Construction costs hamper new schools

Jul. 10—As workers lay the foundation of Nashua's newest middle school this week, Alderman Richard Dowd is keeping a close eye on the cost of what will in a few years become the Brian S. McCarthy Middle School.

Dowd, who chairs the committee of aldermen and school board members overseeing the Gate City's major school construction, said he is wary of surprises at the McCarthy school site and the expansion of Pennichuck Middle School.

"Right now it looks good," he said. "We always have to be careful of the unknown unknowns, everything from cost increases of products, to we open up a wall and, 'Oh my God, we've got to do something else.' "

Money the school board and the city have set aside for unexpected expenses and "escalation," or the expected annual cost increases on a project, are holding for now, Dowd said, though it's possible Nashua will have to find additional funds if the projects hit any unexpected snags.

Supply chain issues, difficulty hiring and the rising cost of land and petroleum have pushed construction costs to stratospheric highs this year. The school renovations and building projects that come in a flurry during the summer are getting more expensive too.

Concord hopes that when the time comes to build its own new middle school in a few years, the market will have settled.

Last year, said Business Administrator Jack Dunn, the cost of building a new Rundlett Middle School was projected to be about $96 million.

This spring, Dunn said the estimate was $176 million — close to double the original estimate.

Shortages, gas prices drive costs

The cost of building anything is climbing so fast, said Bedford construction estimator Marc Jobin, that some projects with tight margins — such as affordable housing — are not beginning at all.

Jobin said he has noticed more people calling him for a cost estimate before they begin design work, sometimes even before they buy land.

"In many cases, they're finding out that they're not viable," Jobin said.

Shortages of many types of material are keeping prices high, Jobin said. He traces the problem to the beginning of the pandemic and said price increases have been steeper the past two years.

"On average, normal construction escalation year-to-year is 3% to 4%. Lately, the last couple years, its been 9% to 12%," Jobin said. "Some materials have doubled in price — they've gone up 100%."

Jobin said school districts, with their particularly strict construction budgets, might have an especially hard time in the current market.

"Fuel costs are really all over the place, diesel's even worse," said architect Tina Stanislaski, working with Concord for HMFH Architects.

"Shipping costs on materials have gone up tremendously, and things that use petroleum, like PVC pipe, have gone crazy," Stanislaski said. "And if they're not sky-high, you just can't get them."

School districts wanting state aid, from the pot of money set aside for school buildings, submitted their applications earlier this month.

Seventeen school districts applied for funding to start projects in 2024 and 2025, according to a list provided by the state Department of Education, for projects ranging from an $8.3 million HVAC upgrade in Brookline to a $74 million new elementary school in Derry and that $176 million Concord middle school. The requests total more than a quarter-billion dollars.

But the state covers only a limited number of projects each year — so there's no guarantee a project will get state aid.

"They have very limited money, and many more applications for assistance than they have funds available," Jobin said. "But that's really what these municipalities and school districts are counting on, is state aid."

Jobin said he wondered if some school districts will be able to build at all if they don't get funding from the state, especially with costs still rising.

Concord administrator Dunn said that district's project may not go forward without state aid, but he hopes the estimated cost of $176 million will start dipping again before Concord starts soliciting bids from construction companies. Maybe rising interest rates will help cool off the construction frenzy, and ease the high demand for materials, he said.

"We're not committing to the $176 million at this moment," Dunn said. "We're also hoping that things will be settled down a bit."

But even if prices settle down, Stanislaski cautioned against thinking prices would drop.

"In my 20 years of building schools I've never seen prices go down. I've only ever seen things flatten for certain amounts of time," she said.

Heeded warnings

Between shipping chaos, workforce shortages and lockdowns closing factories around the globe over the last two years, Dowd said Nashua had plenty of advance warning that the cost of materials would be going up.

"We were able to buy a lot of our material up front to some degree before price increases took effect," Dowd said. Still, paying attention to warning signs hasn't spared the district's budget completely.

When a quote for steel came in this year, Dowd said it was double an earlier estimate. And if Nashua didn't buy within 10 days, Dowd said, the price would have increased another 40%.

So Nashua bought the steel early, bought glass for windows that has since increased 40% in cost, bought other materials well before construction crews would be needed.

Stanislaski said Concord likely would employ similar tactics — working with a construction manager to carefully plan construction phases, order material ahead of time to account for long waits and even rent warehouse space to store a building's worth of supplies.

Stanislaski said schools that are hoping to start construction next summer may be even more vulnerable. Costs have increased 20% to 30% since construction bids came in this spring, Stanislaski said.

Not all districts have been able to ask for more funding, she said, so they're trying to break projects up into phases and cut costs. But when the cost increases are so steep, Stanislaski said it's hard to find enough cuts.

"You really can't value-engineer out a 40% increase," she said. "I don't know how districts are going to deal with this."

Dowd said the expansion of the Pennichuck Middle School appears to be on track to finish on time in the fall of 2023 and may yet come in under budget. Any leftover money will help pay for the new McCarthy Middle School, still about two years from completion.

Dowd praised the construction companies Nashua has been using on the project for their work to keep costs in check amid macroeconomic chaos.

Still, Dowd said, he is willing to cut only so many corners — and he said compromising on materials or construction doesn't make sense in the long term. If a school is well-built in the first place, he said, the ongoing costs of maintenance and repairs should be lower.