đź”’Maine’s construction industry keeping an eye on surging fuel costs
The average price of regular gas in Maine has climbed 32% in the past month, while the U.S. average average is up 34%, AAA data show. MAINEBIZ GRAPHIC / MATT SELVA
As the conflict in the Middle East enters its second month, rising gasoline and diesel prices are widely expected to add to construction costs in Maine and nationwide.The average price of regular gas in Maine has climbed more than 30% in the past month. PHOTO / RENEE CORDESThe average price of regular gas in Maine has climbed 32% in the past month to $3.83 a gallon, according to AAA data as of Monday. Nationwide, the average is up 34% to $3.99 per gallon.Diesel fuel — used to power commercial trucks and heavy-duty machinery on building sites — is 32% more expensive in Maine than a month ago at $5.70 per gallon. Over the same period, the U.S. average diesel price has shot up 46% to $5.40 a gallon as of Sunday.While some construction companies are already feeling the pinch of higher fuel costs, others are weighing their next moves.Kevin French. Landry/French Construction FILE PHOTO“We haven’t seen any direct impact on our projects yet,” said Kevin French, chairman and CEO of Landry/French Construction, a Scarborough-based firm juggling 19 active jobs. All of those jobs were bid and contracted before the recent surge in fuel costs, he noted. Because Landry/French does very little time-and-material work tied to labor hours and supplies, higher fuel costs haven’t sparked immediate changes, he explained.Emphasizing the need to “stay focused and avoid a knee-jerk reaction,” French said that “the key question is whether this is truly a short-term financial inconvenience or something more prolonged.”In anticipation of higher transportation costs, Landry/French plans to prioritize sourcing materials locally as much as possible, he said. The firm also keeps regular tabs on commodity prices to “help us better predict costs when entering into guaranteed maximum price contracts,” French said.
Avesta seeing cost increases
At Avesta Housing, a Portland-based nonprofit developer of affordable housing, “rising fuel prices are starting to impact our projects under construction,” said Patrick Hess, the organization’s vice president of real estate.“We are seeing cost increases from manufacturers of petroleum-based products and proposals from contractors for transportation-related surcharges that weren’t built into our original budgets,” he explained. “We’re managing these pressures as best we can, but we expect that continued volatility in fuel prices will affect overall construction costs.”Kelly Flagg, Associated General Contractors of Maine. FILE PHOTO / TIM GREENWAY
Offering an industry-wide perspective, Kelly Flagg of Associated General Contractors of Maine warns that "the longer fuel prices are escalated, the higher future project costs will be as materials, delivery and operating costs will all rise.”
In many cases, however, passing costs to the clients is not possible “as the contracted prices and rates are already in place, and contractors are faced with managing these escalations internally, which over time erodes profits,” said Flagg, who serves as executive director of the Augusta-based trade association.During times of extended volatility, companies will occasionally use escalation clauses so that base prices are not increased, and so that any increase in price is transparent and directly related to the cost of fuel, Flagg said.“Most contractors are already using efficiency and logistics measures to reduce fuel consumption,” she noted. “This includes things like onsite fueling for efficiency, telematics and reduction of idle run times and route optimization.”
'Baked into every invoice'
On the other side of the country, in Costa Mesa, Calif., TrueCraft Construction founder and CEO Brandon Wells calculates that the firm’s crews driving 45 miles round trip at $5.50 a gallon adds up to thousands of dollars of extra costs across multiple zip codes.“Gas at the pump is never just gas to a contractor,” he told Mainebiz via email. “It’s baked into every invoice, every delivery and every crew mile on a project that was priced weeks prior to the spike hitting.”
Mainebiz wants to hear from you
How is your business navigating rising fuel prices? Please drop a note to Deputy Editor Renee Cordes at rcordes@mainebiz.biz.
