HOUSTON, TX, December 13, 2013 /24-7PressRelease/ -- In response to rising costs and widespread construction delays in multifamily construction, Leedo Cabinetry has deployed a new project cost estimating system and new construction terms. The new proposal generator incorporates both current and projected future costs for raw materials, manufacturing, shipping and installation costs across for each of the various geographical regions where Leedo provides cabinetry, countertops, and installation services. ---
Darryl Preen, Leedo's Chief Information Officer, noted "it is critical that in today's competitive, high-growth, and inflationary environment that we provide our sales team with not only accurate current costs, but also the projected costs for installing cabinets and countertops in in the future. In many cases, we provide sales proposals a year before we perform the work. Our sales team needs to understand not just how much it would cost to perform the work today, but how much it will cost a year from today."
Jonathan Risch, Leedo's Chief Commercial Officer reports that "On average, total project costs have risen by more than 15% in the past 12 months. Hardwood lumber costs have risen 40% in the last 12 months. Particleboard has increased more than 10%, and Plywood has gone crazy because of import tariff issues. Transportation costs have also risen because of new Federal limits on drivers' hours, and the cost to install cabinets has skyrocketed because of a shortage of skilled labor to supply the multifamily construction boom. Today our new proposals will better reflect these increases.
Risch continued by noting that "over the past several months we've seen the impact of increasing costs intensified by the fact that many large construction projects are substantially behind schedule. The customers are hamstrung by a shortage of framers, drywall hangers, and other tradesmen. It's a double whammy effect. Costs are rising at the same time project start and completion dates are moving further into the future. Our new cost forecasting system will help us understand the implications of these cost changes better than we ever have."
"I am excited by the way Leedo has responded to the construction delays we are seeing so much of." George Hagle, Leedo's Chairman commented. "Contractors' schedule delays can be costly to Leedo in two ways. If we have reserved production capacity for a project, and that capacity goes unused, we lose profits. And if costs rise between when we planned to do the work and when our customer is finally ready, that changes the economics of the project. One challenge in the multifamily millwork business is that we make proposals and negotiate agreements as much as a year before we perform the work. There's a risk that we can be squeezed between rising costs and contracted pricing. To reduce this risk we've incorporated cost escalators into our customer agreements that trigger if a general contractor can't keep pace with the schedule they provide when we negotiate our contract. Adjusting contract price in the event of schedule delays is only fair."
Lastly, Ken Hirshman Leedo's President added that we have been fortunate to double our revenues over the last two years and add a lot of new teammates and families to Leedo. We must appropriately position our products and services within an inflationary environment. The technology that has been collaboratively developed by our technology and commercial teams will help ensure the profitability Leedo requires to continue to provide best-in-class products and services to the multifamily construction marketplace.
For more information contact:
George Hagle, Chairman
281-201-0900 ext. 5040
Leedo Cabinetry was founded in 1971 to supply the booming apartment construction market. Today, Leedo remains committed to serving builders around the nation. The company employs more than 550 teammates and 400 subcontractors, producing and installing more than 500,000 cabinets and 100 miles of countertops annually for multifamily developers, large scale single-family home builders, and military housing developments. With corporate headquarters in Stafford, Texas; Leedo manufacturers and ships across the country from its traditional cabinet and countertop facilities in East Bernard, Texas, and its frameless cabinet facility in El Campo, Texas, and its granite and quartz countertop operations in Xiamen, China.
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