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September 29, 2023

It has almost been a year since our last blog update. We've been busy and a lot has happened. Rick just returned home this week after attending the American Society of Professional Estimators National Summit in Chandler, Arizona, where he won the 2023 Estimator of the Year Award and also was a Summit Speaker for two presentations, one on Value Engineering AKA The Value Added Value Engineering Estimator, and another on Developing Relationships During the Preconstruction Phase. The Summit was great and well put together by the administration of the ASPE. It was great to see many of my old colleagues. The ASPE is a professional organization composed of approximately 1600 cost estimators. 

Our company continues to grow with almost no advertising. Most of our clients come to us by word of mouth from other happy and satisfied clients, and so far we have a 100% retention rate with repeat clients. Our philosophy is simple, and it works very well: Go above and beyond for your clients, provide a product second to none in quality, meet deadlines, and treat your clients the way we would want to be treated. 

Rick continues to be heavily involved with the American Society of Professional Estimators, SAVE International, and AACE International. He is currently assisting the ASPE with developing a curriculum and class for teaching Plumbing Estimating in the ASPE Estimating Academy. In his spare time, he is wrapping up his requirements to become a Certified Value Specialist with SAVE International. He is currently a Certified Professional Estimator with ASPE and a Certified Value Methodology Associate with SAVE International. 

Over the past year, we have added to our staff and now have more capabilities than ever. We have experienced a total growth rate of about 400% from four years ago. Although growth is good, if we have a choice between decreased quality or increased growth, we will select quality over growth. Our goal is not to be the largest cost consultant in the nation, but the BEST. It is our quality that sets us apart. 

October 22, 2022

It has been a great year for Wyly Cost, with tremendous growth, success, and fun. As you can see, we have not posted a blog update since January because we have been busy taking care of our clients. Since our last post in January, here are some of the company's highlights since then:

January 29, 2022

Construction inflation continues to be an issue. Many do not understand the difference between general inflation and construction-specific inflation, and they do not understand the different types of construction-specific inflation. The Department of Labor's Consumer Price Index (DOL CPI) measures general consumer inflation and is finally getting a lot of attention over the past half-year while largely being ignored by the media and by experts during the first half of 2021. 

The thing is, construction inflation is currently MUCH WORSE than general consumer inflation reported by the Consumer Price Index which seems to be the only thing the major media talks about. Construction inflation is measured by several indices, with two of the more common being the Department of Labor's Producer Price Index (DOL PPI) and the Engineering News Record's Building Cost Index (ENR BCI). Think of the PPI as the sister to the CPI, with the CPI measuring increases in consumer purchases such as milk and gasoline, while the PPI measures the increase in what manufacturers and contractors (producers) are selling their products (buildings, electricity, timber, coal, fabric, etc.) for including their total markups. The ENR BCI, on the other hand, measures increases in raw costs of construction materials such as concrete, steel, and lumber as well as a nationwide average of different types of skilled construction worker labor rates. There is a relationship between the two. If raw materials and labor go up for construction, it is common sense that the selling price for construction products will also go up later unless contractors and manufacturers absorb cost increases out of their profit margins, and businesses cannot absorb major cost increases in the long term without suffering. Think of it this way: If you increase the cost of the inputs, you will increase the cost of the outputs. 

The ENR BCI shows that from January 2021 to January 2022 we had a 13.94% total increase in construction raw materials and labor. This is holding very close to the rate stated in my August 23, 2021 blog. For decades prior to 2021, we only experienced an increase of 2 to 4% most of the time.  In other words, construction inflation is 5 to 7 times higher than it has been for decades prior to 2021. 

The Producer Price Index also tells another piece of the story. While the increases are shown for the year leading up to August 2021 range up to a high of 7.1, the four-month trend, which you have to use a calculator to determine, is typically higher. Warehouse construction increased by 4.5% over four months, which translates into a yearly rate of 13.5% at that pace. Other yearly construction inflation trends would be 12% for industrial, 8.2% for schools, 4.7% for health care. For trade-specific trends, translating the most recent 4-month increase into a forecasted yearly increase, you would arrive at the following for these contractors for the selling prices of their contracts in their respective industries: Concrete Contractors 9.2%, Roofing Contractors 10.3%, Electrical Contractors 5.6%, and Plumbing/HVAC Contractors 8.4%. 

The ingredients that go into the stew affect the taste of the stew. Increasing inputs will increase outputs. If we continue to see increases in the BCI as we are, the PPI will continue to climb higher as a result, and then many will all be in shock a year from now and claim nobody could see this coming. The data is there, we just need to understand it and know how to interpret it. 

Lastly, circling back to the Consumer Price Index, don't you think that consumer-purchased products will continue to rise if they cost manufacturers and contractors around 14% more per year? In other words, if it costs 14% more to build a restaurant and 14% more to buy the materials to operate that restaurant, don't you think a hamburger will cost 14% more over that same period? Remember, this is all a domino effect. First the BCI, then the PPI, then the CPI. Unfortunately, the people who will be hurt the hardest are the lower-income and fixed-income people who may not receive cost of living increases at all during this period, and if they do, do not receive large enough increases to offset these historically high inflation rates. 

August 23, 2021

Construction costs are increasing at the fifth most rapid rate in the past 106 years.

The Engineering News-Record Building Cost Index has increased 14.04% over the past 12-months (September 2020 through August 2021). 11.49% of that was from January 2021 through August 2021. Only 2.55% of that was during the year 2020.

To find the four years that we had higher construction cost increases, we have to go back to 1979 (16.02%), 1947 (19.47%), 1916 (37.89%), and 1917 (27.48%). Note that two of those years were during World War I and one of those years was just after World War II.