A coalition of construction contractors this past Friday filed a lawsuit challenging Gov. Tina Kotek’s executive order that requires project labor agreements for most state projects.

The lawsuit, filed in Marion County Circuit Court, comes after Kotek’s order drew strong backlash in the construction industry. The contractors allege Kotek “does not have the power” under the Oregon constitution to require project labor agreements for state projects, according to the complaint.

“We believe that the governor exceeded her executive powers and created an anti-competitive environment, disregarding the advice of one of her own agencies regarding the added cost to Oregon taxpayers,” Mike Salsgiver, CEO of the Associated General Contractors’ Oregon-Columbia chapter, stated in a news release on Friday.

Kotek’s Dec. 18 order requires project labor agreements be used for state-funded projects when on-site labor costs amount to 15 percent of project costs, which would capture the vast majority of large-scale projects.

It comes as the state prepares to embark on major infrastructure undertakings, including the Interstate 5 Rose Quarter Improvement Project and the Interstate Bridge replacement project.

Matthew Mues, a construction attorney with Davis Wright Tremaine LLP who is not involved in the lawsuit, pointed to studies showing PLAs raise costs.

“If the executive order requiring PLAs on public projects in Oregon is upheld and maintained, it will have an effect on open shop contractors, and it will increase the cost of construction of those public projects,” Mues said.

Kotek’s office and allies in organized labor have argued that PLAs will provide labor peace and certainty for big infrastructure projects.

The governor’s office did not respond to messages seeking comment.

“The last thing Oregonians can afford right now are the higher costs and cost overruns that come with union-only PLAs,” stated Laurie Kendall, president of the Associated Builders and Contractors’ Pacific Northwest chapter.

“The issue is ripe for adjudication because the Governor has directed all state agencies to comply with the requirements of her executive order immediately,” the complaint states.

The contractors may have reason to hope for relief from the courts after a string of legal victories against similar orders.

In April 2024, AGC and three contractors won a preliminary injunction in Marion County Circuit Court against a community workforce agreement, or CWA, that was entered into between the Oregon Department of Transportation and 37 labor organizations. In that case, Judge Jennifer K. Gardiner said the CWA was “specifically designed to prioritize union labor.”

“To suggest that, because bidding is open to everybody, it necessarily creates an open and equal playing field, is simply false and disingenuous,” Gardiner wrote in her order.

Like the earlier lawsuit, this one opposing the PLA requirement was filed in Marion County, suggesting the contractors like their chances in that court.

“I anticipate based upon the ruling they received on CWAs, that was a motivating factor in filing it in Marion County,” Mues said.

At the federal level, PLAs ran aground in January, when Judge Ryan T. Holte of the U.S. Court of Federal Claims found in favor of contractors who challenged a 2022 executive order by then-President Joe Biden mandating PLAs be used for all federal government construction projects costing $35 million or more.

Holte relied in part on a General Services Administration market survey that found PLAs could be expected to increase costs and decrease bidders’ interest.

The plaintiffs in the new lawsuit include a wide swath of the Oregon construction industry: Associated General Contractors’ Oregon-Columbia chapter, Associated Builders and Contractors’ Pacific Northwest chapter, the Utility Contractors Association of Oregon and Southwest Washington, the National Federation of Independent Business, HP Civil Inc., Hamilton Construction, K&E Excavating Inc., Interlaken Inc., Moore Excavation Inc., Iron Horse LLC, Hatch Western Co. Inc., Hydro-Temp Mechanical Inc., North Santiam Paving Co., Berrien Concrete, American Concrete Co., Kerr Contractors Oregon and Emery & Sons Construction Group.

The contractors are represented by Schwabe, Williamson & Wyatt PC of Portland. Kotek is named as the defendant.

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By Ethan Duran
91��Ƶ Newswires

Construction spending across the nation was $2.1 trillion in August, a 0.1 percent decline from July to August, according to an analysis by the Associated General Contractors.

AGC officials earlier this week said the slight decline was due to stalled federally funded construction projects and a slowed investment in housing during a glut in newly completed buildings.

“Although the federal government has announced thousands of project awards in the past three years, most of the money has yet to turn into construction contracts, let alone work under way,” said Ken Simonson, chief economist at AGC, in a statement.

“There is still great potential for infrastructure and power projects, but the timing remains uncertain. Meanwhile, single-family homebuilding should pick up as mortgage rates decline, but multifamily construction is likely to shrink until the current glut of apartments is absorbed,” he added.

The construction spending figure in August was 0.1 percent below the rate in July, but 4.1 percent more than where it was in August 2023, officials noted.

Homebuilding down in August but still up year-over-year

Private residential spending fell 0.3 percent in August, but was up 2.7 percent compared to last year, according to the analysis. Single-family projects fell 1.5 percent that month but saw a slight rise of 0.8 percent year-over-year, the analysis showed.

Multifamily construction fell again for the eighth month in a row, down by 0.4 percent and falling 7.5 percent from August 2023 levels.

