Friday, April 16, 2004 | 11:01 a.m.
Construction of new public schools and major road projects in Clark County could be endangered because of the rising price of steel, building officials told Gov. Kenny Guinn this week.
Representatives of the Associated General Contractors of Nevada said many future government building projects may not receive bids within the money set aside.
"In some situations prices are up as high as 60 percent in just the last three months," John Madole, executive director of the association, said.
"This rapid rise has made the industry unstable, making it difficult to put bids together, control delivery, and ultimately hinders our ability to build a project that is on time and on budget."
The contractors are asking the state to put a clause in future contracts that would permit automatic escalation of the budget when steel prices rise.
But Guinn wants to talk to others before making any decision.
"The governor is concerned about the major projects and he wants to gather more information before he makes any decision," Greg Bortolin, Guinn's press secretary, said after a meeting with the association.
He said the governor doesn't know if it is legal to change existing contracts to put this escalation clause in.
Bortolin said there has also been a surge in lumber and fuel prices.
"The governor wants to get a more complete picture how they are impacting construction," he said.
He said the Federal Highway Administration is not considering escalating clauses in its contracts.
"It is very difficult for us to consider placing an escalation clause when the money we get is determined at the federal level," said Bortolin, referring to highway construction.
"We have a limited pot of money that the federal government provides us" for highway construction, Bortolin said.
The contractors said there are escalation clauses for asphalt oil in contracts for state highway jobs.
Mario Bullentini, vice president of Reno's Martin Iron Works, said, however, that the industry is increasingly in a bind.
"This has been a nightmare," Bullentini said. "We have to inflate our bids or put very short times frames on our bid quotes. We've seen prices change in just 48 hours."
To make matters worse, bonding companies are telling contractors they won't cover the industry unless there is some form of escalation clauses, Bullentini said.
"If I can't be bonded, I can't bid," he said. "If I can't bid, I can't put people to work. It's pretty simple."
Scott Magruder, spokesman for the Nevada Department of Transportation, said representatives from his agency met with the governor and the contractors' association to discuss the proposed clause. The majority of the department's $300 million in projects for Southern Nevada are strictly asphalt paving although a few sites also require steel, Magruder said.
"We are aware and concerned about unprecedented increases in steel prices and we're trying to work out some solution," Magruder said. "It's obviously in all of our best interests to do so."
Bobby Shelton, spokesman for the Clark County Public Works Department, said adding a clause for steel prices would make it difficult to estimate the cost of projects. The county currently has 63 active contracts with a value of about $328 million, including three steel bridge structures on the 215 Beltway, Shelton said.
"Let's say the contractors bid $100 per foot for a link of steel and they end up buying it for $48. Are they going to reimburse us? I don't think so," Shelton said. "If this clause were accepted the only way it would be fair would be for it to go both ways and I don't see that happening."
Fred Smith, construction manager for the Clark County School District, said he has been contacted by the contractors' association and asked to consider a steel price clause.
"The nature of fixed-price bidding is that general contractors bear the risk of fluctuating prices for things like steel, but the question is, is it fair to expect them to do that," said Smith, whose department is overseeing 15 active contracts worth $340 million.
"If this drives contractors out of business and reduces the size of our bidding pool, the district could end up having to spend more in the long run to get our projects built. Then we would have to reconsider whether it was worth it to try and keep our costs to the lowest possible amount in the short term," Smith said.
The contractors said the price of scrap steel has soared from $150 a ton last fall to more than $300 a ton. Products affected include structural steel beams, nails, sprinkler pipe, metal wall studs, metal flashing, heating and cooling duct work, girders, mesh wire rebar and guardrails.
They said many companies have added surcharges to make up for scarce raw materials. In January a typical surcharge was $20 a ton. By March the surcharges were exceeding $90 per ton, according to the contractors association.
Some of the projects in Southern Nevada that could be in danger include: construction of public schools, an average 12 a year; Interstate 215; the Hoover Dam bypass; U.S. 93; the I-215/I-515 interchange in Henderson; the Martin Luther King Boulevard overpass; the U.S. 95 alternate route in Boulder City; the Lake Mead inlet and pipeline to be constructed by the Southern Nevada Water Authority; city offices for North Las Vegas; and the consolidated baggage handling facility at McCarran International Airport.
The contractors association said China deserves much of the blame for the price increases because that country is using more than 33 percent of the world's supply of scrap metal, a key component of structural steel.
Other factors include the slumping dollar that makes imports more expensive; higher fuel and shipping costs; and a fire in a Virginia mine that yielded much of the nation's supply of coke, an important ingredient of steel production.
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