Managing Food Facility Project Costs

Photo credit:  Nick Grier Photography

Whether building a greenfield project or renovating an existing food facility, construction costs can skyrocket. While some extra expenses can be completely out of a business’ control, there are many aspects of a design-build project to be aware of that can save real dollars and cents.       

“Every project has its challenges,” says John Hanley, project manager for ESI Group USA. “From schedule, to budget, to qualified subcontractors – the goal is finding a balance between all of these.”

For example, one project could have a large budget with contingency, but the contractors available are limited. In another project, time is no object, but the budget? Well, let’s just say it’s tight.

The first step is for companies to determine what their goals are and what they are willing to adjust if saving on construction costs is the number one priority.

“Being open to changing the design to save on cost is always an option,” says Hanley. “Or taking the design-build approach can streamline the construction while still maintaining a high-quality design.”

He says the best policy is for full transparency from all of those working on the project, which includes involving the subcontractors.  

“We gain the respect from the subcontractors because without them we couldn’t do our job,” he says.

From the design-builder standpoint, identifying project scope early on is crucial and then using management tools to aid in the process of estimating costs from design to actual construction is paramount inefficient project execution.

However, keeping tabs on all the components of a construction project can be a bit of a juggling act with many moving parts. Moreover, some of the costs associated with current food facility construction is a product of the times and not easily avoidable. The industry has been weathering the impact of tariffs coupled with a strong economy causing higher demand and leading to low inventories, thus resulting in extremely volatile material costs for the construction industry.

“The means to control costs are limited and vary depending on geographic region,” says Tim Nguyen regional vice president for ESI Group USA. “Pre-purchasing in bulk quantities is possible; however, due to the customization of the food industry this option is not always feasible.”

For companies trying to get a better handle on these costs, the best approach is to make comprehensive business decisions upfront, he says. This allows design-builders to quickly determine the preliminary designs and enables them to make advanced purchases of materials for the best price possible and to ensure delivery is on time.

Another sticking point is the labor component of a construction project. As data provided by the Associated General Contractors organization shows (see Quick Facts), the lack of skilled workers throughout the country is at a tipping point. A deficit of next-generation tradesman to fill the industry’s needs is driving up the cost of labor. Additionally, the labor shortage is even affecting transportation as a shortage of truck drivers, due to a number of factors, is increasing trucking costs.

One failsafe method to better control labor costs is to effectively manage the people that are involved with the project.  In this way, companies should keep in mind that they are not necessarily hiring companies to just construct buildings; but they are seeking firms that can skillfully manage people and teams to execute their deliverables. 

Quick Facts:

  • 80 percent of construction firms report they are having a hard time filling construction jobs.
  • Construction employment grew in 218 metro areas, or 61 percent, out of a total 358 metro areas between March 2018 and March 2019.
  • Construction spending totaled $1.282 trillion in March, down 0.9 percent from February and down 0.8 percent compared to March 2018. 

Metro areas that added the most construction jobs during the last year:

  • The Phoenix-Mesa-Scottsdale, Ariz. at 11,900 jobs, 10 percent
  • Atlanta-Sandy Springs-Roswell, Ga. at 9,700 jobs, 8 percent
  • Dallas-Plano-Irving, Texas at 7,600 jobs, 5 percent

Metro areas with the largest percentage gain of added construction jobs:

  • Monroe, Mich. at 28 percent, 500 jobs
  • St. Cloud, Minn. at 19 percent, 1,000 jobs
  • Chico, Calif. at 18 percent, 700 jobs

Source: All data from the Associated General Contractors.

Client Testimonial

“Having worked in the Engineering/Architecture industry for ten years, my expectations for ESI’s performance on our project was high.”  “ESI has surpassed them by managing a highly complex project in a very organized professional manner while keeping us on budget and schedule.”  “Very well done!”

Michael Pahud, Caito Foods


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