Nonresidential spending inching downward, commercial takes a plunge over the year

Private nonresidential spending inched down by 0.1 percent for the month, but gained 3.6 percent year-over-year, the analysis showed. Manufacturing construction saw a 0.2 percent increase for the month. Being the largest segment in nonresidential spending, manufacturing surged 18.1 percent year-over-year.

Commercial construction spending, which includes warehouse, retail and farm projects, fell by 0.4 percent for the month and dropped 14.8 percent compared to last year, the analysis showed.

Power construction had a 0.3 percent decline for the month but rose 7.6 percent year-over-year, officials said.

Public sector a mixed bag

Overall public construction spending was up 0.3 percent for the month, but its top three segments had mixed results, according to the analysis. Highway and street construction increased by 1.1 percent, education construction remained flat and transportation spending fell by 0.2 percent. However, total public construction spending increased 7.8 percent year-over-year.

AGC lobbies federal government on environmental permitting, Buy America measures

AGC officials said the federal government “has done a good job in announcing projects that will receive construction funding.” However, confusion over Buy America requirements and delays with environmental permitting were keeping projects on from starting, officials added. AGC urged the Biden Administration to speed up permit reviews and give federal agencies more flexibility issuing Buy America waivers.

“Construction spending levels would likely be higher if the federal government could get out of its own way and allow projects to move forward,” said Jeffrey D. Shoaf, the association’s chief executive officer, in a statement. “Promising money is good, allowing projects to move forward is even better.”

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A quarterly nationwide construction survey found widespread pessimism for future opportunities.

The Construction Industry Round Table Sentiment Index, produced by consulting and investment banking firm FMI Corp., found “declining sentiment across all economic components, including the overall U.S. economy, the economy where members operate, members’ construction businesses and the nonresidential sector.”

Design and construction sentiment have been hit by “receding opportunities,” particularly in transportation, industrial and public works. Slight improvement was expected in commercial, education and industrial sectors, according to the survey.

, released Aug. 29, queried 130 CEOs in design and construction. The results “are consistent with what (Associated General Contractors) is seeing nationally and in the Pacific Northwest,” said Mike Salsgiver, executive director of .

“Public work — particularly with federally-funded projects — remains steady, though we have work to do to bolster state- and locally-funded projects,” Salsgiver stated in an email. “The private sector has been slowing, but we will see what happens if the Fed moves to reduce interest rates in the fall.”

In the Portland metro area, major infrastructure projects such as the Portland International Airport’s $2.1 billion main terminal expansion and the Bull Run water treatment project, which is also expected to cost about $2.1 billion, have buoyed contractors. Others, including the Interstate Bridge replacement, are moving through the pipeline.

Labor remains a top issue for contractors and designers. Nearly half of CIRT members said they had overrun budgeted labor costs this year, FMI Corp. reported. Looking ahead, 61 percent said they expect the cost of labor to “moderately increase” in the next quarter.

“The major challenge continuing to face construction is availability of trained and skilled labor,” Salsgiver stated. “While the market is shifting broadly, the construction labor pool remains a serious barrier. We didn’t get here overnight and we won’t fix it overnight, but AGC will continue to work with our partners in government, education, organized labor and privately to bend that curve in the right direction.”

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National contractors came out with a recent survey that most construction companies are having a hard time finding craft workers and called on the federal government to invest in workforce development to bridge the gap.

Currently, contractors across the country are looking for more workers and are having difficulty filling job openings, according to a by the Associated General Contractors of America and human resources company Arcoro.

The association reported that 94 percent of respondents to a recent survey said they have openings for craft workers and 85 percent have openings for salaried workers.

Around a third of contractors working in the building construction, highway, federal and heavy and utility infrastructure subsectors reported fallen headcounts in the past year. AGC officials pointed to federal education, training and immigration policies as the culprit for shortages, which hindered the country’s ability to build infrastructure and construction programs.

“The most likely path to addressing construction workforce shortages is for the federal government to adopt better workforce policies,” said Jeff Shoaf, the chief executive officer of AGC, in a virtual news conference. “Federal officials need to support, instead of undermine, our national infrastructure and economic development policies,” he added.

Construction labor market mixed across the West

Contractors in the west reported slightly less trouble filling jobs than the nation as a whole. Of respondents, 52 percent reported project delays due to worker shortages. More than half — 51 percent — said they had grown their workforce in the past 12 months. An additional 35 percent reported fewer employees, and 14 percent reported no change.

Looking ahead, 70 percent of contractors said they expected to add headcount, 21 percent expected no change and 9 percent were looking to reduce their firm’s headcount.

Contractors reported the most trouble filling jobs for estimators (80 percent), superintendents (79 percent) and project managers/supervisors (78 percent).

AGC Oregon-Columbia Chapter officials could not immediately be reached for comment.

The AGC-Arcoro survey does not break out separate results for Oregon. But in Washington, contractors were more likely to say they have reduced headcount (40 percent), with only 36 percent adding headcount and 24 percent seeing no change.

A lower number than in the nation as a whole — only 59 percent — expected to add headcount in Washington, while 31 percent expected no change and 10 percent looked to reduce headcount.

