Mitigating Market Volatility During Construction Through Collaborative Delivery Methods

Across the board, supply chain issues and rising costs are impacting engineering and construction projects. The costs of construction materials have elevated over the past year due to growing demand and major disruptions to production fueled by the pandemic. These disruptions are responsible for construction material shortages much like the auto industry is facing with microchip shortages. And with more engineering and construction projects ramping up as the pandemic is winding down, the demand is increasing but the availability of materials can’t keep up. Materials that once took six weeks to have delivered on site can now take over a year. Some suppliers have even closed their books for the remainder of this year because of the strained availability of their materials. Suppliers are also hesitant to guarantee prices for extended periods because of the volatility in price and strained availability for the raw materials. Quotes previously honored for up to 90 days are now only good for as little as 24 hours.

However, there are a few things an owner can do both early in their project and when it’s nearing construction that will help save costs. Some of these include sequencing bid packages to stagger delivery, early material procurement, contingency planning, and identifying potential funding options to cover the added costs to name a few.

But the best-value alternative to mitigating market volatility and saving costs is using a collaborative delivery method. There are three very significant ways that collaborative delivery can mitigate the volatility, save costs, and keep projects on schedule.

1.     Early engagement with the contractor optimizes delivery and coordination of complex projects.

Bringing in a contractor early can gain clients a holistic view of their project. The contractor can help mitigate some of the costs associated with preconstruction services and provide cost certainty earlier in the project. They can also provide constructability evaluations to verify design. With all parties working together (client, engineer, contractor), design and implementation can be optimized and streamlined.

2.     Risk can be transferred from the client to the party that’s best suited to take it on.

With design-build delivery, design and schedule risks can be placed on the design-builder, as well as performance requirements associated with the final product. Using a CMAR approach can also reduce owner risk through early contractor involvement. For this latter type of delivery, the owner retains the design risk, creating a shared responsibility of risk between the owner and CMAR, most likely a construction contractor.

3.     Contractors can assist with procurement to identify opportunities for flexibility and contingency.

By assisting with procurement early on, contractors can help owners break out work and materials to stagger project delivery. Using their knowledge of and connections within the market, they can leverage buying power for materials to gain the owner the best prices within a volatile market. Additionally, contractors can work with owners to clearly define scope early in design and develop a guaranteed maximum price.

We’ve all seen the benefits that collaborative delivery can bring to a project, but it’s been more apparent with the current market challenges. There’s no way to predict when the market will become more stable, but collaborative delivery is something to consider to mitigate the market’s impact on your project.

For more on this topic, watch the webinar with Garver’s Kyle Kruger and Archer Western’s David Nine discussing market disruptions and mitigation strategies. Password: G@rverM@rketMitig@tion

About Kyle M. Kruger, PE, Water Implementation Leader, Garver

Kyle Kruger is Garver’s water implementation leader and currently serves as the chair of the WDBC advisor group. He has worked on a wide array of water and wastewater projects, providing both design and construction oversight. Over his career, Kyle has designed numerous water and wastewater process projects and developed extensive experience with construction observation and administration. His valuable knowledge of working and coordinating directly with contractors has enabled him to take on the stresses of project construction, allowing clients to rest assured that he is taking on the day-to-day concerns. Additionally, Kyle has advised numerous clients on how to lower construction costs, create competitive bidding on contracts and materials, and sequence projects to fit within clients’ budgets and address immediate needs with flexibility to address future requirements/growth.

About Jana Bendinelli, Senior Strategic Writer - Water Marketing Team, Garver

“Make the words matter.” This is the phrase that drives Jana Bendinelli, who serves as a senior strategic writer for Garver’s water marketing team. Jana is involved in messaging throughout all phases of the client development process. She believes effective content provides a better understanding of the engineering world to our audience. Jana employs a conversational writing style to create engaging content. She strives to tell her team’s story in a way that holds the reader’s attention and makes them remember who we are and why we love what we do. Jana has 10 years of experience in the A/E/C industry. Her success is rooted in clear, concise content, open team communication, and innovative development strategies. Jana creates customized content for proposals, presentations, and other marketing efforts, delivering winning, client-focused messaging.
Topics: Collaborative Delivery, Garver.