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Month: June 2021

Construction Costs To Jump 20% This Year

• Ex-BCA chiefs say surge to last into 2022

• Call to ‘bond’ building materials imports

• ‘Every part of society paying COVID price’

Two ex-Bahamian Contractors Association (BCA) presidents yesterday warned that construction costs will likely increase up to 20 percent this year as cement became the latest product to take a hit.

Stephen Wrinkle and Leonard Sands both warned project sponsors – ranging from multi-million dollar developers to residential home owners – to brace for a significant price spike over the remainder of 2021 due to the post-COVID environment facing The Bahamas and rest of the world.

With cement supplies running low in recent days (see other article on Page 1B), the duo reiterated that increased construction activity and building materials demand had combined with supply chain and shipping bottlenecks worldwide to generate a surge in costs as the world continues to emerge from the pandemic.

Mr Wrinkle, warning that “every aspect of society is paying the price for COVID-19”, warned: “All across building materials and shipping, virtually every aspect of the industry is going up. It’s going to be difficult to hold prices at the end of the day because the contractor cannot absorb that. There’s not enough margin in the industry to absorb that.

“Costs are going up across the whole production and supply chain. It’s like a house of cards. It looks like this will continue through the end of the year as it will take that long to catch up. Every time a contractor prices a job he has to account for the price of labour and materials going up. They have to factor that in one way or another.”

While larger construction contracts contain clauses that deal with price/cost rises, Mr Wrinkle warned that the situation threatens to leave “the average homeowner who has a fixed mortgage” exposed. The surge in building materials alone could place construction of such a person’s home beyond their financial reach, especially if they are unable to obtain extra financing from the bank or other commercial lumber.

With plywood, an essential building material used in almost all aspects of construction, having doubled in price in some instances, the ex-BCA chief told Tribune Business: “You could see a 10-20 percent increase in construction costs over the course of this year. The consumer can expect to pay anywhere from 10-20 percent more this year if this current trend continues. 

“Most of our suppliers have tried to absorb the increase, and contractors have tried to absorb it, by any orders placed today have to reflect these increases. I ordered materials in January, and if I ordered the same now I would be paying 10-20 percent more.

“To get it to Nassau, it’s a 40 percent increase because of duties and VAT, and materials are typically 40-50 percent of the job. You have a 20-40 percent increase on materials, with plywood in short supply. This is unprecedented territory for us,” Mr Wrinkle argued.

“This phase that we’re going through now is particularly devastating. It’s not related to the industry; it’s related to COVID-19. It’s totally out of the control of the construction industry, it’s totally out of the control of the consumer, it’s totally out of the control of the Government. We’re all suffering. Every aspect of society is paying the price for COVID-19.”

Mr Wrinkle suggested that the present situation could revive talks about ‘bonding’ construction materials so that import tariffs and VAT are only paid when they are sold, rather than at the border. “It lends credence to discussions about bonded materials coming into the country,” he said.

“If affects businesses by having to pay so much in taxes up front. The auto dealers got their bonded status. To make this easy we need to defer duties and VAT until the point-of-sale. Some suppliers spend over $50m a year bringing in materials and that’s a lot of cash.”

The Government has being relying heavily on construction to drive and stimulate the economy post-COVID, and the combination of supply shortages and price increases threatens to disrupt its plans by causing delays and deterring projects still in the pipeline.

Mr Sands, meanwhile, echoed Mr Wrinkle’s assessment of the impact by saying: “I would safely say you are probably going to see an increase in construction costs of 15-20 percent over pre-pandemic levels. Everyone is going to have to adjust to the increased cost of materials prices they will be paying, and that is going to have a net effect on pricing contracts for construction.

“This is globally. We’re going to be feeling the pinch. This is going to go on for a long time. I think for the next 12 months we can see this holding. After that, it will be towards the end of 2022 that we take it back to normal, whatever we consider normal to be after this pandemic. It will be towards the third and fourth quarter of 2022.”

Mr Sands added that all lumber, ranging from plywood to rough framing wood, has been “severely impacted” by production and shipping bottlenecks as both industries attempt to play catch up with soaring global demand following COVID-19 lockdowns and other health measures.

“I’ve seen significant price increases, in certain cases by 100 percent, but on average by 60-70 percent on what it was in 2020,” he disclosed. “That’s a big number to pay for a product we use in every aspect of construction from start to finish.”

Delivery times, Mr Sands said, have been equally impacted. “What is interesting is that, post-pandemic, orders of major items like windows, right off the top they’re granting 40-plus weeks for delivery when, prior to the pandemic, they were granting six to eight weeks,” he added. “What we’re hearing is that shipping is backlogged because there are so many orders that people are trying to catch up on. It’s creating a nightmare.”

