Q2 2022 Summary: As the industry looks at ways to navigate continually changing market conditions, it is necessary to plan a mitigation strategy for the temporary issues as well as the permanent effects brought on by the pandemic, national and global events.
As you have likely noticed, supply chains continue to experience dramatic impacts from the coronavirus pandemic, coupled with the effects of natural disasters and the war in Ukraine. Factory shutdowns have delayed production for a multitude of construction materials and equipment, while delays at major ports have snarled typical shipping logistics. Fuel prices are way up, and some raw materials are in short supply. In all cases, the result is higher prices.While we believe some of this material escalation is short-lived, another important component may not be receiving sufficient attention and is likely a more permanent change. Labor escalation is also occurring as contractors are competing for qualified and competent craft workers. These wage increases are largely here to stay, and it is important to realize that the idea of prices returning to pre-pandemic levels is likely not a reality. Adjusting expectations to fit this new normal is helpful in making informed decisions about how and when to deploy capital for projects. As always, your trusted contractor partner is a valuable resource in evaluating current market conditions and future projections to aid in decision-making.
City permitting woes continue to affect all aspects of construction. Commercial permits for new construction, renovations, and utility tie-ins are taking a considerably longer time on average to go through City and utility provider departmental review for AHJ approval. See the table below showing average lead times across the larger Texas markets:
*Site development permit lead times can take up to 12 months in some markets. In saturated markets, utility provider coordination and approval may substantiate longer processing times.
The issue seems to have started with the coronavirus pandemic and is now being impacted by staffing shortages and employee turnover. Most projects are requiring multiple re-submissions, with each iteration having to go back through all departments.What can you do? Submit your plans as early as possible and allow adequate time in your schedule to accommodate the current processing times. In addition, procurement of major equipment and coordination with your project’s utility providers can overlap the City permitting timeframe. This will ensure your project does not experience additional delays and gets off to a strong start.
Supply chain impact is a new reality that every Owner, Design Team, and Contractor must evaluate on their projects. How firms mitigate the effect of long lead items is becoming an increasingly crucial process during preconstruction. We have incorporated some of the following examples on recent projects and found them useful in helping to keep schedules on track:
We would love to hear about any other supply chain issues you may be experiencing. We likely have a lesson learned or another tool in our belt that we would be happy to share.Click here to read more about how to maximize the value of your Job Order Contract.
Concrete structure progress on the Prairie View A&M University, Engineering Classroom and Research Building project.
Vaughn Construction is a Texas-based construction company that specializes in new construction, renovations and additions to civic, healthcare, education and research facilities. The privately-held company has offices in Austin, Bryan/College Station, Dallas/Fort Worth, El Paso, Houston, Lubbock, San Antonio, and the Texas Medical Center (Houston).