Your contractor clients have probably noticed that there is a serious lumber shortage. Materials that were once plentiful on the racks of material yards all over the country are now taking weeks to arrive. Furthermore, they might only be available when pre-ordered. The construction industry has been hit particularly hard. Therefore, it is critical to understand how this lumber shortage is impacting your contractor clients and what they can do to weather the storm.

Why Is There a Lumber Shortage?

First, it is important to take a closer look at why there is a shortage in the first place. Some of the biggest reasons why include:

  • The home construction industry is incredibly strong right now. According to data that was published by the Census Bureau, residential construction from June to July jumped up more than 20%.

  • Throughout the Covid-19 Pandemic, lumber mills have been forced to shut down. Social distancing requirements have made it difficult for these mills to work at full capacity, leading to a drop in lumber production.

  • Multiple tropical storms & wildfires across the country have put additional strain on raw materials.

  • Contractors who typically utilize lumber yards for product are hesitant to buy from big box stores due to the poor quality available.

  • Finally, with so many people spending time at home, there has been an increase in the frequency of do-it-yourself home improvement projects, drying up lumber across the country.

These are just a few of the reasons why your clients may be struggling to get the supplies they need.

Understanding the Impact on Contractors

Throughout Covid-19, contractors are finding it difficult to obtain basic materials. This has led to a number of troubling issues for those in the construction industry. Material shortages and increased lead times are creating a discourse between contractors and clients as jobs get pushed past their original completion dates. Furthermore, many contractors may find that they are not being hired as often by their commercial and industrial clients. They are finding that large construction projects are being pushed back due to material shortages and soaring material costs.

Additionally, if contractors find that they are unable to fulfill requirements due to material shortages, they could find themselves in hot water due to breach of contract issues. It is extremely important for contractors to be prepared and to ensure their company is protected during this strange time.

What Can Contractors Do?

There are a few tips that contractors should follow. These include:

  • Utilize a time and materials contract

  • Special order lumber in advance and build lead time into the job scope

  • Utilize tips to help control cash flow – Read Tips to help your troubled contractor

  • Consider changing the contract structure to protect against potential breach of contract materials. This could include Cost-Plus contracts.


Find an Underwriter