3 Ways to Manage D/B Projects Amid Shortages

Container ship
Container ship in Port Klang. Malaysia

Manage Projects with Rising costs. Transportation backlogs. Labor shortages. Time delays. Supply chain troubles. All of which are plaguing the design/build industry, and ultimately trickle down to food facility owners looking to build or expand facilities.

“Product availability, lead times on raw materials and a large interruption in supply chain logistics has created the perfect storm for project delays,” says Jason Weber, project manager, ESI Group USA. “Owners have tasked us with being creative in this unprecedented situation we are all in.”

Weber points to three critical ways in which owners and design/builders can work together to meet that challenge.

 1. Circumvent Delivery Windows

Material availability is impacting project timelines. For example, expect to wait up to nine months for steel joists and metal decking; roofing materials and wall panels about six months. “The entire industry has been affected by these delays, which has pushed the start dates of these projects out those six to nine months just based on material availability,” says Weber.

Weber and his team have found ways to reduce those delivery windows. One is to buy out an entire project early and store materials while waiting to begin construction. Additionally, they have come up with alternate steel designs, when possible, with structural shapes (beams, channels, purlins), to circumvent the nine-month lead time for steel joists. Weber says this could reduce that delivery window by two to three months.

Another strategy he is deploying to reduce time delays is to lock in subcontractors early. “The objective here is to get submittal review going ASAP to ensure we aren’t waiting on long lead items,” he explains.

2. Candid Cost Conversations

These material delays undoubtedly shake up project pricing. In fact, Weber says one hundred percent of ESI’s projects are coming in over what customers budgeted for back in late 2020 or early 2021.

“The biggest increases have been on anything containing steel, insulation, and piping, whether plastic or metal,” he says. “Some steel shapes are up over 100% year over year and most commodities have risen 25%-35% year to date, with vendors advising us of more increases coming early next year. This certainly has a large impact on the overall budget of a project and whether customers can get enough funding to offset these escalating costs.”

Weber says: “Our projects are typically designed without a lot of bells and whistles to keep costs down already, so there are not a lot of items owners are interested in cutting for the overall quality of construction to offset rising prices.”

Design/builders and owners need to have open conversations about pricing expectations. “This situation is really out of the builder’s control,” says Weber. But it helps when we can show owners documentation from vendors showing price increases and shipping delays.”

But he points out that there is a breakeven point when considering schedule impact versus increased cost. “We have had a few customers willing to pay the additional structural steel costs to get construction started two to three months earlier and save on the overall project duration. But there is a point of diminishing returns with this, depending particularly on the size and scope of the project.”

3. Start Early

If you are even considering a project in the near future, Weber recommends completing these tasks as early as possible:

  • Begin construction documents while estimated costs are being obtained.
  • Get geotechnical exploration work completed early, even if the project won’t start until the following year.
  • Plan contingencies into capital expenditure requests for escalating costs.
  • Award subcontracts early to get submittal, and shop drawing review completed right away to prevent vendor procurement holdups on long lead items.

“Most importantly, be patient with the contractor and understand that this is a global issue and there are very few things that can be done to offset the effects of this unprecedented situation.,” he says.

Quick Facts

Steel prices are up 200% since March 2020

71% of contractors face at least one material shortage

83% of contractors are experiencing project delays

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