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AGC: Construction materials prices up in April

May 20, 2024
Association warns proposed tightening of Buy America rules for highway projects could drive up costs, delay completion of much-needed infrastructure

The price of materials and services used in nonresidential construction increased 0.4% from March to April, while an index that measures contractors’ bid prices inched up by 0.1%, according to a recent analysis of government data by the Associated General Contractors of America.

Additionally, association officials cited a new survey of highway contractors that indicated inflexible federal Buy America mandates could lead to future price escalations and other disruptions to highway projects.

“Prices for construction inputs have risen faster than contractors’ bids every month so far in 2024,” Ken Simonson, the association’s chief economist, said in a news release. “In addition, persistently long lead times for electrical equipment are adding to the cost of many building and infrastructure projects.

“Meanwhile, inflexible rules for sourcing materials could drive up prices for federally aided projects such as highways.”

The producer price index for new nonresidential construction—a measure of what contractors report they would charge to put up a specific set of buildings—edged up 0.1% in April. That increase followed an identical rise in March, no change in February, and a gain of 0.3% in January, Simonson noted. In contrast, input prices climbed 0.4% in each of the past three months and 0.9% in January.

The association released results of a just-completed survey it conducted with the American Road and Transportation Builders Association to determine the impacts on highway construction from a proposed tightening of Buy America requirements. The survey was in response to a Federal Highway Administration (FHWA) proposal to roll back a longstanding waiver from these requirements for most manufactured products permanently incorporated into federal-aid highway projects.

More than two-thirds of the 192 respondents—69%—stated that they will “price” risks in their bids reflecting uncertainty about costs and/or availability of Buy America-compliant materials for particular projects. This reality usually results in higher project costs and diluted benefits from federal investment. In addition, if FHWA rolls back its waiver, respondents expect significant challenges in complying with Buy America requirements for many manufactured products. All eight categories of manufactured products included in FHWA’s Request for Information had a greater ratio of respondents indicating that compliance would be “difficult” and “very difficult or impossible” compared to “easy” and “possible.”

Association officials noted that fewer than 15% of respondents believe these products would “easy” or “possible” to acquire in compliance with a new FHWA Buy America policy. They added that respondents listed numerous additional products that would be difficult or impossible to source without waivers.

“Federal officials are attempting to shut down a diversified global supply chain for construction materials before enough domestic supply exists,” said AGC CEO Jeffrey D. Shoaf. “That’s a recipe for higher costs and delayed projects that will harm both the U.S. economy and highway safety.”