2021 Construction Industry Update
2021 experienced unanticipated and unprecedented inflation rates in the construction industry.
The global impact of the Covid-19 pandemic coupled with winter storm Uri in February negatively affected supply chains for most products that are installed in schools and other commercial buildings. Some of these sectors were impacted again by Hurricane Ida in August. At periods during each of these events, many manufacturing plants were shut down or ran at reduced capacity. Any stockpiles of surplus materials were quickly exhausted as construction levels grew throughout 2021 (up 8.9% from 2020)[1], and the demand for products increased at levels that the market could not sustain.
Additionally, the bottleneck in the shipping industry has also contributed to the lack of availability and timeliness of receipt of materials. The Texas market also saw massive construction projects by Tesla, Seefried Industrial Property, and Amazon[2,6] absorb a significant percentage of available materials, adding to an already exasperated situation.
All these factors combined have resulted in extreme cost increases for new non-residential construction (22.1% compared to 2020)[3] and unusually long delivery times of materials. At points last year, concrete was on allocation[6]. Steel products have experienced price increases of 142%[3]. At their worst, lead times for steel joists were at 52 weeks. This has since begun to improve but all steel products continue to have delivery issues.[1,6] Roofing materials, insulation especially, have been one of the hardest hit areas in recent months with the full impact not yet felt. Several of these products are seeing 6-9 month delays and price increases of 17%[3,6] and rising. These are a few examples of a market impacted across the board. For additional information, review any of the six sources noted below.
Construction prices are expected to continue to rise at a higher-than-normal rate throughout 2022 (possibly 12-15%), though not at the extreme rate seen in 2021.
Godley ISD’s Response
While Godley ISD did plan for some cost escalation when preparing project budgets for the May 2021 bond, there was no way to anticipate the extreme jump that occurred. As a result of the market impact on project costs, Godley ISD is reassessing all bond projects. The District is prioritizing needs related to growth and is striving to deliver all promised educational spaces. As much as possible, scope is being reduced where it will have little or no impact on the ability for students to be productive learners. This was achieved in large part by delaying some non-growth related projects to a future bond. Delayed projects include the reconfiguration of some spaces at the Godley Intermediate and Godley Middle School campuses and reducing finish updates at Godley Elementary. It also postpones some roof and HVAC unit replacements at multiple campuses and delays portions of the addition originally planned behind the visitor side of the stadium at Godley High School including a practice gym (what would be the third gym) and the upper level of visitor seating and supporting restrooms and concessions. In summary, as reflected in the table below, the market escalation drove the total of all bond projects to $205,501,178, meaning $36,577,039 of projects will be postponed and considered as part of a future bond.
During the summer of 2021, when these price increases were first being realized, Godley ISD and their architect also re-evaluated the design of Phase 2 of Godley High School and made it more efficient by combining all classroom spaces in the four-story career center addition, thus reducing the overall square footage for this project.
Godley ISD also received an updated demographics report in the fall of 2021 that almost doubled the rate of growth compared to earlier predictions. As a result, Godley ISD anticipates having the bonding capacity available sooner to accelerate the timeline of the remaining projects planned in the 2021 bond. By completing the bond projects earlier than planned, the district is able to save more than $2 million in budgeted escalation costs and apply that toward the scope of the bond projects. With the accelerated growth, it also means the District will need to consider another bond election in 2024 instead of 2026. This allows some of the delayed scope from this bond election to still occur at or near the original timeline.
Godley ISD will continue to be transparent with our community as design and construction of bond projects progress and will continue to look for cost savings opportunities and prioritize what will have the greatest and most positive impact on our students as we navigate our unprecedented growth.