91��Ƶ construction reporter Ethan Duran also contributed to this report.

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By Ethan Duran
91��Ƶ Newswires

As the end of 2023 edges closer, experts shared their views on the state of the construction industry going forward. According to experts from the nation’s leading contractor associations, certain parts of the construction industry fixated on manufacturing and infrastructure will continue to see prosperity, while some challenges like labor shortages will still likely be universal in 2024.

Top economists from the (ABC) of America and (AGC) of America had a mixed picture for contractors. Most construction sectors grew along with job openings and wage increases. The influx of federal money promised more infrastructure projects, but even those have strings attached.

One thing the experts rejoiced about was the slowing of the Federal Reserve’s interest rates; in mid-December, Jerome Powell, chair of the Fed, announced rates would stay between 5.25 percent and 5.55 percent.

“It’s been brighter thanks to the excellent news about inflation at the producer and consumer level, and the (Federal Reserve) expectations for their interest rate targets,” said Ken Simonson, chief economist for AGC. “That’s been a pleasant surprise.”

Supply chain issues traded for financing woes

Contractors were less focused on woes with the supply chain since last year, dropping nearly 30 percentage points since September of 2020 compared to the final quarter of 2023, research by Baltimore-based Sage Policy Group showed. However, concerns over ability to finance projects have doubled since 2022, according to a recent poll.

This was a trade between the number of projects moving forward and the workers needed to build them, said Anirban Basu, who serves as both top economist for ABC and leader of Sage.

“What you’re sensing there is the market is starting to turn a bit. A small proportion saying we’ve got worker challenges and a higher proportion saying we’ve got issues with availability of financing for projects. Those things fit together. If projects aren’t moving forward, you don’t need as many workers and the worker shortage issue is not as great,” Basu said.

Manufacturing took the cake for construction spending in both Sage and AGC’s figures; Sage pinned spending in the sector for 164 percent growth since February of 2020. However, office construction only saw growth of 8 percent and multifamily housing permits skewed downward. Sewage and waste disposal, water supply and commercial construction remained king, evidence of federal infrastructure spending.

“If you’re along for these megaprojects, your economics are different from everyone else’s. If you’re dependent upon small, middle-sized private developers who historically developed office buildings, shopping centers and so forth, I think you’ll face more headwinds going forward,” Basu noted.

Rushmore of concern: Labor availability, materials and the greater economy

Simonson named labor supply and quality the two things most mentioned by frustrated members, followed by worries of a possible recession and materials costs. It’s worth noting Simonson and Basu had different views on whether a recession will happen next year; Simonson didn’t think so, but Basu insisted it will happen.

“Most firms said they’ve seen great improvement in the supply chain and materials costs, while they didn’t come back to where they were before the pandemic, they certainly aren’t rising for most things. The one exception to that is electrical components, switchgears and transformers. The lead times are extreme,” Simonson added.

“We think the percentages would be higher in many places if there were enough qualified applicants,” Simonson said.

Simonson said he thought construction employment would continue to grow, but contractors would likely pay more for labor. The average hourly earnings for production and nonsupervisory employees went up 5.9 percent, according to the U.S. Bureau of Labor Statistics. It’s gone up consistently month over month, and Simonson predicts the trend will continue contractors look to fill positions.

The indexed average for cost of materials and related trucking services has been about flat in the last few months, but customers reported increases for certain types of steel, structural rebar and plumbing parts.

“This might be a harbinger of what we may see next year,” Simonson said. “I’m telling contractors to brace for possibly four to six percent increases of material costs overall. That hasn’t been the case lately and I’m hoping the good fortune will last, but I think it’s prudent to a resumption of cost increases,” he added.

There’s been a huge interest in datacenters partly driven by interest in artificial intelligence, Simonson said. There’s also a drive for large manufacturing plants for products such as semiconductors, electric vehicles and batteries. Companies may also be looking to re-shore away from conflict zones, supply chain snags or are following the carrot-and-stick of federal funding, he added.

Construction of single-family homes also carried momentum for the new year, as Sage data showed an uptick of nearly 1,000 single-family home permits in 2023. However, multi-family permits across the U.S. lagged compared to previous years at just above 400 permits.

Economists at odds on possibility of recession

Economists seemed cautiously optimistic about construction in 2024 but were at odds on the direction of the general economy. At the end of his presentation, Basu remarked the economy would get worse before they got better and listed the previous Federal interest rate as a driver.

“Basing to an extent on poll results, you don’t need to be from Baltimore to be pessimistic,” Basu said, insisting on his belief a brief recession was on the horizon.

Simonson noted more consumers had more purchasing power, based on employment and real wages rising month over month. Wealth increases for homeowners and stockholders were also evidence for Simonson’s hypothesis for a stronger economy.

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“The dirtiest man on TV” is coming to Central Oregon.

Mike Rowe, creator and host of the hit series “Dirty Jobs,” will take the stage for a moderated Q&A during the Associated General Contractors’ Oregon-Columbia chapter’s summer convention at Sunriver Resort. The three-day event, presented by SAIF, will take place Aug. 7-9.

