The most recent hurricane season devastated parts of Texas, Florida, and areas of adjacent States, as well as Puerto Rico and the U.S. Virgin Islands. As the post-storm cleanup costs mount, other parts of the country are also faced with financial impacts from the powerful storms. Fuel prices are typically the first to be affected. As Hurricanes Harvey and Irma bore down on Texas and Florida, fuel prices rose sharply before stabilizing due to Gulf Coast oil refinery operation and pipeline transmission disruptions.
Although fluctuating fuel costs are somewhat predictable, municipal and utility leaders may be surprised to hear the catastrophic hurricanes also caused pipe prices to increase substantially. The hurricanes in the Gulf Coast area have damaged several pipe resin manufacturing facilities, resulting in an acute shortage of resin material. “The availability of pipe resin material is limited, and pipe suppliers informed us that the supply shortage has driven up pipe prices in the range of 25 to 30 percent for polyethylene based pipe,” says Jeff Hruby, Civil Practices Director.
AE2S Nexus advises those with projects that were bid recently or others who plan to bid soon to take a step back and consider the options. “If you already bid a project, I suggest contacting the vendors to confirm the prices that were bid. If you have a near-term project that cannot wait, it is prudent to research the updated costs and adjust your estimates so you have a realistic budget. After you have updated your budget to account for higher material costs, prepare to explain the cost increases to the City Council or Commission, and other city leaders. It’s critically important to communicate budget changes like this in a timely fashion,” says Shawn Gaddie, AE2S Nexus Division Manager.
Another option is to postpone major pipe projects until the market recovers. “It’s actually the opposite of what financial advisors tell clients about the stock market – to ride it out. I advocate for being prepared to bid projects when the market conditions are more favorable,” says Nate Weisenburger, AE2S Drinking Water Practice Leader.
“Timing is everything when it comes to asset management and horizontal infrastructure replacement. Monitoring market trends can make a huge difference in the effectiveness of capital investments. With the exception of a few areas, we have enjoyed a great bidding environment lately, and some may think that they missed an opportunity right now due to an unfortunate bidding environment. If you are able to postpone a project a few months, you can be ready to bid when conditions are more favorable,” explains Weisenburger.