Contractors Navigate Workforce and Supply Shortages, Rising Costs

YOUNGSTOWN, Ohio – Last year was a record one for Lencyk Masonry of Boardman, and this year is shaping up that way as well. Business volume is up at least 10% from where it was a year ago.

The problem Larry Lencyk, president, has is one he acknowledges is common.

“There’s a lot of work out there. The biggest issue for most people now is the manpower,” he says.

Lencyk was among several builders contacted by The Business Journal to get an update on the construction industry, including what projects they are working on and the challenges they are facing. Though largely upbeat about this year, some contractors are wary about prospects for business in 2024 because of the rise in interest rates and next year’s election.

In addition to Lencyk, The Business Journal reached out to Mike Coates Jr., president of Mike Coates Construction in Niles; Tucker Cope., president of C. Tucker Cope & Associates Inc. in Columbiana; Joe DeSalvo, president of DeSalvo Construction in Hubbard; Dawn Ochman, president of Dawn Inc. in Warren; and Frank Vendemia, president of VendRick Construction in Brookfield.

Steady Stream of Projects

Mike Coates Jr. at Mike Coates Construction reports business this year is “a little bit better” than in 2022, with a “steady stream of projects,” mostly for governmental entities or schools, with some private projects as well. Local projects include work at Warren’s wastewater plant, Western Reserve Transit Authority in Youngstown and a Coates Car Care in Boardman.

In Pennsylvania, Coates recently completed work on the $10 million renovation project at Slippery Rock University, a parking deck in Pittsburgh and a historic theater project in Erie.

In addition to Warren G. Harding High School’s $36 million Student Recreation and Wellness Center, DeSalvo Construction will be the contractor on Farmers National Bank’s 27,000-square-foot expansion of its Canfield headquarters. Work should get underway on that project this summer, Joe DeSalvo says.

“We’ve been extremely busy this year and blessed with a lot of local area projects,” he says.

The company’s current workload includes renovations to the former emergency department space at Akron Children’s Hospital Mahoning Valley in Boardman to convert it to other use, construction of Youngstown Orthopaedic Associates medical office building, also in Boardman, and a building for Salem Regional Medical Center at Canfield’s Millennial Moments development.

Construction should be complete this fall on the $14 million outpatient musculoskeletal campus that Youngstown Orthopaedic Associates is building in Boardman. Financing was provided by Farmers National Bank. The transaction involved a ground lease and bond issuance with the Western Reserve Port Authority.

DeSalvo Construction also is starting an expansion for Bral Corp. in Warren. “We’re still finalizing the design,” he says, “It’s a big project.”

Among Dawn Inc.’s upcoming local projects are work at the Warren Community Amphitheatre, Mosquito Lake and retail and office buildings, says CEO Dawn Ochman. Her company also has projects under construction at the Lodge at Geneva-on-the-Lake, Wright-Patterson Air Force Base, Pittsburgh Air Reserve Station, and several courthouses in Ohio and Pennsylvania.

“Business is great. We’re cautiously optimistic,” Ochman says. The company experienced an earlier boom in bidding, with an influx of projects between January and April that normally wouldn’t occur until the June-through-September period, she says.

Frank Vendemia reports VendRick Construction is rebounding from a rare bad year in 2022, “probably one of the worst years” in its 30-year history. This contrasts with 2021, which “was probably our best year in business.”

Inflation and product availability made costs volatile and estimates difficult to prepare, according to Vendemia.

This year, business is “back to a little bit above average,” he says. Estimates account more for inflation and the contractor is working on locking in pricing on materials when possible and purchasing them ahead of time.

VendRick Construction’s workload includes projects throughout Ohio as well as near Pittsburgh, Vendemia says. They include a $15 million school project near Butler, Pa., and a $6 million office project for the Stark Area Regional Transit Authority in Canton.

“We’re spread out all over,” he says.

Lencyk Masonry’s workload also includes the Harding sports complex, Salem Regional and Youngstown Orthopaedic projects, as well as the United Local School District’s K-12 building, which is a $6 million masonry contract, Lencyk says. Four other school projects in Ohio account for more than $20 million in work.

Business remains good at C. Tucker Cope & Associates Inc., compared to 2022, Tucker Cope says.

His company just finished an addition and renovation at Columbiana Ford and is completing a 70,000-square-foot expansion for Zarbana Aluminum Extrusions in Columbiana, Cope says. In addition, the company is preparing an expansion project for Trailstar International in Smith Township and a 100,000-square-foot spec flex building in Yorkville along the Ohio River.