Through the show, Rowe has showcased the tireless efforts of countless workers in essential industries – from construction to steel manufacturing to garbage collection. In addition, he serves as CEO of the mikeroweWORKS Foundation, which aims to “make work cool again.” The foundation promotes skilled trades and crafts, emphasizing the value of hard work and its potential for fulfillment and self-worth.

The construction industry, like many others, is facing significant challenges due to a labor shortage. Plus, economists in Oregon predict a 16 percent increase in the demand for construction workers over the next decade. This projection has raised concerns about the industry’s future if no action is taken.

Getting people into the construction workforce is one of the industry’s biggest issues – and one that is not improving but rather worsening, AGC summer convention chair and INLINE Commercial Construction principal Brandon Flint said.

The Q&A with Rowe will take place at 6 p.m. on Aug. 8. He’ll address the pressing workforce crisis facing the construction industry and other essential sectors while engaging with the audience.

“We were sitting around the table and it’s like who better to deliver that message than the international figurehead himself Mike Rowe from ‘Dirty Jobs,’” Flint said. “So, we wanted him to come in and not just highlight the issues in the Northwest. We feel that bringing him here will really let people know that we’re serious about it.”

Construction professionals in Oregon have been actively engaging with young people and educators to inform them of career opportunities as well as the skills required for long-term success, Flint said. Career fairs, classroom visits, organized field trips, and mentorships are being used to inspire the next generation of workers. However, a disconnect persists between outsiders’ perceptions of the trades and the reality.

“There’s not enough educational facilities or schools that are really telling people that the trades are an extremely viable career path and that it’s possible to make six figures as a tradesperson,” Flint said.

In addition to participating in the Q&A, Rowe will debut his own brand of whiskey in a private tasting event immediately following the speaking engagement. This will give attendees a chance to unwind and network with industry peers.

Register now for the convention at .

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By Ethan Duran
The Daily Reporter

Fuel, lumber, steel and trucking costs were on the decline while materials like copper, aluminum and concrete rose last month in the latest Associated General Contractors of America analysis. Experts within the association said some construction input costs dropped in December in a look at the latest Bureau of Labor Statistic data.

The producer price index for material and service inputs to new nonresidential construction fell by 1.8 percent for the sixth time in seven months, and the PPI for goods sank 2.7 percent — a drop like this last seen in November 2008, association officials said. However, materials and services were up 7.2 percent year-over-year and slightly outpaced a 6.5 percent increase in the consumer price index, which is the crystal ball of inflation.

Construction input costs were 7.9 percent higher than they were a year ago and nonresidential construction input prices were 7.6 percent higher, an Associated Builders and Contractors analysis showed. ABC‘s top economist Anirban Basu said the recent short-term price drops had both good and bad effects on the construction economy.

“This Producer Price Index data represents another positive development on the inflation front,” Basu said during a recent webinar. “However, this is both good and bad news. Recent consumer and producer price releases indicate that inflation is fading, though it remains well above the Federal Reserve’s 2 percent target. Should inflation continue to abate, the Federal Reserve may be able to stop increasing interest rates sooner than anticipated. Interest rate-sensitive segments like real estate and construction would be among the primary beneficiaries. Contractors are currently maintaining their longest backlog since 2019, according to ABC’s Construction Backlog Indicator.”

Falling prices may also indicate a shaky economy in the U.S. and other parts of the world, Basu said. “Moreover, there could be bad news on inflation in the months ahead. War continues in Eastern Europe and the commodity use-intensive Chinese economy is in the process of reopening. Though there is evidence of improving supply chain functioning and moderation in input prices, contractors should not be tempted into complacency,” he added.

The PPI for new nonresidential building construction, the measure of the price contractors would bid to build a fixed set of buildings, was flat for the month and up 19.4 percent year-over-year, the AGC said.

New residential construction PPI inputs fell 1.2 percent for the month but increased 6.9 percent year-over-year, followed by one-month declines for four product groups:

• Diesel fuel was down nearly 30 percent, but up 20 percent year-over-year;
• lumber and plywood were down 3.7 percent for the month and down 20 percent year-over-year;
• steel mill products were down 2.7 percent and down 29 percent, respectively; and
• truck freight transportation was down 1.7 percent and 8.2 percent year-over-year.

Meanwhile, copper and brass mill shapes had a PPI increase of 1.5 percent in November, but prices were down 3.6 percent year-over-year, AGC’s analysis showed. Ready-mixed concrete was up 1.4 percent for the month and 13.6 percent year-over-year and aluminum mill shapes were up 1.3 percent for the month and 5.7 percent year-over-year.

AGC found some concrete steel producers posted price increases in December for hot-rolled coil, and commercial retail tile producers announced price increases up to 8 percent in February.

U.S. hotel construction saw a slight increase in the last few weeks but plans for future rooms fell 16 percent, according to STR data analytics. Places like New York City, which has the most rooms under way, and Nashville were showing signs of a slowdown.