Mr Sands added that the Government will have to factor increased construction material prices and other costs into its 2021-2022 Budget projections, as this will raise the price tag for its capital works projects as well as impact revenues.

And post-Hurricane Dorian reconstruction in Abaco and Grand Bahama will also stand to be impacted by building materials availability and costs.

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Source

Nassau ‘Running Low’ On Cement Supplies

New Providence is “running very low” on cement supplies due to a combination of shipping delays and surging post-COVID construction activity, merchants disclosed yesterday.

They told Tribune Business that tropical storms in the Gulf of Mexico, which have held-up incoming shipments, have imposed short-term pressure on cement supplies but the impact is unlikely to last long-term.

Philip Andrews, Bahamas Redi-Mix Concrete’s managing director, told Tribune Business: “We’re not out of cement, but the island is running very low. We’re supposed to have our shipment come in next week.

“We have had shipping problems with the cement, because our shipment was supposed to have been here a week ago but they had some kind of storm in the Gulf of Mexico and that’s where our boats come from, the Gulf of Mexico. There was a tropical storm that went over into the Gulf and up past Alabama.” 

Distributors and suppliers, both in The Bahamas and internationally, are struggling to catch up with construction industry demand due to the supply chain backlog that resulted from factory/plant shutdowns at the height of the COVID-19 pandemic and other health restrictions. 

Mr Andrews added: “We’ve still got cement and we’re still open, but there’s a shortage on bag cement, which is causing a slowdown of everything. Our bulk cement is going to come in on June 29. I don’t do bag cement; you would have to talk to some of the other suppliers here that do bag cement for the smaller contractors.

“Bulk cement is running low but bag cement is the main issue that’s causing the slowdown of the smaller construction. We’re able to continue producing ready mix, so we’re still servicing the bigger jobs that have their own cement that have been able to keep things going, but I think the smaller guys are running out of bag cement so they can’t proceed with their jobs.” 

Terry Kemp, operations manager at Premix Concrete Ltd, said the cement shortage in The Bahamas was due to external factors outside the local industry’s control.

He acknowledged that “there is a shortage of supply because our foreign supplier got caught up in the global problem of deliveries because of COVID-19. But this is nothing to do with anything or anyone on the island. We ordered something and if they can’t bring it in now, they can bring it whenever they can bring it in. We can’t do anything about it.

“Basically this is a global problem we’re having, just like with lumber and everything else. This will probably be like this for a while and in the next couple of weeks we should be up and going,” Mr Kemp added. “This is a problem that’s not a Bahamian problem. It’s a foreign problem because of all of these ships that are backed up.” 

Leonard Sands, the former Bahamian Contractors Association (BCA) president, yesterday said cement supplies “on the whole island have been out” but the situation appeared to have eased over the last few days.

“Some suppliers are rationing out cement supplies,” he added. “You cannot buy any once over a certain amount. For some reason we kind of ran out. Everybody was using a ton of it, and the whole island ran short. It’s an indication of how much construction is going on.

“I think it’s going to be short-term. Like everything, the post-pandemic increase in activity is happening, and we see it being very short-term. Activity has held up, and you’re going to see very strong activity in the third quarter and fourth quarter of this year.

“I think the challenge with cement is going to level off because the product is close enough, in Haiti, Mexico and Florida, to get more in. I don’t think we’ll have the challenge of an outright shortage. I don’t see that happening.”

Stephen Wrinkle, another ex-BCA president, said that while he had not been impacted by any cement shortage he had heard of challenges faced by others. “We consume a tremendous amount of cement on a daily basis,” he added, noting that construction timelines and costs would only increase if it was unavailable for use in concrete, block walls and plastering.

By YOURI KEMP

and NEIL HARTNELL

Tribune Business Reporters

Source

Improving Worker Productivity ‘Must Be Our Top Priority’

The National Tripartite Council’s (NTC) chairman says improving the Bahamian workforce’s productivity “has to be the number one priority” as the latest effort to eliminate workforce skills gaps launched yesterday.

Robert Farquharson, pictured, speaking as the National Workforce Skills Gap Survey 2021 was released, told Tribune Business that improving labour skills and quality was vital to The Bahamas’ economic competitiveness and strength of the post-COVID revival.

“I think it has to be the number one priority of the ministry of labour and the government to improve the level of productivity in the Bahamian economy,” Mr Farquharson, who heads the body responsible for resolving all labour matters in The Bahamas, said.

