b'YOUR TOOLKIT FOR BUILDING EXCELLENCEcontinued from page: 8on project timelines, said Ron Ciotti, a constructionconstruction projects too, especially on the commercial attorney with Hinckley Allen, a Boston-based law firm. side.Many new projects will no longer pencil out, causingImpact on marginsan overall reduction in the number of new projects,Contractors are likely to feel the squeeze within months said Ciotti. Owners and developers will be concernedif the tariffs take effect in March, said Julie Workman, with delays due to supply chain disruption and productpartner at Saul Ewing, a Philadelphia-based law firm.shortages, and being gun shy from having just dealt with those issues through the COVID years, will decide toItll be relatively immediate, said Workman. Given put their projects on ice until there is more confidencethat the tariffs are presumably going into effect within in the flow of goods and materials. the next month, I think that those prices are going to Passing on costs start going up very quickly, certainly by the summer.Sam Giffin, principal product manager at Gordian,For contracts already signed or in progress, absorbing a construction cost data tracking firm,agrees thesethe increased costs will cut into contractor margins, material price accelerations can lead to overall projectsaid Damiecki.slowdowns. Contracts that are signed or in-process did not factor On the margin, it is likely that increased steel andin the cost of tariffs. Therefore, the increase in costs will aluminum costs will push some projects into a delaymost likely be absorbed by the contractor which will decision, especially as we consider other economicimpact margins since the recovery of the additional variables at play, said Giffin. Decision makers arecosts is unlikely, said Damiecki. For future projects, certainly watching sustained high interest rates and thecontractors should review contract terms to incorporate threat of significant decreases to the construction laborprice escalation clauses.pool as they make decisions about capital allocation. Price hikes could come even sooner, said Ciotti. Indeed, At the very least, tariffs will put additional pressure onconstruction input prices jumped 1.4% in January, construction project costs, said Giffin. marking the largest monthly increase in two years, according to the most recent analysis by Associated Costs will likely increase from these higher materialBuilders and Contractors.prices, and that will likely be passed on to consumers,In 2018, when President Trump initially threatened or project owners via contractor bids, said Giffin. Itstariffs on steel and aluminum, the price of steel and hard to imagine a scenario in which these tariffs doaluminum immediately jumped, well before the tariffs not lead to another inorganic surge in market priceswere actually implemented, said Ciotti. Thus, if the for steel construction material. old saying that history repeats itself is accurate, the When the Trump administration enacted steel tariffsindustry will immediately begin to feel the cost impact.in 2018, U.S. steel imports fell by 19% while overallSome contractors with large stockpiles of material may steel consumption remained steady. That caused pricesbe able to mitigate market pressure for a time, said for benchmark steel materials to jump 14% in the firstGiffin. But that proactive approach will cause contractors year, though it regressed slightly to 10% by the end ofas a whole to be quickly impacted by supply chain 2019, said Giffin. disruptions and product shortages, said Ciotti.The burden this time around will likely fall on theIn other words, the construction industry will bear the shoulders of the construction industry, said Kassalen. brunt of tariff-related impacts, according to an S&P For that imported steel, the increased costs due to tariffsGlobal report.are expected to be passed directly onto constructionThe downstream users of steel and aluminum, such as projects, said Kassalen. The general expectation is thatthe construction and auto industries, will be affected project costs will rise as a result of tariffs. disproportionately, according to the report. The tariffs Aluminum prices will likely increase as well, said Giffin.would increase costs to construction projects including Kassalen expects those gains to be passed through tohomebuilding, infrastructure and possibly defense contractors. FRAME BUILDER - VOL62 / 9'