Escalating Materials Prices Turn Construction Bids Into a Gamble

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Construction companies, manufacturers and other businesses that submit bids to win jobs say that process has turned unpredictable as rising materials costs expose them to potential losses.

As projects and orders stack up in a rebounding U.S. economy, some construction and manufacturing executives said they are surrendering profits on jobs or paying out of their own wallets to cover materials costs that exceed their bids.

Rising prices for steel, copper, brass, lumber, laminate sheeting and plastic-based materials, such as PVC pipe, are particularly hard to predict and factor into bids, according to executives. Inventories of materials remain tight because of production and transportation bottlenecks as well as growing demand. That has juiced some prices to record levels, including the U.S. spot-market price for coiled sheet steel, which has increased by more than 80% since the start of the year.

At Harper Construction Co., a San Diego-based construction contractor specializing in projects funded by the federal government, its president, Jeff Harper, said he has shelled out about $2 million this year to cover materials costs that exceeded his bids.

“It’s a real gamble,” Mr. Harper said. “It’s tough right now to figure out how to get work against a dozen competitors and not lose your tail in the process.”

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