“We need to make our economy more competitive, and one of the ways to do it is increase the level of skills so that employers can find everything at all levels in our economy. Because we’re coming out of the pandemic our economy needs to be very competitive just because we are competing on the world stage for the tourism dollar. Improving the level of productivity and efficiency will make the Bahamian economy more competitive on the world stage.”

The last Bahamian workforce “skills gap” survey was conducted in 2012 by a combination of the Inter-American Development Bank (IDB), the government and the Bahamas Chamber of Commerce and Employers Confederation (BCCEC). It found significant deficiencies, with multiple sectors wanting to employ Bahamians but finding there were too few available with the necessary skills or wanting to do the work.

“We know there’s a need to increase productivity,” Mr Farquharson, a former union leader, reiterated. “We know there’s a demand from employers to have the workforce upskilled. This survey will identify the specific needs, and develop programmes to address those needs and improve the level of productivity and efficiency in the labour marketplace.

“The last comprehensive survey, done in 2012, identified significant skills gaps specifically in the medical and allied services industries, the construction sector and the maritime sector. We saw a significant amount of gaps being experienced in those sectors because we did not have trained Bahamians qualified to do the job, particularly in construction, such as tile laying, air conditioning and welding.

“We had to issue a significant amount of work permits to non-Bahamians because there is a need for those skills in those areas. We were unable to find the skills in the Bahamian labour force and had to issue work permits. We’re trying to address that problem by training Bahamians and giving them skills so that when vacancies occur again we have a foundation of trained, certified Bahamians with the necessary skills.”

Mr Farquharson, which is working with the Ministry of Labour, National Training Agency (NTA) and Department of Labour on a survey that also has the Chamber of Commerce’s support, said they want to ensure the replies received are not “Nassau centric” and the goal is to obtain feedback from the major Family Island economies such as Exuma and Eleuthera with help from their private sectors.

John Pinder, director of labour, voiced optimism that the skills gaps identified, and strategies developed to address them, would enable his agency to reduce by 50 percent the more than 10,000 labour certificates it issues annually to support work permit applications for highly skilled expatriates.

“Currently, the Department of Labour is issuing over 10,000 labour certificates annually for skilled labour,” he said. “This includes renewals of certificates for labourers who are already working in the country. I believe that this survey would address this area.

“In the end, if Bahamians are trained to do the various jobs that require certain specialised skills, we would be able to reduce the amount of labour certificates issued by about 50 percent.”

Gadville McDonald, the National Training Agency’s (NTA) executive director, added: “We are requesting the participation of all businesses and employers in every island of The Bahamas.

“This is an opportunity for you to assist in bridging the skills gaps in our country and partner up to improve the overall efficiency and productivity within your own organisation. We believe that the current climate created huge opportunities to train, up-skill and retrain the workforce of the Bahamas.”

And Mr Farquharson added: “This national survey is designed to engage employers and business owners in The Bahamas by inviting them to answer 16 questions that will assist in the gathering of critical data to enable the Ministry of Labour to identify the skills required by the business community to make their enterprises more productive and efficient; design education and training programmes to respond to the needs of employers and make the Bahamian labour force more competitive; provide the Department of Labour with additional data to improve the delivery of quality service to both job seekers and employers that utilise the Public Employment Services Unit of the department; and provide important data to our policy makers when making decisions on the Bahamian labour market and policies and programmes for our national development.”

The survey is being sent to all businesses and employers throughout The Bahamas and is also accessible at http://www.surveymonkey.com/r/KYGDNYP, ntabahamas.org and on the Ministry of Labour, NTA, Department of Labour and NTC Facebook pages. The results will be tabulated and provided to all relevant parties.

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Source

Bahamas Must Replace Vital Infrastructure ‘Every 20 Years’

• Nation losing 5% of ‘capital stock’ annually to storms

• IDB: Some health clinics using ‘condemned’ buildings

• Just over 2% of population are fully COVID vaccinated

The Bahamas faces having to replace its entire infrastructure every 20 years due to its exposure to more severe and frequent hurricanes, an Inter-American Development Bank (IDB) analysis has asserted.

The just-revealed report, prepared as part of a $40m loan project to strengthen the Bahamian public healthcare system, said a United Nations (UN) report on disaster risk reduction showed that this nation is losing on average five percent of its “capital stock” per year due to the winds and storm surges created by hurricanes.

Defining “capital stock” as fixed assets such as roads, bridges, docks, airports and public buildings, the IDB analysis said that extrapolating out the UN’s findings suggests that The Bahamas is unlikely to gain the “full useable life” from its infrastructure investments as these will need to be renewed and replaced every two decades.

Taking the average annual loss (AAL) identified in the UN report, the IDB analysis said: “The UN Global Assessment Report on Disaster Risk Reduction indicates that the AAL for The Bahamas due to natural disasters is near to five percent a year as a percentage of its capital stock, well above the two percent average of the region.