“I’ve had conversations with numerous people about [the lack of] clean, modern manufacturing space,” Cope says. “No one wants these old mill buildings.”

Finding Workers

Keeping a good workforce is key, Cope says. One of the reasons companies aren’t interested in old mill buildings is because they are too cold and difficult to heat.

“The big thing is employee comfort. With the tight labor market, you’ve got to have a new facility for your employees who want to work and no one wants to work in a freezing mill building,” he says. Employees want a good work environment, good tools to work with and a stable company.

“We try to work on load balancing our projects so we’re not burning our people out,” Cope says. His company has modified its compensation structure and offered more schedule flexibility to its workers.

Coates wonders where all the workers went. “When you start looking for people and you can’t find them, it’s an odd thing” he says.

Not being able to find workers affects scheduling capacity, Ochman points out. She hasn’t talked to anyone who isn’t having trouble finding workers, and it’s difficult getting applicants, let alone finding qualified ones.

“It’s definitely the employees’ job market right now as opposed to five to 10 years ago, when it was the employers’ market,” Ochman says. “Our team has been working on showing everyone who we are, what we do, our vision, mission, and core values. We believe all of these things set us apart from other employers.”

Lencyk acknowledges his masonry company, which has about 75 employees, could use another 25 or 30. To attract and retain workers, his company tries to do the best it can to provide the latest and safest equipment to make employees’ work easier and safer.

“We try to treat everybody fairly,” he adds. “We’re not demanding. We just expect a day’s work for a day’s pay.”

The lack of workers has led Vend-Rick to employ subcontractors for some work, Vendemia says.

Supply Chain, Inflation

All industries have been affected by inflation and supply chain issues, and construction is no exception, Ochman says.

“It can be tough to tell clients you can’t hold your pricing for long because of market volatility. And with supply issues, delivery dates are moving targets, and that impacts schedules,” she says.

Supply chain issues have “more or less settled down,” moderating back to a “new normal,” DeSalvo says.

Still, the biggest issues now are obtaining rooftop heating/ventilation/air conditioning units, as well as electrical components such as switchgear and panels, he says.

Cope also cites obtaining HVAC units as a big supply issue.

“Besides that, everything else is becoming more available,” he says. “It just takes more planning and more coordination on the front end.”

Inflation now is less of a shock than it had been and mostly has slowed to a more manageable pace, the contractors agree.

“Supply is getting a bit better. There’s still a lot of issues,” Coates says.

There have been challenges getting special components for the wastewater plant work, such as ductile iron pipe and valves, he says.

But price increases definitely have affected project costs, according to Coates. While steel pricing has leveled off, concrete has gone from $120 per cubic yard to $170 for the same amount, he says.

“So far we are managing supply issues,” Lencyk says. “Mostly it seems to affect other trades more than us, and that ends up affecting the schedule for projects.”

DeSalvo sees commercial projects as a “late lagging” economic indicator.

“When interest rates go up, it really doesn’t impact us today or even next week or next year. But it could potentially slow down projects that are being planned for next year,” he says.

“With these higher interest rates, some projects could probably get put on hold,” Coates agrees. “If you’re paying 8% interest and you kind of priced your project at something a lot lower than that, it’s just not going to work out.”

The rise in interest rates won’t affect public projects, according to Coates. One such project, the new main gate at the Youngstown Air Reserve Station, is expected to go out for bid early this summer, he says.

What the Future Holds

Ochman says she’s “excited for the future. The market will always throw us curveballs, and companies will manage through them.”

It’s too early to predict what 2024 might hold, Cope says. Estimating and bidding hasn’t slowed down, but contracts aren’t signed yet. With interest rate increases, money isn’t as cheap as it used to be and people might hold off on finalizing agreements until they see how pro-business government is expected to be following the next election, he speculates.

“The businessman wants to know what the government is going to be and is it going to make sense to just hold your money or keep growing the company,” he says.

Lencyk doesn’t anticipate much change next year. At least half of his company’s workload is for school-related projects, and he doesn’t see that changing. There are fewer competitors bidding on work, whether they have gone out of business, retired or simply lack the workforce to bid on the jobs.

“I don’t see the work slowing down anytime soon,” he says. “If there was manpower available, I think it’d be a bit different. There’s still plenty of work out there locally and throughout the state.”

Pictured at top: C. Tucker Cope & Associates is completing a 70,000-square-foot expansion at Zabana Aluminum Extrusions on Esterly Drive in Columbiana.