Addressing 2022’s Top Construction Challenges
By Robert Marchione
CPA, Director, RBT CPAs
“It was the best of times. It was the worst of times.” It was as if Charles Dickens was writing about the construction industry in 2022 when he penned these infamous words.
On one hand, the industry is looking at its single biggest cash infusion of all time. With the American Rescue Plan Act and Infrastructure Investment and Jobs Act, many construction projects will be kicking off in 2022. On the other hand, persistent labor shortages, supply chain bottlenecks, skyrocketing materials prices with no expectation of stabilizing anytime soon, fuel cost increases, inflation, and other challenges are plaguing the industry. So, what’s a construction firm to do? Start by focusing on the top one or two challenges.
The 2022 Association of General Contractors (AGC) Survey of providers in the Northeast and nationally shows the pandemic’s top impact on projects to be:
- Costs are higher than anticipated.
- Projects are taking longer than expected.
While those findings are probably no surprise, we hope some research we’ve done introduces you to one or two new ways to address cost and time challenges. It’s important to note that fixes for one challenge – time or cost – in many cases has a positive impact on the other; they are not mutually exclusive. With that in mind, here are some budget and scheduling tips:
- Be smart when developing a budget.
The 2022 AGC survey found 62 percent of respondents were putting higher prices in bids and contracts. So, consider including a 5 percent to 10 percent buffer.
- Be realistic about scheduling.
According to the 2022 AGC survey, 32 percent of respondents in the Northeast are putting longer completion times into their schedules. Create a master schedule, break it down into phases and then into tasks. Remember to include time for everything from paperwork to permits and inspections. Include a start and end date for each task and confirm you’ll have the equipment, materials, and staff to meet timelines. Consider what can occur concurrently and what needs to happen sequentially. Add 10 percent for unexpected issues and delays. Make sure your contract allows for time extension requests in certain circumstances.
- Get to know the details and plan accordingly.
Know your project specs inside and out. Verify property boundaries and determine where anything underground is – pipes, septic, water, gas, electric. Draw a site layout to show where everything will go, including material, equipment, trailer, break areas, employee entrances, etc., so you can identify and fix potential issues before a project gets under way. Make sure insurance is up to date.
- Create a contingency plan.
Expect and plan for the unexpected. Work with your team to identify potential risks and contingencies (i.e., plan for overtime if project is running behind; weather delays may warrant extra equipment and staff). Then, develop a risk management plan.
- Make safety a non-negotiable priority.
Accidents and potential safety hazards can hurt budgets and timelines, not to mention businesses and reputations. Make sure your team and subcontractors know your safety expectations. Review your safety plan. Reinforce its importance daily. Address issues before they escalate. Make sure everyone knows how to escalate an issue or concern.
- Staff up.
Some anticipate the labor shortage may pose even bigger challenges than what’s going on with supply chains and materials. So, focus on staffing and building relationships and backup relationships. Evaluate your benefits and pay. Decide whether it’s time to invest in upskilling. Reach out to community colleges and technical institutes to build a pipeline of potential talent.
- Work as a team.
Make sure you have a full lineup with all positions covered – from supervisors to safety managers, expeditors, and more. Officially kick-off each project. Have your team and subcontractors review, give input, and sign off on plans. Hold weekly team meetings and clarify your expectations about communicating potential delays or risks. Make sure you listen to what your team members have to say.
- Manage your customer.
Investing more time up front walking your customer through the ins and outs of the project can save you time and money later. Before starting a project, get your customer’s sign off on all materials and costs. Also make sure your customer understands how scope changes can impact time and costs. Set a cut-off date for customer changes and stick to it.
- Manage your project every day.
Monitor and track your timeline and budget with daily reports. Pay attention to the details. Watch for red flags.
- Shop smart.
If you’re a small organization competing against big ones, look to level the purchasing field with a group purchasing organization. Consider alternative materials that may also be less labor intensive. (For example, synthetic roofing materials may require less labor and equipment.) If possible, build material reserves.
Use technology. Software can help you streamline and better manage each part of the process, from project planning to payment tracking. Use construction management software for scheduling, organizing and storing documents, and more. Consider the role digital and other technologies can play in saving time and money. Drones, wearable sensors, self-driving vehicles, and more are predicted to have huge impacts on productivity and value.
- On every project, it’s a good idea to consult with your legal and financial advisors to mitigate risks.