After two tumultuous years and an especially challenging period this spring, the construction supply chain appears — finally — to be settling into some more regular routines. For developers and builders, that shift is providing a little more stability but very little relief.
The good news from the supply chain is that lead times on some critical path items have started to improve. For example, steel joists and girders, which were taking 14 months to acquire, are now being delivered in about eight months, said Drew Enstice, Director of Business Development for ARCO Design/Build Industrial. In addition, the number and severity of price hikes and lead time increases are diminishing.
Supply chain improvements, however, are limited. While some lead times have improved, most prices have not declined (steel prices jumped 400 percent from the beginning of 2021 to early 2022) and some costs are still rising.
“Cost escalation is continuing but it is continuing with fewer products and commodities, and the rate of increase has lessened,” said Bill Hahner, Preconstruction Executive at DPR.
Some basic items still require extremely long time periods to obtain. Most manufacturers are so busy or so short on basic supplies that expedited shipments are not an option. And the supply chain still experiences the occasional, surprising hiccup.
“This doesn’t mean that things are getting better at the moment. They’re just not getting worse,” Hahner said. “There are some unprecedented market conditions. I have been doing this for 27 years and I certainly haven’t seen anything like this.”
One of the biggest challenges is roofing materials. In a two-month period in 2021, the lead time for roof insulation jumped from three months to 12 months.
“Roofing has been a major issue since March 2021 and it has gotten steadily worse,” Enstice said. “The timeline has leveled off a little but roofing is still 12 to 14 months out. Rubber membrane, insulation and roofing fasteners are all hard to come by.”
Similarly, lead times for generators, switch gear, air handlers, and other electric and mechanical equipment have expanded to over one year. Deliveries of non-critical-path items — such as wooden doors and laboratory casework — have gotten delayed to the point that they now drive construction schedules.
“Dock equipment has a really tough lead time right now,” Enstice said. “There are many different brands and different types within each brand. Depending on exactly what you need, the lead time and the price can fluctuate greatly.”
In the midst of the ongoing delays, heightened costs and general turmoil, developers and their project teams need to adopt some different practices to avoid critical setbacks or cost overruns.
First, bring contractors onboard especially early. A well-informed contractor will be able to lay out current challenges and possible risks in the supply chain, develop a plan to procure all items on a workable timeframe and “get the client set up in the queue for long lead-time items so that you are not scrambling for materials or equipment on the back end of the project,” Enstice said.
Second, be prepared to deal with price fluctuations, often by building more allowances into contracts and acting quickly to lock in prices.
“Sometimes the prices in proposals from our trade partners are only good for seven days,” Hahner said. “We will flag that to an owner. The sooner an owner can give us notice to proceed, the sooner we can procure from trade contractors and they can procure from their suppliers and get the costs locked in.”
Finally, developers and project teams need to devote heightened effort to tracking all aspects of the supply chain and be prepared to develop and execute creative solutions to delivery delays and price shifts.
“Bad news never gets better with age. The sooner we can learn about issues — like a manufacturer who is having problems or some failure in a supply chain — the sooner we can develop options for the owner and design team and determine what is the most palatable solution,” Hahner said.
Those solutions, he said, could involve sourcing alternate materials, adjusting schedules, approving more overtime, completing items out of sequence, installing a temporary roof (while waiting for a roofing shipment) or completing more work using only temporary power – “whatever keeps the job moving forward and keeps people as productive as possible,” Hahner said.
Mastering all three practices, he added, could serve companies well in the long term because “I don’t know if we are ever going to see things come back to where they were pre-Covid, unfortunately.”