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Construction industry tightening belt to adjust to higher fuel costs, budget cutbacks

Just when the recession may be coming to an end and the construction industry thinks of brighter days ahead, fuel prices make a dramatic move upward and government entities make budget cuts. How are Mississippi’s construction companies adjusting?

“The higher gasoline costs are definitely having an adverse effect on our members,” said Mike Pepper, executive director of the Mississippi Road Builders Association. “We discussed it at a recent board meeting. The big question as we head into summer is how will MDOT adjust their bid proposals? We don’t know yet.”

The summer months are the busiest time for road and bridge building and also traditionally the time gas costs rise. Pepper feels his members will be hard hit. “I haven’t heard of any jobs being cut, but we will monitor the situation closely,” he said. “The good news is that we’re now beginning the road construction season after making it through the winter. This is the time of year we really start getting work.”

Perry Nations says members of the Associated General Contractors of Mississippi are scrambling to manage costs to and from job sites and stacking more people in vehicles. “Typically what happens in construction is that jobs are started with costs figured six or eight months ago based on fuel and material supplies at that time,” the association’s executive director said. “That creates problems for construction companies.”

He points out that the industry already had problems after falling from a good plateau a few years ago. “It was like a dip straight down, but we were on our way up again,” he said. “Now rising oil prices will cause costs to go up as we have budget cuts in government work and no private funding for jobs.”

Nations sees work ahead as medical and educational facilities expand, along with infrastructure improvements. “We can cling to those sectors for survival,” he said. “The Gulf Coast has been the salvation for many in the industry as there’s been quite a bit of work there. My members have been fortunate to get some of it but out-of-state companies have come in to do some of it too.”

As a sign of the changing times, he notes that half-million-dollar jobs used to get six bids but today usually receive around 15 bids. “That’s good for the owners of the projects but bidders have to keep costs close as they try to compete and keep people working,” he said.

Meredith Anderson, owner of Can’t Be Beat Fence Company in Hancock County, says she hates to pass on increased fuel costs to customers. “Even though we’re primarily a commercial company, we still do some small jobs and residential fencing and hate to increase the cost for these customers,” she said. “My costs for all metals have gone up 34 percent since Jan. 1. Fuel costs have a domino effect, falling backward for all suppliers and then falling forward to consumers. It affects everyone in some outlandish way.”

Coastal projects associated with Hurricane Katrina recovery have helped the company beat government and private budget cuts, but Anderson has seen some slowdown in contracts in the past few months. “We have compensated by getting out of the area. We weren’t afraid to expand into other areas of work and the country,” she said. “You have to go where the work is and can’t be afraid to branch out. We’ll do anything as long as it’s legal, even cutting grass.”

With locations now in Florida and Indiana, Can’t Be Beat Fence Company is taking down some trees and re-doing a pool at two Florida work sites.

Members of the Mississippi Associated Builders and Contractors are not happy with fuel prices, according to their executive director Buddy Edens. “This increase makes it exceedingly more costly to operate,” he said. “Most jobs were estimated months ago when costs were lower. We don’t know what we can do about it at this point. We just have to deal with it.”

He says the economy continues to have a negative impact on the industry as government contracts are not doing well. “However, we’re seeing some private money come in. We’re keeping our heads above water by tightening our belts and continuing to make positive contributions to our industry and the economy.”

For members of the Mississippi Homebuilders Association, rising material costs that are driven upward by increased fuel costs is a growing problem. “There is no question that builders have to figure those increases in,” says Marty Milstead, executive director of the association. “I do not know any specifics, but some delivery surcharges are being added to help offset costs. Fuel costs add to manufacturing costs and everything involved. It is definitely having an impact.”

The Homebuilders Association is celebrating its 50th anniversary this year. A commemorative video will be presented, along with special recognition, at the group’s annual conference June 2-5.

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