Frisco workforce-housing project delayed amid rising construction costs
October 17, 2017
Frisco has missed an ambitious goal to start building a workforce-housing project by the fall after a contractor's bid came in $600,000 over budget, pushing construction of the nine-unit complex to next spring.
Ballooning construction costs, fueled by a statewide building frenzy and devastating Gulf Coast storms that have strained materials markets, mainly caused the setback. Lumber prices, for instance, have gone up 28 percent in the past two months, town staff said.
Tyler Lundsgaard, contracted as owner's representative for the project, told the town council during a work session last week that the only bid he received came in at $2.1 million, well above the $1.5 million budgeted for the project, known as Mary Ruth Place.
"Construction costs have gone up," he told the council. "We've seen an increase in steel costs over the past year nearly identical to lumber costs. For gypsum, we expect to see a couple percent increase over the next quarter, especially in the wake of recent natural disasters. So many resources have been funneled that direction and driven costs up."
Units at Mary Ruth Place on Galena Street will be reserved for a mix of town staff and employees of local businesses. The project is a high priority for council and was moving swiftly before falling back to earth last week.
The Frisco Planning Commission approved final plans for the project earlier this year, and town staff was aiming to get shovels in the ground by the fall.
Recommended Stories For You
Construction would've continued through the winter, which would have added cost. That was less significant, however, than higher construction costs across the board.
"Mechanical (costs are) $100,000 over budget as well," councilman Rick Ihnken said during the work session. "It seems to be all encompassing… so that's completely out of whack with historical trends."
Four contractors were initially interested in the project, but only one submitted a bid. That lack of competition may have contributed to a higher bid, as well.
"With only one bid coming in it's hard to see if that's truly where we stand," Lundsgaard said. "So I don't want to say that 2.1 (million) is where we sit currently, but it certainly is an indication that (the price) is a little higher than what's currently there for the budget."
The high number of construction starts nationwide has spread contractors and subcontractors thin, increasing their bid prices and making them more selective on projects.
Turner Construction, a national construction services company that tracks nationwide building costs, noted a 1.18 price increase in the second quarter. The index was up 4.7 percent last year.
"The steady pace of construction starts across the country is continuing to have an impact on the skilled labor workforce," the company's vice president, Attilio Rivetti, wrote in a quarterly report. "As a result, we are seeing subcontractors exercise greater caution in their pursuits. Their selective approach to bidding also contributes to increased prices."
Construction is moving along at a healthy clip across Summit County, particularly in lower-margin workforce-housing projects such as Denison Placer and Huron Landing in Breckenridge.
In Frisco, site work has begun on a mixed commercial and micro-condominium complex at the Basecamp Center. Upon completion, it will include 18 units reserved for local workers and seven at market rate.
"There were four people interested but when they started talking to sub(contractors), and those other related things, found out it was spread pretty thin," Mayor Gary Wilkinson said. "There's a lot going on — a lot of starting right now."
Still, the push to get the project in the ground and alleviate the housing crisis for local workers may have led to missed opportunities for savings.
"I'm an engineer, it happens," Councilwoman Deborah Shaner said during the work session. "It's bad, it's really bad. There aren't enough materials, there aren't enough contractors, Colorado is building like crazy. But that doesn't excuse us from value-engineering this project where we can, because I'm not going to blame this all on construction costs."
That will be the plan moving forward. Town staff members said they would enlist consultants to find savings wherever possible without reducing the project's scope. The plan now is to re-evaluate the project over the winter and be ready for new bids by January or February.
"It was worth a try, trying to get into the ground this fall," town manager Randy Ready said. "But it didn't work out, so we'll recover and move on."