Steel Up 27.6%, Diesel Doubled: Re-Forecast Your Jobs Now

By Douglas Kohn, MBA, CPA

On October 15, the Associated General Contractors of America reported that the producer price index for inputs to new nonresidential construction rose 11.9% from September 2025 to September 2026, the most in four years. Diesel fuel more than doubled, up 115.2%. Steel mill products rose 27.6%, aluminum mill shapes 25.2%, and copper and brass mill shapes 30.0%. Truck freight was up 19.3%.

The part that should worry owners most is not the price list. AGC said firms "appear to be absorbing most of the cost increases" because soft demand outside data centers makes it hard to raise bids. Contractors also report that steel shape producers say their order books are full through the spring of 2027, and some have been told they will receive only a small fraction of the beams they ordered.

In plain terms: the jobs you bid last year at last year's prices are being built at this year's prices, on a slower schedule. That shows up in the books whether or not anyone updates them.

Why this is a CFO problem, not just a purchasing problem

When input costs move this fast, the estimate behind every open contract goes stale. If you recognize revenue over time using a cost-to-cost measure of progress, a stale estimate-to-complete does two kinds of damage. It overstates percent complete and revenue on jobs where remaining costs have climbed, and it hides losses until the job is nearly finished, which is the worst time for a lender or bonding company to find them.

Here is what a controller or fractional CFO should be doing at this month's close.

1. Re-price estimate-to-complete on every open job. Do not just roll forward last quarter's budget. Pull open purchase orders, uncommitted material quantities, and fuel-heavy cost codes (equipment, hauling, paving) and re-price the uncommitted portion at current quotes. Document the source of each new price so your CPA can tie it out.

2. Book anticipated losses in full, now. Under the long-standing construction guidance retained in ASC 605-35, when the current estimate shows a contract will lose money, the entire expected loss is recognized in the period it becomes evident, not spread over the remaining work. A job that was bid at a thin margin can flip to a loss on the steel package alone. That loss provision belongs in this month's statements.

3. Treat escalation clauses as variable consideration, carefully. If your contracts include material price escalation language, the extra billing you expect to collect is variable consideration under ASC 606. You can include it in the transaction price only to the extent it is probable that a significant revenue reversal will not occur. An escalation claim the owner is disputing is not the same as an approved change order. Keep a separate schedule of pending escalation and change order claims, with status, so they don't quietly inflate margin.

4. Watch uninstalled materials and supplier deposits. With steel allocations tight, many contractors are paying deposits or taking early delivery to hold their place in line. Deposits are prepaid assets, not job cost. Materials delivered but not yet installed may need to be excluded from your cost-to-cost progress measure, or recognized at zero margin, so they don't overstate progress. Lead-time delays also push revenue into later periods; update your cash forecast and your bonding capacity math accordingly.

5. Update internal equipment and freight rates. If you charge company-owned equipment to jobs at internal rates, a doubling in diesel means those rates are understating true job cost. Re-set them, and re-check any freight assumptions baked into material budgets.

Where AI actually helps, and where it doesn't

This is exactly the kind of high-volume, repetitive work AI tools are getting good at: matching vendor invoices to purchase orders, flagging cost codes running over budget, and re-pricing open commitments against new quotes. The adoption numbers say most contractors aren't there yet. Bluebeam's report released October 13 found that only 28% of AEC organizations have moved AI into production, though 40% of those running it in production report savings above $500,000 and 64% report greater cost predictability.

The governance gap is the warning sign. BRG's October 13 research on AI in construction found that liability for errors in AI-generated work was the top risk concern (43%), yet only 34% of executives say their policies address accuracy and reliability. A model that re-prices your commitments is useful. A model that books a loss provision, or decides an escalation claim is collectible, without a human signing off is a restatement waiting to happen. Use AI to surface the variances; have a controller own the judgments and the journal entries.

Why you need a fractional CFO for this

Most mid-sized contractors and developers don't have a full-time CFO, and their bookkeeper isn't positioned to challenge a project manager's estimate or call a job a loss. A fractional CFO does exactly that: runs a disciplined monthly re-forecast, books loss provisions and claims under the right standards, keeps the escalation schedule honest, and translates all of it into the cash and covenant picture your lender and surety will ask about.

Ultramar Financial provides fractional CFO and controller support for real estate and construction companies. For South Florida businesses and nonprofits, our sister firm SoFla Prime Consulting offers fractional CFO, controller, and accounting services. If your estimates haven't been re-priced since the spring, now is the time. Learn more at https://www.ultramarrealestate.com.

Sources

Associated General Contractors of America, "Construction Input Costs Rise 11.9% From September 2025 To September 2026..." (Oct. 15, 2026): https://www.agc.org/news/2026/10/15/construction-input-costs-rise-119-september-2025-september-2026-price-increases-spread-fuel-metals

Bluebeam, "Bluebeam Report Brings Construction's AI Paradox to Light..." (Oct. 13, 2026): https://press.bluebeam.com/2026/10/bluebeam-report-brings-constructions-ai-paradox-to-light-firms-running-ai-in-production-report-real-savings-but-only-28-have-gotten-that-far/

BRG, "Construction Firms Are Investing Millions in AI—But It Is Not Reducing Headcount, and ROI Remains Unclear" (Oct. 13, 2026): https://www.thinkbrg.com/news/construction-firms-are-investing-millions-in-ai-but-new-brg-research-shows-it-is-not-reducing-headcount-and-roi-remains-unclear/