Knox County officials plan to build three new elementary schools but fallout from the COVID-19 pandemic has triggered a change in how the first is slated to be built.
Officials are also bracing for the possibility that the other two schools could end up costing more than was originally planned, due mainly to fluctuations in the cost of construction materials caused by the pandemic.
“There is no doubt that has had an impact,” said Chris Caldwell, finance director for Knox County.
The Knox County Commission is set to vote on a resolution Monday night to change contract details for the construction of a new Lonsdale Elementary School. Plans call for the school to open in August 2022, which means site work needs to begin March 1 with nearly $3.3 million going to cover “the advance purchase of steel …. so that the Contractor may lock in the purchase price due to a volatile market with constantly rising prices.”
The amended contract also moves up the guaranteed maximum price of design, or the limit the contractor can spend, to 100% completion, instead of looking at the price when half of the design work is completed.
If the designs are fully complete, then contractors will be able to get a guaranteed price on construction materials and labor instead of having to guess beforehand. The new contract will help “alleviate some concerns” about the fluctuating market, Caldwell said.
“It gives us a firm idea,” he said.
The contractor for the Lonsdale Elementary project is Rouse Construction Co., based in Knoxville. Company representatives did not comment for the story.
A new Northwest Elementary School is set to be built next year, along with a new Adrian Burnett Elementary School. The estimated costs for Lonsdale Elementary and Adrian Burnett are around $18 million each, while Northwest Elementary is expected to be around $22 million.
The Adrian Burnett and Northwest projects haven’t gone out to bid yet.
Caldwell said the county is bracing for the cost of the next two schools to increase as the projects move toward the design phase.
“It’s a concern we have to pay attention to in the future,” he said.
There are no other major construction projects pending in Knox County that the market fluctuations could affect, he said.
Knoxville city officials said they also do not have any major construction projects in their capital budget that could be affected by the market changes.
Since the COVID-19 pandemic began last March that led to shutdowns in several states, including Tennessee, the economy has gone into recession.
The Turner Building Cost Index, which measures costs in the nonresidential business market, said in the fourth quarter of 2020 that prices remained stable, but prices still dropped more than half a percent than in the fourth quarter in 2019.
Raw materials such as steel, copper and aluminum saw modest increases, while lumber went higher, the report said. Concrete has gone down in price.
Rising prices have been offset by increased competition between builders trying to find work, but prices continue to fluctuate, according to the report.
Grant Rosenberg, vice president for business development with Denark Construction, Inc., said he agreed.
“There’s been a lot of volatility over the last year due to the pandemic,” he said.
In the past year, there have been a lot of disruptions to the supply chain, which in turn has left some materials in demand, he said.
For example, copper has gone up 50%, steel has gone up 100% and lumber has gone up 110%.
All are materials needed to build schools.
“That trickles down,” Rosenberg said.
Another big piece of the market picture right now is a demand for skilled laborers by subcontractors who are scrambling to find enough workers.
In the end, there’s no way to tell right now if the planned Knox County schools can be built for the original projected price.
There’s always a risk involved when bidding out contracts, Rosenberg said.
The recession the United States encountered, though, in the last year has not been as deep as the Great Recession of 2008 and there’s every reason to believe the economy could rebound as more people become vaccinated and fears subside.
“As the economy stabilizes there ought to be more stability in the marketplace,” Rosenberg said.
Published February 22, 2021