Steel Pricing NASCC - AISC

For our guidance? That they are looking at us not as a commodity subcontractor, but as a steelspecialty contractor that can bring value into their project?This question is our opportunity to demonstrate the expertise and value a steel professional canbring to a project team.We were asked recently by the Associated General Contractors to answer that question. Weoutlined seven points a general contractor needs to keep in mind. Allow me to share those pointswith you as we presented them…First, recognize today’s situation as an opportunity to develop a better understanding of thespecialty contractor process, particularly that of a steel fabricator. What we all learn in thesevolatile times will serve us well in increasing both your profitability and that of the fabricatorwhen stability returns.Second, recognize that during a period of price volatility for any type of product, the shorter theamount of time between accepting bids, selection notification and authorization to proceed thebetter. If you want a fabricator to lock price on a project, be prepared to hear from the fabricatorthat they will need to turn the project from bid submission to mill or service center order in aperiod of days, not weeks or months.Third, make sure that both you and your bidding subcontractors are approaching the globalmarket volatility on a realistic basis. Some fabricators may suggest including "price adjustment"clauses in their contracts. Whether such clauses should be used on individual contracts is anindividual decision that needs to be made on a job-by-job and company-by-company basis. Ifyou decide to use such clauses they should be structured to be as accurate and as fair to allconcerned as possible.Fourth, on existing contracts be aware that there is discussion at the specialty contractor level toseek recovery of unforeseen cost escalations such as surcharges. This is not just an issue withrespect to the structural steel package, but we have heard similar desires from the plumbing,HVAC, concrete and electrical industries. It is clear that these were unforeseen increases thathave created performance difficulties under existing contracts. It would seem prudent to sitdown and discuss the issue of price escalation with both the project owner and the affectedspecialty contractors at the table to come to a workable solution. This is an internationalproblem that has resulted in price displacements throughout the construction industry. It is notreasonable to anticipate that the specialty contractors should bear this burden alone.Fifth, move away from evaluating pricing on a per ton basis. Evaluate the steel package incomparison to other materials on a per square foot basis and, better yet, make sure you comparesystems based on their impact on total project cost including the overall construction package,accelerated schedule savings in general conditions, soft cost savings from early occupancy andlife cycle cost reductions.But in terms of future projects during this time of volatility and beyond, I would like to suggest asixth consideration. I would recommend that you consider integrating specialty contractors andparticularly a certified steel fabricator early into the project team. Fabricators monitor steelpricing on a continuous basis and can recommend value engineering. Design can be directlyinfluenced to take into account fabrication and erection efficiencies. Fabricators can also5