NEWS // 07.01.20
Construction market update and pre-bond design
Part three of Huckabee’s MORE Momentum market update series focuses on the Texas construction market. We discuss the current construction market, what’s changed in the past few months, what school districts can learn from the current state of affairs and the pro/cons of pre-design before passing a bond.
Our guests include:
- LaShae Baskin, Huckabee’s Austin Office Director
- Kevin Byrd, Central Texas Vice President of Operations for Bartlett Cocke
- Dennis Yung, Vice President and General Manager for the Houston and Dallas areas for Skanska
- Chris Huckabee, CEO of Huckabee
We’ve broken out each question for MORE Momentum #6: Construction Market below. You can view the webinar in its entirety by clicking here.
Austin / San Antonio Market
What is driving the market right now in the Austin and San Antonio areas?
For the first time in 10 years, we are seeing a pricing correction in the market. In recent months, 9/9 project bids have come in significantly under budget, including prototype designs. Factors contributing to savings opportunities include: subcontractor backlog, the supply chain and availability of manpower. If you’re ready, it’s a great time to build.
DFW / Houston Markets
Does this differ from what is going on in the DFW and Houston areas?
In the DFW/Houston markets, commodity prices are favorable. Supply chain updates predict that for the next 6 months, pricing on construction materials and equipment will remain flat and even potentially decrease. This creates ideal conditions for construction projects.
In Houston, 15-20 percent of projects have been delayed, suspended or canceled. Companies are looking to rebuild their backlog. This competitive environment, when combined with favorable commodity prices, creates an ideal time to start construction projects.
Dallas is one of the fastest growing construction markets in the country and is expected to be the second busiest construction market in 2020. However, like other areas throughout Texas, companies, including subcontractors, are looking to fill their backlog.
Impact to School Districts
What are some things that school districts need to be on the lookout for or aware of?
Be diligent when selecting contractors. The K-12 construction and subcontractor market will be flooded with businesses stepping outside their primary sectors. Make sure firms are qualified and capable to deliver K-12 projects. Evaluate their experience and qualifications related to your scope of work.
We have a new normal in the construction industry with new standards for safe work environments. Requirements for social distancing, safe work practices and personal protective equipment all have an impact on productivity. As you build schedules for your projects, make sure they account for these changes.
How Can School Districts Take Advantage of Market Changes
Work with your construction manager and architect to understand the opportunities in your region. While we are not able to see if the price correction will last beyond six months, we see real opportunity right now. If you can take advantage of the current market, do it.
Shovel Ready Pre-Bond
What is critical for school districts to understand about the process of design before a bond is passed?
The concept of shovel ready pre-bond essentially means getting your project ready to bid so that you can capitalize on a favorable market as soon as funding is available. Districts have adopted the process to help save on inflation. Today, we are looking at a favorable climate where districts can take advantage of the lower prices in the construction market over the next six months.
There are several considerations to determine if this approach is right for your community, including:
- Mental shift
- Availability of design funds
- Community support for this approach
- Scheduling and time-lost due to COVID-19
It’s critical to ensure that your stakeholders are on board. Your administration, school board and bond steering committee should all be involved in the conversation. Help them understand the pros and cons of this process so you can make an informed decision.
Pros and Cons of Pre-Bond Design
Pre-bond design requires design fees upfront. If this seems like a risk to your community, then this process might not be a good fit. Your decision should be based on data-driven information and what is most logical for your community.
One major benefit of pre-bond design is the ability to keep your projects on schedule. Right now, we are also looking at the opportunity to take advantage of a narrow window for optimum bids. The current market also gives districts the chance to more accurately align costs with contractors, which results in a positive impact on the bottom line.
Final Takeaways
The construction market is very competitive right now, which is driving prices down. Districts can take advantage of this within the next 6 months, because beyond that, we don’t know what pricing will look like. If you have never gone through the process of pre-bond design, and this is something that feels viable for you, start having the conversation with your stakeholders and talk with your architect on what the process looks like for your district. You don’t need to rush anything, but if you are in the position to take advantage of the market right now, you should.
About MORE Momentum
Huckabee’s MORE Momentum series highlights how our educational partners are investing their time, energy and focus to keep the momentum going during this unprecedented “pause.” We will explore themes related to bonds, planning, design and safety and security, among other topics that impact Texas public education. Follow us @HuckabeeInc on Facebook, Twitter, Instagram and Linked In, or complete the form below to get a first look as new content is released.
