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