripled in cost”.
“Historically, we would see $5 to $6 per foot as the cost of our roof construction. And today it’s probably $17 to $18 (per foot),” said Crafton. have been shifted to 10 to 12 months… You are either going to delay the start of your project or extend the duration of your project, both of which are potentially cost-effective.”
To address the enormous challenges, regional construction and real estate development companies are trying to be more proactive, said Doug Roberts, a partner at Panattoni Development of Reno, which develops industrial, office and retail space in more than 278 cities.
“What we’re doing is just getting ahead of our order,” Roberts said.
Pre-pandemic, Roberts said, Panattoni would take several weeks for a steel order. Because of the shortages, the company sees custom-built customers — i.e. a commercial building or space built specifically for the customer’s needs — authorizing Panattoni to spend a certain amount of money to get in line” so we don’t miss out on those steel orders,” said Roberts.
Panattoni’s orders come early and often and in large quantities. The company says it has developed an average of about 12 million square feet per year since 2011. The North Valleys Commerce Center in Reno, for example, has nearly 3 million square feet alone.
“Given the size of our projects, we hope we order enough steel and materials so that we have a little more purchasing power,” Roberts said. “But we are still subject to these delays, just like everyone else. That’s really what it comes down to. It’s probably more simple delays on schedule and higher prices. Because people naturally do what they have to do to get their projects in on time. And they will pay extra to make that happen.”
Still, Roberts said he expects each project to take two to three months longer than they hope.
“It depends, of course, on what kind of material we’re talking about how much lag there is,” Robert said.
Regardless, all executives who spoke to the NNBW said they have never seen a materials shortage close to what they are experiencing now, even during the economic downturn a decade earlier.
“I thought I’d never seen anything like it or faced the same kind of challenges,” Crafton said of the Great Recession. “And then we went to COVID and the pandemic. It has been a whirlwind of firsts.”