Construction Association Projects Rising Costs

October 3, 2012
By Marc Bussanich, LaborPress City Reporter

The New York Building Congress issued a report on Monday, October 1 revealing that construction costs in New York City are rising. Richard Anderson, the president of the NYBC, said some of the factors for the increase are attributable to cost increases in the labor contracts with building trades unions, materials prices going up and because there’s more work, contractors and sub-contractors are bidding a little higher on projects.

"All the labor contracts call for increases. Only the painters signed a contract that was without a cost increase," said Anderson. The wage rates vary among the building trades' members, but Anderson noted the cost increases average about two to three percent.

Another factor is that doing business in New York is just more expensive by virtue of the fact that New York is the largest city in the country, which complicates the logistics of building in the city.

“The city’s construction costs are increasing faster [compared to cities such as Boston, San Francisco and Washington, D.C.], partly because of labor costs, but also because of costs related to the city’s Department of Buildings' reviews and appraisals…this all adds to the cost of building in New York,” Anderson said.

According to the NYCB press release, “Construction costs in New York City rose 3.55 percent in 2011 [based on the Engineering News-Record’s Building Cost Index]. This is in addition to a 2.42 increase in 2010. ENR is projecting a 4.30 percent increase in construction costs for 2012, compared to mid-year 2011.”

Also in the press release, Mr. Anderson wrote that the city’s higher costs are unsustainable and that “Government and industry can and should do more to improve the economics of building in New York City.”

When asked in an interview how both government and industry can lower costs, Mr. Anderson said, “Everyone has to look for ways to economize in order to remain competitive. Project labor agreements are one way. Labor and contractors agree with the owners that there are ways to streamline things—not necessarily a reduction in wages, in most cases, just a change in work rules.”

He was also asked will it require a reduction of wages and benefits if those attempts do not lower costs.

“So far, they haven’t. But on the other hand, non-union work is growing, and if that growth continues, it may require some changes to wages,” said Anderson.

Some building trades union leaders took exception to Mr. Anderson’s comments of rising labor costs being a factor in the city’s rising construction costs.

Jack Kittle, IUPAT DC 9’s Political Director, said that just about every building trades union took a cut or a wage freeze. While his union’s recent negotiations with industry associations such as the Structural Steel Painting Contractor Association and Window & Plate Glass Dealers Association of New York calls for increases on the back end, i.e., one-year wage increase paid out in six-month increments in the fourth year of the contract, DC 9 members will work for the next two years without overtime on Saturdays or Sundays.

“If costs are rising in construction, it’s not because of labor. We did everything we could do,” said Kittle. He also noted that the recent contract negotiations were more difficult than usual because the Building Trades Employers’ Association of New York City presented a 27-item “wish list” that unless IUPAT DC 9 and other building trades unions accepted, the industry would hire only non-union.

“The BTEA was trying to take advantage of a horrible economy where workers in every sector are scared of losing their jobs to implement their demands,” said Kittle.

John Skinner, political and legislative director for Local 46 of the Metallic Lathers and Reinforcing Ironworkers, also disputed Mr. Anderson’s claims by noting that the union was willing to renegotiate contracts to accommodate building owners struggling to finance projects. The new contract is for four years, from 2012 through 2016.

“We took a 15 percent rollback in our wages on June 1. The renegotiated contract calls for no raises for the first year of the contract, a $2 dollar cost-of-living raise for the second year and a $2 increase until 2016,” said Skinner.

He also noted that the union agreed to use more apprentice labor on projects, whose wage rates were also reduced.

“The Related Companies was thrilled with what we did and [a Related representative] thanked my business manager personally, as did a lot of other contractors for stepping up to try to help them get more work and keep it quality union work,” said Skinner.


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