Single-family housing starts fell 1.4 percent in December at a seasonally adjusted annual rate from November and 22 percent year-over-year, the Census Bureau reported. Multifamily starts fell nearly 20 percent, with more permits out for the month but less compared to other years, leading analysts to suggest construction will decline when current projects are done. There were 926,000 multifamily units underway in December across the U.S.

The Federal Reserve projected a flat course for economic activity from mid-November to Jan. 9, according to its latest Beige Book report. “Housing markets continue to weaken, with sales and construction declining across Districts,” the central bank said. “Commercial real estate activity slowed slightly, on average, with more notable weakening in the office market. (Some) bankers said higher borrowing costs had begun to dampen commercial lending.”

Meanwhile, union membership in the industry dipped by 0.5 percent or 5,000, from an annual average of 1,024,000 in 2021 to 1,019,000 in 2022, the Bureau of Labor Statistics reported. There were 8,671,000 people employed in the construction industry last year, which is a 6.3 percent increase from 2021, but unionization rates still declined between years. The total of workers represented by unions was 1,076,000 (or 12.4 percent) in 2022, compared to 1,112,000 (or 13.6 percent) in 2021.

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As most people are undoubtedly aware, the construction industry has seen material prices escalate astronomically over the past few months. Some specialty lumber prices have soared upwards of 6,000 percent. The cost of a sheet of plywood is double what it was even six months ago.

Generally, contractors assume the risk of material prices when they sign a lump sum or GMP contract unless there is a material escalation clause included in the contract terms. Thus, many contractors are likely wondering what their options are to try and get paid for some of these price increases, especially if they are mid-project and do not have a material escalation clause in their contract. Consider the following guidance on mitigating damages arising from these significant price increases:

Engage in open dialogue with the owner early

Contractors that are facing significant material price escalation on projects, regardless of whether there is a material escalation provision, should immediately notify the owner to communicate the cost increase issues. There is no substitute for a good candid conversation about all project issues, especially when they are about significant price increases. Generally, owners have been receptive to discussing the material escalation issues facing the industry as a whole and generally understand it is not the fault of their contractors. Open and candid dialogue with a project owner can allow you to resolve and mitigate issues before they significantly impact your project. Demonstrating to the owner that you are doing everything reasonably possible to procure the materials may also serve to redirect the owner’s attention to the distributors and suppliers that are closer to the source of the problem.

Evaluate mitigation opportunities

Oftentimes there are opportunities for the contractor to mitigate damages relating to material escalation (e.g., proposing different materials, purchasing in bulk, etc.). On a recent large project in Portland, the owner and contractor were able to negotiate use of additional storage/laydown areas so all materials could be purchased by the contractor in advance and stored for later use. In fact, the owner agreed to pay for the additional area that was needed to store the materials. In other instances, it may be cost-effective to secure additional off-site storage and buy materials in bulk. These options to mitigate damages should be brought forward and discussed with the owner to see if a reasonable solution can be reached to mitigate damages to the contractor and the project – there are also implications on payment and insurance that need to be considered if you are storing materials. And a reasonable damage mitigation offer that is rejected by the owner will be a helpful data point in the unfortunate event a claim arises in the future.

Address material escalation issues before contracting

If you are negotiating a private project or bidding on a public works project, ask to include a material escalation provision in the contract terms (either through private negotiations or asking the agency to modify the IFB during the public solicitation process). Most contracts do not have a standard material escalation clause, so contractors need to specifically negotiate these. Owners may benefit from these clauses because contractors would be less likely to include large contingencies to account for the risk of material escalations. These material escalation contract terms can be limited to a certain type of material (e.g., the Oregon Department of Transportation specifications contain a specific provision for steel price increases) or all materials, and limited to certain durations of the contract. An example material escalation clause is:

Owner acknowledges that some of the materials that are to be incorporated into the Project have volatile prices (e.g., the prices of wood, steel, aluminum, etc.) that are changing day-to day or even hour-to-hour. Accordingly, Contractor cannot guarantee material prices for any amount of time during the course of this Contract. If material prices deviate more than ___ percent from the time of execution of this Contract to material procurement, Contractor shall be entitled to a Change Order to compensate Contractor for any material price escalation after this Contract is executed.

If a contractor is faced with an existing contract that does not contain a material escalation clause and a difficult owner that is unwilling to work with the contractor to mitigate the damages, and assuming there are no other contract provisions that would entitle the contractor to additional compensation, then the contractor may be able to argue that the significant cost increase caused the contract to become commercially impracticable or impossible, or that there was a unilateral or mutual mistake at that time of contracting.

Depending on the timing of the project and date of the contract, it is also possible that a clause targeted to COVID-19 may provide relief to the contractor. Likewise, the underlying cause of the material shortage or price increase may arguably trigger a contract’s force majeure provision. These claims, however, can be very difficult to prove and any contractor contemplating such arguments should consult with its attorney.

Material escalation is impacting the entire construction industry and all projects at various levels. Contractors should be proactively addressing material cost increases before they become significant problems and cause an otherwise great project to turn into a distressed project.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the authors and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. None of the authors nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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While construction remains a bright spot for the U.S. economy during the pandemic, soaring costs and shortages of materials are creating havoc for companies across the country. This is especially true of lumber.

