Mitigating Risk from Steel Tariffs in the Construction Industry

August 15, 2018 Karli Langner

Changes in Complexities Requires Changes in Business Processes

Newly imposed tariffs on steel will create increases in construction costs. The entire construction industry has seen increases in construction material prices for the past two years, but these increases will go even higher with the new tariffs. Contractors will pass these costs along when bidding for jobs.

Per Concrete Construction magazine, “Metal products that are used in construction include steel bars (rebar) to reinforce building and highway concrete; piles and beams (structural steel) in buildings; steel studs to support wallboard in houses and buildings; steel and copper pipe; and aluminum window frames, siding and architectural elements. Several other products that are important to construction also had large price increases over the past 12 months: diesel fuel, 38.5 percent; lumber and plywood, 13.2 percent; gypsum products, 8.0 percent; and plastic construction products, 4.9 percent.”

In essence, construction costs are going up, which means housing and building prices will be going up as well. This will affect not only consumers, but also contractors. While price volatility is nothing new, what you can do about it involves digital technology and automated processes, including:

  • When writing proposals, consider prices adjustments to mitigate potential risk from price increases. Use fluctuation clauses specific to material cost to limit bidder risk. Numerous media sources mention that aluminum and steel prices are changing every minute making it hard to guarantee prices.
  • Mitigate risk by planning alternative actions if issues, such as loss of a source or price increases occur. Shop around for suppliers of steel and aluminum to get the best price.
  • Use an integrated quoting, dispatching and billing tool like Command Alkon’s HaulIt, which helps with cost control for projects. It integrates with Command Alkon’s TrackIt to track trucks, fuel, navigation, driver logs and driver performance, resulting in optimal fuel usage and asset utilization. Optimize routes to reduce miles and fuel usage, which also lowers costs.
  • Simply automating the ability for drivers to clock in/out without leaving their truck saves time. On average, time savings is 40 minutes per day, per truck, which equates to 4000 hours per year. That 4000 extra hours can be turned into extra work that can bring your project in under time, saving money as well.
  • Data can be shared through Command Alkon’s integrated solutions, allowing management to make more informed decision in real-time. Having the knowledge to know what to do when an issue arises can keep costs contained and improve customer satisfaction.

The unique challenges of the Heavy Building Materials (HBM) with added complexities from new tariffs requires automated business processes, as paper-based processes will slow the job cycle.

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