Inflation and supply chain disruptions will impact the new infrastructure law as the continued increases of fuel and material costs, as well as wages, will raise the overall cost of construction and likely affect the type and quantity of projects to be completed. As a result of these strains, state and local officials facing increasing prices may opt for less ambitious projects with their respective infrastructure bill funding.

Leah Brooks, an economist from George Washington University was recently quoted in the Wall Street Journal saying, “There’s this hidden effect of inflation, which is that it should push you to choose projects that have less risk of delay and there’s more certainty of cost. Those are probably smaller projects.”

When we consider inflation, we naturally think of consumer inflation that is reported widely in the news and has advanced 7.5% in the past year – a rate that is actually lower compared to the other pressures affecting the construction industry. Supplier price information released by the Department of Labor earlier this month shows costs for construction projects rose 13% in January compared with the prior year. Materials prices for roads and highways are up 20% and steel mill products are up 113% – both from a year earlier.

Although the increased cost of construction labor has increased less than many other industries, finding workers has never been more difficult which also slows projects and increases overtime which, in turn, further increases overall project cost.

So how do merit shop contractors address all of these pain points while also staying competitive and retaining their staff? The solution could be to provide a more comprehensive bona fide benefit plan.

Higher wages mean higher payroll taxes and payroll-related insurance premiums. If your company contributes the prevailing wage fringe to a bona fide plan instead, those contributions are not subject to the aforementioned taxes, potentially saving you, the employer, considerable amounts of money. With these savings, the door opens for you to not only be more competitive in bidding but also to better attract and retain employees.

How We Can Help
Direct Advisors, LLC, established in 2001 and located in the Albany, New York area, provides bona fide benefit plan consulting and third-party administrative services to merit shop (non-union) construction companies that are subject to the Davis-Bacon Act and state prevailing wage regulations. Our clients are located throughout the United States.