LMC Construction Vice President Kyle Anderson said he’d seen a 40 percent increase in material prices over the past couple of months. For one recent $2 million project in North Portland, he said, from the time the contract was awarded to the time of procurement, the cost of materials jumped to $430,000.

“We’ve dealt with material inflation and supply shortages before, but nothing like this – this drastic in a short period of time,” he said. “I’m hearing that message pretty consistently with subcontractors and with wood suppliers.”

Idaho Pacific Lumber Company, a leading supplier for multifamily construction, routinely releases market reports. In the Pacific Northwest, the cost of 4-by-8 sheets of 15/32 Oriented Strand Board (OSB) has risen from $395 per 1,000 board feet (MBF) last year to $1,550, said Scott Sunday, vice president of purchasing and sales for Idaho Pacific Lumber.

“Lumber has more than doubled in price, panels quadrupled, and OSB quadrupled,” he said.

Project teams across the country are stopping work, Sunday said, because they can’t find the materials they need. Items ranging from metal fasteners to dishwashers are becoming scarce. But nothing is causing more concern than lumber.

Just before talking with the 91��Ƶ, Walsh Construction senior project manager Ed Sloop had spoken with someone about how to deal with lumber – it was his fourth call of the week on the subject.

Sloop, Walsh Construction’s chief estimator, has been watching the market particularly close for the past several months trying to determine the best time to buy materials or, more frequently, how to account for a project’s cost with escalating prices.

“It’s just gone crazy,” he said of lumber. “That is the single biggest impact to us.”

How did we get here?

The Associated General Contractors of America last month released a survey on the impacts of COVID-19 on the construction industry. Results showed that backlogs and shutdowns at factories, mills and fabrication facilities – both domestically and internationally – are causing the majority of the supply issues.

While many manufacturing facilities and mills responded to the pandemic like a recession was imminent, Sunday said, builders for the most part did not. There was a slight pause early on, but then construction was deemed an essential business and work picked up again. This led to pent-up demand for materials such as lumber, Sunday said.

Even after factories and mills resumed operations, COVID-19 case counts led to some pausing again. Suppliers couldn’t catch up.

At the same time, the single-family market started booming – and the home improvement market ramped up. Even greater pressure was placed on supply.

Historically, single-housing construction has significantly impacted supply of lumber. But in 2006, the market fell off a cliff. According to Trading Economics, housing starts dropped from a little over 2.1 million in 2006 to under 750,000 in 2008 – an approximately 65 percent drop.

But single-family construction has since recovered slowly, and that trend became even more apparent entering 2020, Sunday said.

Then COVID-19 arrived. The pandemic shocked producers, but not builders. Demand for lumber failed to wane.

It wasn’t always that way, said Steve “Tiny” Morlock, a counter crew leader for Milwaukie Lumber Co. who has been in the industry 30 years. In 2007-08, he said, there was a glut of lumber and not enough demand, which led to a number of mills closing down.

Now those mills that remain can’t produce enough.

“The single-housing market combined with certain factories or mills being affected by COVID shutdowns … Those two items together combined then created a perfect storm,” Anderson said.

Then in late summer 2020, the lumber supply caught fire … literally.

Disastrous consequences

In a letter to Idaho Pacific Lumber customers in mid-March, Sunday wrote: “In regard to lumber, the results of the 2020 forest fires last September in the western United States had a (devastating) effect on the industry. It was reported the Oregon alone lost 15 billion board feet of timber, enough to build a million homes. The amount of logging equipment lost in these fires is in the hundreds of millions of dollars.”

The loss of that amount of lumber – as well as equipment – due to the fires has been “catastrophic to the lumber market,” Sunday said. It “all added to this terrible situation that we’re in and being so undersupplied.”

While the coronavirus has disrupted job sites, the volatility of the lumber market could have a more devastating effect, Sunday said.

“(It’s as) bad as it could possibly get,” he said. “If we get another fire season, it’ll truly cripple the industry.”

LMC Construction in the past could procure lumber for projects in two to three weeks, Anderson said. Now it’s closer to six to eight weeks, he said, adding that he’s definitely worried about the schedule for any project getting out of the ground and heading toward framing.

Walsh’s Sloop has similar concerns.

“When you’ve been told, ‘Hey you can’t have doors until after you’re supposed to have occupancy,’ that’s a problem,” he said.

Project start and end times are all daisy-chained, Sloop added, and at some point, subcontractors will have to send their people to the next job. Unfortunately, delayed deliveries of materials could lead some contractors to turn to weekends to get work done on time, he said.

Where are we headed?

Both Sunday, who has 36 years in the industry, and Anderson, who has 24, said they’ve never seen lumber market volatility like what is happening now. And change might not come for some time.

“We’re expecting the remainder of 2021 to be turbulent on that front (lumber),” Anderson said. “Having any kind of shutdown on already … a strained market is going to make things worse.”

For the lumber market to normalize, it needs either a substantial infusion of supply (unlikely anytime soon, according to Sunday) or a decrease in demand – perhaps because of projects being put on hold.

