MERRILL: Thee rising cost of liability and operations insurance, that’s the biggest thing affecting us. We’re a commercial builder, but our commercial coverage didn’t cover a recent residential project we had replacing siding on some condominiums, so we had to get insurance from a separate carrier. The cost (for premiums) exceeded $35,000 on a $1.1 million project, which I find a bit staggering.
How are you recovering the cost of higher premiums?
MERRILL: Insurance used to be considered an incidental cost. Now I have a line item on each project bid for insurance. Depending on project risk, it ranges from 1.5 percent to 3.5 percent of the total project.
What are you doing to hold down costs?
MERRILL: We’ve never had a claim, and it’s more important than ever to maintain our record. I hold weekly safety meetings and make sure we have supervisors who are trained in quality control methods. We’ve increased everybody’s awareness of the potential liability of their actions.
FREDERIKSEN: The lack of available, developable property. Yes, we’re all seeing lots of land around Clark County, but once you do the research and find out it will require tons of expensive wetland mitigation, it’s not usable. When it costs too much to get it ready to develop that it exceeds the value of the property, that can be a deal breaker. We’ve got businesses who want to move here to create jobs and we’re struggling to help them develop land for that.
What makes these open land tracts too expensive to develop?
FREDERIKSEN: There are several examples. Maybe the developer will find he needs to relocate a traffic light or extend the sewer and water, and before you know it, that’s all added to the cost of the land. If you get a project that requires tons of wetland mitigation, too, that adds to the costs and you suddenly find it doesn’t make economic sense.
What can be done to alleviate these problems?
FREDERIKSEN: We need to bring more developable land into our urban growth area and we need to continue to look carefully at policies and requirements that add cost to projects. I understand that cities and counties don’t have adequate funding for roads, but if a developer finds he has to build a new freeway off-ramp, the deal is off . The (state) Department of Ecology has hugely expanded their jurisdiction and requirements for preserving wetlands, which keeps shrinking the land supply.
Are similar challenges affecting your business?
TAPANI: Because we do a lot of work for residential subdivisions, putting in roads and utility pipes for sewer and water, the really big issue for us is the new (Washington) state stormwater regulations. The runoff water during construction has to be clear, but that’s almost impossible if you’re working on a subdivision on a slight hill when it rains. And it rains all the time in Southwest Washington. That is going to affect our market and a lot of other contractors over the next few years. In the winter time you cannot have exposed soil on a job site for more than three days, so you’re constantly covering these piles of soil. It’s a huge problem and it’s just going to get worse.
How will this issue affect the market?
TAPANI: We’ll all have to pay for it in the cost of developing public roads and lots for subdivisions. It will add about $10,000 to the price of developing an individual lot for a home, and that means somebody’s going to pay for it.
How is your company dealing with the problem?
TAPANI: We’ve hired a full-time expert to help us interpret the regulations, but the requirements make winter work here pretty cost prohibitive. It’s forcing our company to travel outside of the area looking for work.
What issues are affecting your business this year?
OLSON: Our market is driven by our ongoing relationships with retail and office developers who happen to be actively building right now, like Killian Pacific and Gramor Development, so we’re doing fine thanks to these solid relationships.
What’s happening with the rising cost of construction materials?
OLSON: It’s a definite problem, with unstable markets for steel and costs
fluctuating for any material that contains oil.
How is your company dealing with the problem?
OLSON: We use a system in our industry known as the partnering system where we get together with the developer and architect to talk about the components of the construction project. We ask, for example, ‘Does it make more sense to build with wood or steel?’ Then we try to get those prices locked in early in the game and make sure we’re building with the most cost-effective materials.
What other trends are on the horizon for commercial construction?
OLSON: We’re all getting more involved with green building, in fact, it’s becoming more the norm for our industry. Our company has added a green division, now and we’re building most of our projects to silver or gold LEED (Leadership in Energy and Environmental Design) standards. |
Mike Merrill
Owner of Merrill Contractors
“Our commercial coverage didn’t cover
a recent residential project... Insurance
used to be considered an incidental cost.
Now I have a line item on each project
bid for insurance. Depending on project
risk, it ranges from 1.5 percent to 3.5
percent of the total project.”
Ron Frederiksen
President and Owner of RSV Construction Services Inc.
“When it costs too much to get it ready to develop that it exceeds the value of the property, that can be a deal breaker. We’ve got businesses who want to move here to create jobs and we’re struggling to help them develop land for that.”
Shane Tapani
Vice President of Estimating and Marketing at Tapani Underground
“The really big issue for us is the new (Washington) state stormwater regulations. The runoff water during construction has to be clear, but that’s almost impossible if you’re working on a subdivision on a slight hill when it rains.”
Matt Olson
President at Robertson & Olson Construction
"(Cost of construction) is a definite problem, with unstable markets for steel and costs fluctuating for any material that contains oil."
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