Aluminum Moves Between Bid Day and Buyout Day
You priced metal in March against a quote good for 30 days, then bought it in November on a contract the GC won't escalate.
A labor-heavy trade can absorb a commodity move because material is a thin slice of the number. When two thirds of your contract is metal and glass, the commodity is the job. Every month between bid day and release to production is an open position on aluminum that you hold with no hedge and no price adjustment clause.
The size of it
A 10 percent aluminum move on a job that's 60 percent material is six points of gross margin, which takes a large share of the job's profit in one stroke. The longest-duration jobs, the ones you worked hardest to win, have the most exposure.
A curtain wall or storefront package is 55 to 70 percent material, which puts you closer to a manufacturer than to a labor contractor. Aluminum prices off LME plus the Midwest premium, then adds Section 232 tariffs that were widened to cover derivative aluminum products, which is where extrusion and framing fall. USGlass reported metal windows, doors, and frames being 11 to 18 percent higher year over year in the November PPI, with an economist quoted saying about 50 percent of the price increases have happened and there's another 50 percent in the pipeline. Extruders and glass fabricators hold quotes 30 days or less, hard-bid awards come 4 to 9 months after the bid date, and on private hard bid the GC routinely strikes the escalation language.
Three moves, in order
Step 04: Estimating system
The estimate maps one to one onto the job cost codes, so variance means something the day it appears.
What else costs curtain wall and glazing contractors money
The same mechanism in other trades
What curtain wall and glazing owners ask
Aluminum price increase between bid and buyout on a glazing contract?
You priced metal in March against a quote good for 30 days, then bought it in November on a contract the GC won't escalate.
What does it cost?
A 10 percent aluminum move on a job that's 60 percent material is six points of gross margin, which takes a large share of the job's profit in one stroke. The longest-duration jobs, the ones you worked hardest to win, have the most exposure.
What do I do first?
Date-stamp every extruder and fabricator quote in the estimate and put the expiry into the bid file, so buyout knows which quotes have gone stale.
What are curtain wall and glazing contractors supposed to be making?
Curtain wall and glazing has 27% gross margin, 18% overhead and 9% net profit after taxes at $1M to $5M. The all-trade average is 7%, so this trade is 2 points above it. The CFOS target is 12.5%.
Which part of the system fixes it?
The step is number 04, estimating system. The estimate maps one to one onto the job cost codes, so variance means something the day it appears. It comes from chapter 4 of CONTROL: C.F.O.S. Construction Financial Operating System.
Everything on this page is something you can install yourself, and CONTROL is the order to do it in. If you would rather buy the finished result, SPM The Construction CFO does this work for curtain wall and glazing contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, led by the same author.
What a fractional CFO does for curtain wall and glazing contractors
Wrote CONTROL, the 8 step system behind these figures. More about the author.