Massachusetts Sees Tariffs Pinching Public Projects

Tariff Turmoil and Economic Unease
The on-again-off-again nature of new U.S. tariffs on foreign construction materials such as lumber, aluminum, and steel and the threat of a trade war with Canada has begun impacting Massachusetts public construction projects.

The Massachusetts Daily Collegian reports that in January, before new tariffs were implemented, development of a 5-story project on the edge of the UMass campus was scaled back due to the high cost of steel and fears over future price increases. 

Effective March 12, the U.S. imposed a 25% import duty on foreign steel.  President Donald Trump had announced plans to double US tariffs on Canadian steel and metal imports to 50%, but backed off after Ontario canceled a 25% surcharge on electricity supplied across the border.

Canadian softwood lumber saw its U.S. tariff raised from 8.05% to 14.54% on August 19, 2024 by the Biden Administration.  Trump has argued the need to raise this duty further.

The U.S. economy has been buffeted by a spate of bad news.  The S&P 500 Index recently sank to more than 10% below its February high, the value of the U.S. Dollar is 5% below its high on inauguration day, and a J.P. Morgan economist has predicted a 40% likelihood of the country entering a recession.

The uncertainty caused by what has been termed “tariff whiplash” has crept into construction bidding for the planned renovation-expansion of the J. V. Fletcher Public Library in Westford.  Beset with cost escalation and competing budget priorities, the $33 million Westford project has exhibited challenges parallel to those encountered by Amherst’s $46.1 million Jones Library renovation-expansion.

 See related: Overcommitting to an MBLC Library Expansion — A Cautionary Tale from Westford

Questions in Westford
The Town of Westford first invited bids for the library project on January 24, 2025 with trade bids due on March 5 and general contractor bids due on March 20.  On March 5, a prospective bidder submitted a request for information (RFI) regarding how the impact of tariffs on construction costs will be handled.

The request begins, “Given the public bidding requirements of Massachusetts Chapter 149, which requires a fair and level bidding process to ensure equitable competition among all bidders, it is critical to establish a clear and fair mechanism for handling both the inclusion of tariff-related costs at bid time and cost adjustments should new tariffs be implemented during the course of the project.”

The contractor summed up the problem: “Without clear direction, the lack of predictability creates risk exposure for all parties involved – awarding authorities, general contractors, and subcontractors – potentially leading to unnecessarily increased bid amounts as bidders hedge against unknown future costs.”

The RFI posed the question, “Should bidders include or exclude additional costs associated with the Canada & Mexico 25% tariff in their base bid?”  It added, “If new tariffs are enacted after the bid date but before or during construction, will the awarding authority allow for an equitable adjustment to the contract price?

Finegold Alexander Architects (FAA) who are coordinating the bid process for Westford responded that it will be up to the bidder to use the best information available to formulate a bid, and subsequently to document and defend any post-bid cost increases due to tariffs.

RESPONSE:
The Town is not specifying a cost percentage inclusion or exclusion rule for bid prices that may be subject to change on account of potential tariffs on materials or equipment. All bidders should calculate their bid prices on the basis of the best information available to them at the time of bid submission. If, after award of a contract, there is a question regarding an impact on pricing as a result of adoption or assessment of a tariff, the Town will evaluate the circumstances to determine whether a contract price adjustment is warranted. Bidders should create and save documentation and supporting information (including price quotes, take-off sheets, etc.) for bid prices used at the time of bid submission. Any contract price adjustment will require clear evidence of a post-bid price change, and how, specifically, the material or equipment cost was affected by tariff requirements after submission of the bid.

NOTE: The contract price will be subject to reduction if bid prices include an amount attributable to tariffs that ultimately are not adopted for, or not assessed on, the item(s) in question. The Town reserves the right to require evidence of Contractor’s bid pricing computations and prices actually paid for materials and equipment, for the purpose of ensuring the Town does not pay any inapplicable tariff-based premium. The Contractor shall comply with Town’s information and documentation requests for that purpose.

Not addressed by FAA was how the Town of Westford would respond if tariff-related increases resulted in the total cost exceeding the municipal appropriation for the project.

Potential Problems in Amherst
In Amherst, tariff uncertainty is magnified by four large capital projects in various stages of planning and construction.

The $97.5 million project to build a new Fort River Elementary School does not appear in danger of exceeding its appropriation because it is being subsidized by roughly $49 million from the Massachusetts School Board Authority and funded by voters’ passage of a debt exclusion. Some cost uncertainty was already introduced when the project start was delayed several months while the state Attorney General’s office settled a bid protest by two contractors.  The Town may borrow up to $92.5 million and raise property taxes above Proposition 2 ½ limits to recover any funds needed to service the debt. 

Asked at the March 14 meeting of the Elementary School Building Committee whether steel for the project has already been purchased, OPM Kseniya Slavsky replied yes, but, “nobody’s going to find out anything more, we think, until that steel comes to the [Canadian] Customs Station.”

“We would not be surprised to hear something in a couple of weeks, and we will do our best to manage that situation,” she added.

Cost increases due to tariff impacts and other factors will be borne by Amherst taxpayers.

How economic changes will affect the long-delayed projects to replace the Town’s Central Fire Station and Dept. of Public Works Facility are still to be determined.  Amherst’s One Town, One Plan vision to complete four ambitious capital projects has collided with the reality that public projects are complex, unpredictable, and require buy-in from the residents paying for them.  With attention focused on the new Fort River School project and a troubled renovation-expansion of the Jones Library, the Town has yet to firmly settle on locations for the new fire station and DPW building.

See related: Town Council Hears About Four Ways to Pay for Amherst’s Major Capital Projects

The $46.1 million Jones Library renovation-expansion, which is in the midst of public historic preservation and environmental reviews required to qualify for federal funding, faces tariff questions similar to Westford’s library project, but with some exacerbating factors.

The Town chose to put the project out to bid in September 2024, before the impacts of a Section 106 historic preservation review were known, and before the possibility of a new president introducing tariffs and trade wars was fully considered.

Two successful construction bids were received on October 31, with the lowest coming in $231,000 below the Town’s advertised cost estimate of $36 million.  According to Town Manager Paul Bockelman, the bidders were asked to hold their bids for 60 days.  The bids are now more than four months old, and the Town recently succeeded in having the Massachusetts Board of Library Commissioners, who have already contributed $2.7 million to the project, extend its deadline to sign a construction contract to April 30.

Casting a pall over the library renovation-expansion’s future are tariff-related cost escalation, design changes requested by historic preservation authorities, Massachusetts procurement laws, risk that the Jones Library Capital Campaign cannot raise their share of project costs, growing concern among residents over public education cuts, and increasing skepticism on the Town Council over the project’s chance for success.  While Town Council President Lynn Griesemer and Town Manager Bockelman have been unwavering in their commitment to see the plan through, it is unclear how they will overcome the many hurdles facing the contentious project.

See related: Jones Library Project Faces Hard Decisions