Should the GC or the framer buy lumber on multifamily jobs? Pros and cons

The Madison's Lumber Prices Index stood at $449 per thousand board feet for the week ending Nov. 6, down $10 from the week before and $50, or 10%, from a month earlier. Mill prices take time to reach jobsites. The National Association of Home Builders says builders may wait anywhere from several weeks to two months or so before a drop shows up in their prices, and that buying power grows with company size, which affects how fast lower prices pass through.

Leaving lumber in the framer's contract keeps takeoff errors, waste, shortages and reorders with the crew that cuts the wood. The risk is the framer's balance sheet. A 2017 commentary by Rose Hall for the International Risk Management Institute (IRMI) says wood-frame subcontractors tend to be smaller and less capitalized, which makes them a higher default risk, and recommends prequalification, bonding and joint checks to lumber suppliers. A joint check names both the framer and the yard, so the supplier gets paid out of the framer's draw.

Buying direct gives the GC control over price, timing and supplier, and lets it lock in a package while the market is soft. It also moves the framer's old risks onto the GC: storage and moisture protection on site, which IRMI says wood-frame jobs need a plan for, and any gap between ordered and installed quantities. In a briefing on owner-purchased materials, the Minneapolis law firm Fabyanske, Westra, Hart & Thomson warns that the buyer can end up caught between a vendor who blames the installation and the contractor who did it.

Sales tax depends on the state and the contract. Indiana's Department of Revenue, for example, treats a contractor on a lump-sum contract as the consumer of its materials, so it pays tax when it buys, while a contractor on a time-and-material contract buys for resale and charges tax on the material line. Contractors can buy exempt for owners who could buy exempt themselves, such as nonprofits and government agencies. Moving the purchase from framer to GC can change who owes the tax and when.