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Way down the global supply chain, a southeast Ohio village can’t fix its sewer line
By: David Forster
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ATHENS, Ohio (WOUB) — The village of Chauncey in Athens County needs to replace a section of its sewer main that’s in bad shape.
It’s been trying for months to get the work done. But no contractors will bid on the job.
The problem is a severe national shortage of sewer pipe that has sent prices soaring. Contractors who order pipe can’t be certain when they’ll get it or how much they’ll have to pay for it when it arrives.
This makes it difficult to bid jobs.
“We’re just guessing,” said B.J. Webb, an estimator with Ironton-based Southern Ohio Trenching. “We’ll take their quote and mark it up so much percentage and hope for the best. It’s not a very good way to bid a job, I’ll tell ya.”
What’s happening in Chauncey is just one example of how ongoing disruptions in the global supply chain, some caused by the pandemic, some caused by severe weather, are playing out in communities across the country.
The Chauncey sewer project did receive one submission when it was first put out for bid in May. But the bid was over budget. Sean Brooks with Hocking Athens Perry Community Action, which is handling the bidding process for the village, said the contractor who made the bid warned that pipe prices were rising and it was going to be difficult to find someone willing to bid.
“Little did we know that that was some foreshadowing of what we’re seeing today, which is massive increases in cost.”
And right now there’s no end in sight. It could be months or even a year or more before there’s enough supply on the market that prices begin to stabilize.
Plastic sewer pipe is made from a resin that is a byproduct of refining oil into petroleum. Most of this resin is produced by companies along the Gulf Coast of Texas.
Production at these companies slowed with the onset of the coronavirus pandemic, as the government shutdowns chilled the economy and put construction projects on hold. The pandemic curbed demand for fuel, resulting in significant cutbacks in oil production.
Then came severe winter storms in Texas that forced resin producers to shut down for several weeks. Hurricane Ida slammed into Louisiana in August, forcing oil refineries there to shut down.
The result is the resin used to manufacture all sorts of plastic products is in short supply.
Meanwhile, demand for building materials is up sharply as the federal government has funneled billions of dollars in pandemic relief funds to communities throughout the country to pay for things like infrastructure.
The president of Core & Main, the largest distributor of water and wastewater pipe in the United States, sent a letter in late July to the company’s customers. He wrote that demand for pipe and fittings far exceeds supply and the vendors who supply it are no longer willing to guarantee a price. So Core & Main would no longer be able to guarantee the prices it quotes when customers place orders.
Other distributors have sent similar letters, warning customers it will likely take a couple of months or more to fill their orders and that the price may not be known until the order ships.
This has put contractors in a bind.
When they bid for projects, they usually know enough about the price and availability of materials that they can be fairly certain they can get the job done on time and make a profit.
That’s no longer the case when it comes to pipe.
“They’ll quote you a price right now, (but) they don’t give you a … firm price until the day it’s actually delivered,” Webb said. “It can go up 10 percent, 15, 20 percent.”
And that can eat up what profit a contractor was hoping to make on a job.
Webb said most of the cities he’s working with have been willing to make adjustments to the bid so the contractor doesn’t have to eat the loss if the price for materials ends up significantly higher.
Price aside, just getting pipe is a challenge. Because there’s not enough to go around, there’s a chance that as it’s produced it will get shipped first to contractors working on the bigger and more lucrative projects.
“What it means is smaller projects such as this three or four hundred thousand dollar project in Chauncey, Ohio, which is very important to our community, doesn’t really hold the weight of a sewer replacement project through a major city … that has multimillions of dollars of pipe ordered for that project,” Brooks said.
This makes it even more challenging for contractors to schedule the work on a project and can lead to costly delays if equipment and employees are sitting idle.
Webb said his company is facing shipment delays. Pipe deliveries have been pushed back one to two months for sewer projects it’s doing in two small communities, one in Ohio and one in Kentucky.
The pipe shortage has created a bizarre situation in which the $1 trillion bipartisan infrastructure bill pending in Congress, which should be a godsend for the construction industry, may only make things worse by creating even more demand.
“We are already concerned that as we see these dollars come in for infrastructure that this becomes a repetitive issue for us, that the supply for these projects of materials just won’t be there,” Brooks said.
“I really don’t know what the answer is except for to wait.”
And so that’s what’s happening in Chauncey. The sewer project is on hold, and in the meantime, the village is having to reroute some of its sewer lines as a temporary fix.
“I think the industry has to just right itself, and what they’ve experienced is unprecedented even for them,” Brooks said. “So, I’m not sure they know what the answer even is at this point.”