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Construction Advisory_Q2 2020

Q4 2022 Summary: Are we in a recession, or aren't we? Will prices come down or continue to rise? Will the materials for my project show up on time or not? How will all of this affect the schedule and budget for my project? Market uncertainty is set to continue for the foreseeable future. With all that project owners cannot control, there remain variables that they can. Here are three examples of new best practices to combat labor, cost, and schedule uncertainties:


 

Addressing Labor Uncertainties

The recent influx of projects in Texas markets makes trade contractors increasingly selective about their work. To help your projects stand out to qualified contractors and hedge labor market shortages, consider pursuing Construction Career Collaborative (C3) designation. The C3 alliance promotes the financial security and robust training necessary for craft workers' advancement. C3-designated projects require workers to be paid fairly and receive OSHA-10 or OSHA-30 certification. By declaring your project C3-designated, trade contractors know you meet higher safety and training standards. C3 designation makes your project more attractive in the short term and facilitates building long-term relationships with qualified trade contractors who trust you to consider their needs on future projects.

 

 

CA_Q4_2022_TMC3The Texas Medical Center is a C3 designated project


Hedging Cost Uncertainties

Labor uncertainty is only one of the challenges facing the construction industry today. Cost uncertainty is set to continue for the foreseeable future. Here are actions to consider:

1. Keep budgets up to date. There can be a long period between a project's concept approval and the start of the preconstruction phase. During this time, a lot can change in the market. Periodically update the project's budget to consider any changes. Pricing changes are happening rapidly, and some resulting swings are relatively large. Work with your 3rd party cost consultants and trusted construction manager partners to stay up to date. Staying abreast of the budget will allow you to make early value decisions for your project and avoid budget surprises.

2. Maintain competition. An intentional owner-led commitment to product-to-product and vendor-to-vendor options is essential in maintaining competitive trade contractor pricing on your project. Trade contractors only control a portion of their bid; manufacturers and suppliers dictate the rest. Best practice dictates designing the project with at least three products and vendors are acceptable within the specifications to bid on the project. Following best practices breaks the financial grip of a single entity dictating the price you pay for their product.

3. Have a game plan. Supply chain disruptions and the resulting material lead times are affecting projects like never before. It is essential to understand early on the long lead time for your project's materials and equipment and utilize creative procurement tactics to mitigate potential schedule impacts. Time is quite literally money. Successfully achieving project goals may require innovative procurement, buyout, and construction sequencing approaches.

  • Consider early procurement packages or multiple GMPs to allow for procuring critical equipment or materials in advance of the completion of the project design. Specialty product lead times can wreak havoc on an interior renovation project schedule due to its quick nature. 
  • Leverage your relationships to gain the lead time information you need to maintain your project schedule expectations.
  • Select a construction manager with the expertise to provide detailed input during preconstruction. Your construction manager must coordinate early procurement packages and traditional bid packages to manage these procurement risks.

Live Oak

Texas State University, Live Oak Studios Building project site is located in an area known to contain early Native American artifacts in the soil layers. Texas Historical Commission and the Texas State Archeological Department were involved in all excavation activities.


How to Stay Ahead of Project Life Cycle Duration

With current market conditions, we often focus on time associated with material procurement and industry-wide delays experienced. As a project owner, it is essential to look beyond time impacts during the construction phase and explore potential inefficiencies in the entire project life cycle. A few examples of this include:

1. Selecting and onboarding A/E and CM partners early on: Reevaluate your procurement processes when onboarding an A/E and CM team to remove excessive time. To minimize the risk of escalation, plan to have your project teams on board earlier to collaborate on the project's complete design and buyout. Allot adequate time for the selection and contracting processes as it relates to establishing overall schedule goals for the project.

2. Synchronizing A/E and CM preconstruction efforts: Program development without market condition feedback may result in over-budget programs, requiring valuable time spent on value evaluation efforts to get the project back on budget. Onboarding the CM after the program is underway or already completed hinders in budget efforts. Instead, leverage the synergy of early coordination between all project team members.

With each passing day, it is best to minimize your project's exposure to escalation costs. Expanding your focus to include a holistic view of the entire project time cycle may highlight opportunities for time savings.

4Q2022 Article Three Graphic_FINAL

To view a full-sized version of the chart, click here.

 

About Vaughn Construction

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).