Delaying projects would be a dangerous game to play, especially amid market volatility, Anderson said. He would prefer to see project teams simply account for cost increases.

Meanwhile, as COVID-19 vaccinations take place and mill shutdowns cease, supply might be able to catch up.

Morlock, of Milwaukie Lumber Co., said he’s seen logs at mills waiting to be processed. However, he added that even if operators were to work 24 hours a day, only so many logs can be processed at a time.

“I think we’re going to be in this kind of pricing into 2022 and maybe well into 2022 before seeing any type of release,” Sunday said.

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Transformation of an industry’s culture is a herculean task.

But Andersen Construction CEO Joel Andersen believes the construction industry can become one that rejects racism and discrimination, even if it takes a generation to do so fully. In Portland, that laborious process began with the launch of “Safe from Hate” – a contractor-led initiative developed in response to an incident on an Andersen Construction jobsite in which a rope noose was found hanging conspicuously.

Almost three weeks passed before Andersen Construction executives even became aware of the incident after it was reported. But then Andersen and others were spurred to seriously tackle the racism on jobsites that has been all too prevalent for far too long.

“We realize we have to do something to help try and transform our industry,” Andersen said. “If we keep doing what we’re doing, not only is nothing going to change – there is a good chance it gets worse.”

After the Metropolitan Alliance for Workforce Equity (MAWE), Oregon Tradeswomen, the National Association of Minority Contractors’ Oregon chapter (NAMC), the Urban League of Portland and other groups called for the contractor to explain what happened, Andersen realized there was an opportunity to do more than that.

“Everyone was hurt and frustrated, and rightfully so,” Andersen said. “But they were like, ‘Yes, we are absolutely willing to do something to make it better.”

A rapid response

The Safe from Hate campaign quickly attracted a wide variety of groups, including those involved in advocacy, the public sector, trade unions, designers and of course contractors and subcontractors. These groups have continued to meet for several months and reached agreement on four central pillars: 1, zero tolerance for discrimination; 2, education; 3, recruitment; and 4, advancement.

“They documented their commitment as owners, and all of this has really built momentum,” said Kelly Haines, a senior project manager with Worksystems and a MAWE representative. “We met every few weeks from that incident and we coauthored the pledge. From there, we know that’s just words on paper. So, to hold people true to that commitment, that’s what the alliance is meant to be – the implementation and the accountability.”

Then participants realized that such a large group needed to become smaller ones in order to foster more efficient communication. A steering committee was formed to oversee subcommittees comprised of apprentices, public owners, a labor caucus, subcontractors, trade associations, contractors, pre-apprenticeship training programs, public agencies and community-based organizations. The steering committee held its first meeting Feb. 4 and will continue on a monthly basis.

In addition, an executive council comprised of labor representatives will oversee the steering committee. This will also help guide future training and anti-discrimination efforts on the labor side.

“Everyone felt that those most impacted by jobsite culture needed to be leaders in that work,” Haines said. “So, everyone is essentially reporting back to that council. That’s the goal – to be a friendly competition, where everyone comes together and shares what they’re doing and coordinating.”

The Associated General Contractors‘ Oregon-Columbia chapter is serving alongside NAMC Oregon as a shepherd of sorts, providing guidance to help advance the entire process.

“The generals (contractors) … want to do the work individually to their companies, but they are looking at how you pull together as a structure, and that’s why they’re looking to us,” AGC Executive Director Mike Salsgiver said.

But there are no illusions that the work will be easy.

“I think even when you start to really think about what got us here, it was the noose,” said Nate McCoy, executive director of NAMC Oregon. “But what’s a bigger issue is the bias on the jobsites and who should be here and who shouldn’t.”

Building momentum

Jobsite racism affects Latinos as much as any other minority group. Further, they now represent around 30 percent of the construction workforce – a proportion that is growing.

“It’s always there,” said Leanna Petrone, executive director of trade association LatinoBuilt. “Discrimination and hateful acts against our community have been a huge barrier for Latinos.”

Incidents such as the noose are just the tip of the iceberg, Petrone said.

“There’s been a lot through the years, and it’s been this way as long as I can remember,” she said. “My father worked in trades, and he worked in a field, and it’s always been a segregated work environment. The white males tend to stick with their own kind. The women tend to stick with their own. The Latinos, generally men, stick with their own kind. They’re not really included.”

Safe from Hate is by no means the first attempt to address racism in the industry, McCoy said. The difference now is that participation is widespread.

“There have been many decades of conversation around this subject,” he said. “It’s just now the larger GCs are diving into it, which is totally what we want; we want to operate together.”

Haines, Oregon Tradeswomen Executive Director Kelly Kupcak and other industry figures have been working for some time to also implement Rise Up, Green Dot and other programs that aim to eliminate harassment and discrimination on jobsites. Safe from Hate simply builds upon those efforts, said Afton Walsh, community outreach director for Walsh Construction.

“This was in the works even before Safe from Hate,” she said. “So, to say this all started in June is wrong. There has been a lot of groundwork and a lot of work that the community has been doing for a long time.”