“This figure indicates that, on average, every year The Bahamas loses five percent of its total capital stock due to natural disasters. This implies that The Bahamas would need to fully replace its capital stock every 20 years on average, well below the expected useable life of most infrastructure.

“Throughout the Caribbean, the main threat is from wind and storm surges that accompany hurricanes. According to this report, The Bahamas loses every year on average $2190m (sic) of capital stock due to natural disasters.” The latter figure seems extraordinarily high, and is more likely to be $219m, with the IDB analysis reflecting a typographical error.

However, the concerns are borne out by the estimated $2.464bn worth of damage inflicted on Grand Bahama and Abaco by Hurricane Dorian. When added to the $104m in damages suffered by the southern Bahamas during Hurricane Joaquin in 2015, the $373.911m stemming from Hurricane Matthew in 2016, and $32m generated by Hurricane Irma in 2017, total storm damages in The Bahamas over a five-year period come to almost $3bn.

The IDB’s findings are being used to justify why $19.954m, or almost 50 percent, of the health system strengthening loan is required to either construct new Family Island public clinics or upgrade existing ones by incorporating natural disaster risk mitigation measures in their design and construction. Dorian alone was said to have inflicted almost $38m in physical damage on the public healthcare system.

“The healthcare infrastructure in The Bahamas is aged and vulnerable to environmental hazards. Health facilities were built in the 1980s and have experienced a series of natural disasters, especially during the last decade,” the IDB analysis said.

“The clinics are scattered along the archipelago, which poses logistical and organisational challenges for appropriate maintenance and delivery of medications and supplies. Many clinics are aging and degrading due to an inadequate maintenance programme, making them less resilient to disasters and climate conditions. The population increase exceeds the clinics’ capacity, which is becoming insufficient to satisfy demand and signals the need to retrofit and expand them.

“The growing impact and the increasing number of these storms underscored the vulnerability of the health infrastructure to natural disasters, and prompted focus on climate resilience as a priority for healthcare infrastructure planning. To overcome these vulnerabilities, the Ministry of Health plans to upgrade the aging infrastructure. The scheme comprises capital works to retrofit nine clinics in seven different Islands, including Exuma and Andros.”

The report exposes the significant physical deterioration of several public health clinics, with the facility located at Smith’s Bay, Cat Island, presently housed in “a condemned building”. The Fresh Creek clinic in Andros, meanwhile, is based in a property that is “in a severe state of disrepair”.

Both areas are to get brand new clinics, while the facilities at Black Point in Exuma, Mangrove Cay in Andros and Rock Sound in Eleuthera will also be replaced by new builds. The former two are presently based in “inadequate rental” accommodation.

Besides the five new facilities, which will cost between $1.63m and $3.6m to construct, the clinics in Abaco, Andros, Long Island and Bimini will also be retrofitted and upgraded. Abaco’s primary health centre was damaged by Hurricane Dorian, while Bimini’s has “a leaky roof” that requires repairs.

Turning to the rationale for its $40m loan, the IDB said improving preventative care and early stage detection was critical to tackling the level of non-communicable diseases in The Bahamas and improving public health outcomes while reducing costs.

Disclosing that diabetes and hypertension together cost almost $35m per year, representing some 17.6 percent of the Government’s annual healthcare spending, the report said: “Appropriate preventive and curative care for non-communicable diseases in primary care facilities and hospital settings can reduce health costs and up to 25 percent of the mortality rates for these conditions.

“For example, more than 70 percent of breast cancer patients are diagnosed with late-stage cancer, which in turn reduces treatment effectiveness and life expectancy and increases the costs of care, whereas early screening increases life expectancy and reduces the costs.”

Disclosing concerns over domestic violence victims being able to access healthcare, the IDB added: “One in three women on average will experience domestic violence in their lives, and among those women that suffered a violent incident that required medical attention, an intimate partner (14 percent) or a friend or acquaintance (17.8 percent) caused the injuries.

“The Bahamas has taken significant strides to increase co-ordination and response to gender-based violence…… Nonetheless, human, and financial resources are still limited to address the number of persons needing assistance. Up to 22 percent of households report domestic violence, and the COVID-19 pandemic increased this problem by 11.3 percent.”

As for COVID-19, the IDB report said that as at June 4, 2021, just 2.2 percent of The Bahamas’ population – some 8,659 persons – were fully vaccinated against the virus. Some 55,037 doses had been administered by that date, with the Government set to request the first disbursement of an earlier $20m IDB loan within weeks to aid in acquiring vaccines.

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Source