This process informed how Safe from Hate took shape, Walsh added.

“We spent months working on the language to make sure it was broad,” she said. “Each company has ways to implement these broader principles. We wanted everyone to join in the journey wherever they are, so it works for nonunion, union, large or small contractors. Everyone can use these as guiding principles to find where they fit in.”

Essentially safety

Kupcak said she and others have been in communication with the Oregon Bureau of Labor & Industries about harassment on jobsites for some time. She hopes to eventually see enactment of regulations that treat discrimination as a formal health and safety issue enforceable by Oregon Occupational Safety and Health.

“We have shifted the way we approach it as an intervention,” she said. “OSHA convened a task force a couple of years ago about harassment, and we are part of that conversation. Not only do we lose really good people – they love their jobs; they just don’t want to deal with it day after day – but people have died.”

A quarter of a century ago, safety began to become an everyday focus for contractors and clients, Andersen said. It was a slow process, but one aided by acknowledgment that it benefited the entire industry. The effort to eradicate racism and discrimination is no different, he said.

“That was a vernacular that was easily understood; it’s part of the everyday DNA of every jobsite,” he said. “The idea to build upon that with the campaign of Safe from Hate was to say let’s just include that in the definition of safety.”

There is no question that discrimination in construction is fundamentally a matter of health and safety, according to parties involved in the Safe from Hate effort.

“It is absolutely a safety issue,” said Michael Burch, the community relations and outreach representative for the Pacific Northwest Regional Council of Carpenters, which represents over 28,000 union carpenters in Oregon, Washington and four other states. “But it goes deeper than that.”

Beneath the surface

A crackdown on graffiti and casual use of racist language is just a start, Burch said. A broader effort must be made to recruit and retain people of color and women in the trades, he added.

“Instead of hiring folks and letting them languish out there, (firms’ leaders) need to be intentional about the leadership paths they put them on,” he said. “There’s a problem with porta potties and lunchrooms, but that’s low-hanging fruit, and we can do that. It’s a problem when you walk onto a construction site and there are 100 workers and they are all white males.”

Changing that is not only the right thing to do, Burch added, but also good for business. The Pacific Northwest Regional Council of Carpenters implemented positive jobsite culture training some time ago, and Safe from Hate fits neatly within those parameters. The goal is to strengthen the workforce and increase the flow of skilled labor to contractors and jobsites.

“We talked to the apprentices about whether or not they would go back to work tomorrow and asked if they would enjoy it, and most said no, they go for the paycheck,” Burch said. “We spent 18 months developing this curriculum. It’s in the safety class, which all apprentices take, and it’s a training that goes to jobsites.”

The carpenters’ union has even made this training mandatory at its jobsites. Some members have participated multiple times.

“It works for a while, but it’s a marathon, because our work is transient,” Burch said. “They are on the site when the training happens; (then) their work ends and they are off to other areas, and it’s right back to business as usual. So, you have to continue to water those seeds that you planted.”

History shows organized labor is strongest, Burch added, when everyone – “Black, brown, BIPOC folks” – comes together.

“It keeps being pointed out that the industry is weaker because of the divisions, and we’ve done quite a bit of work in that area,” he said.

Optimism for change

In the end, this is only a start to what promises to be a long and potentially frustrating process. But in Portland, at least, a tipping point may have finally been reached.

“We are just beginning, but, man, does it feel exciting to be where we are,” Andersen said. “I say that with this mixture of ‘Here I am, a white guy pumped about what we’re doing.’ But the part that sickens me is, for so many of our peers in the industry and those who have found themselves not welcome, this has been their life’s existence. And we haven’t done enough.”

Open acknowledgment of the problem is encouraging, McCoy said.

“It’s a marathon and not a sprint, and some may not be as equipped or have the systems in place to wrestle with this reality that there is racism and discrimination, big time,” he said. “This is not the first attempt at this, but typically we don’t have the top dogs using their time in the room and saying, ‘It starts with us.’ Now we’ve got that commitment, and it’s a beautiful thing.”

Already, there are signs of progress. Haines noted that several months after the noose was discovered at the Andersen Construction jobsite, a similar incident occurred at a Hoffman Construction jobsite. This time, there was a much more serious response. It was treated like a crime scene, she said, and the person found responsible was removed from the project immediately and disciplined.

“Part of the work is we don’t want to sweep it under the rug, and we found that Hoffman reacted night and day differently than Andersen,” she said. “They shut the site down, called the police, and we have tried to share that example. It was a painter, and the union wrote a letter right away and said they won’t defend members who engaged in this behavior. It was a coordinated effort and transparent.”

That’s why Petrone and others are optimistic.

“I’m not sure it will take 30 years to really shift the way we think of our current jobsite culture here,” she said. “I think it can be done. It might take a Coca-Cola ad, but we’ve already seen awareness and change come in this short period of time.”

After all, it’s about working for a better industry.

“It can’t just take people that look like us,” said Twauna Hennessee, who will soon take over Burch’s position at the Pacific Northwest Regional Council of Carpenters. “We need everyone not being afraid to speak truth and putting action behind what we hear.”

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