COSTS, COMMODITIES & COVID: IMPACT EVP MATT DALE BREAKS DOWN CONSTRUCTION INDUSTRY HURDLES

The construction industry was no stranger to cost dilemmas in 2021, but can we expect things to get back to normal this year?

IMPACT Executive Vice President Matt Dale analyzed the problems of today and shared his forecast for the future during a panel hosted by Raymond, a full-service architecture and engineering firm.

Matt joined the virtual roundtable with a unique perspective, as someone who is extremely well-versed in the construction of healthcare, K-12, higher education, sports and recreation, and multifamily properties.

Although many were hopeful that last year’s construction woes would normalize in 2022, Matt explained that one particular problem has remained.

“Across the board, I think ‘supply chain’ is still the buzzword,” Matt said, referencing the supply issues that construction – and virtually every other industry – faced in 2021, largely due to the COVID-19 pandemic.

While the construction industry is familiar with the ebbs and flows of market demand, many supplies simply aren’t readily available today – even if you’re willing to pay top dollar for them.

But as critical supplies remain difficult to acquire, the demand for construction jobs has remained constant.

He also noted that design teams are now being more cognizant of specifying domestic materials, or at least doing their own research before specifying. They’re also feeling pressure to expedite their process to get the ball rolling on material lead times.

Of course, materials aren’t the only thing in short supply – there’s also a labor shortage. Getting interested participants to the table is proving challenging according to Matt. In the last six months to a year, companies have been more selective when pursuing work because the demand for their services is so high.

Meanwhile, general contractors are starting to adapt to the current situation, adjusting their contracts in the face of today’s supply chain landscape.

“We’re seeing general contractors modify their contracts and schedules to include language, which encompasses COVID-19, supply chain issues, and other unforeseen circumstances.”

Developers aren’t immune from the struggles faced by their industry colleagues. Although some projects that were tabled during the pandemic were able to be picked up again, most of them weren’t so easy to resume.

“A lot of those deals were abandoned because the land purchase or financing was contingent on the construction budget and the stability to get started with an established cost. It’s not always as simple as dusting off the drawings.”

When it comes to owners dealing with today’s uncertainties, Matt says they need to prepare for worst case scenarios, which can affect both their timelines and budgets.

“We’ve had to remind owners that we’ve never seen anything of this magnitude in our careers,” he said, adding that they should anticipate escalation claims from subcontractors and know how to handle them.

Matt offered insight regarding project schedules, which are being heavily impacted due to the current construction climate. He said that putting a plan in place in the beginning can help keep projects moving forward in the face of delays.

“We’re building critical paths of our schedules, starting with unique long lead materials and working backwards.” He also noted that owners should lock in pricing early and engage with general contractors as much as possible because they’re the ones who are the most knowledgeable about lead times.

When clients are faced with questions about what they should do in these unprecedented times, Matt says that IMPACT is in a position to provide guidance early in the process to conform to any circumstance. By evaluating the market through their lens, they are able to give clients a better understanding of where they stand. In some cases, it may make sense to stay the course and build, in others, a delay may be the only answer.

“We’ve started discussing the benefits and costs of all the options with our clients, and it’s been very beneficial,” he said.

While no one can truly anticipate what lies ahead for the construction industry and its many components, Matt feels optimistic that we can at least expect some level of normalcy moving forward.

“I do think some conditions will normalize, and everyone will learn how to take a more stabilized approach to projects. That doesn’t mean all the inflation will deflate, but many commodities will become a little bit more predictable.”

Matt was joined at the virtual roundtable by industry peers Raymond Ramos (founder & CEO Raymond), Conor Clarke (vice president of OCMI), and David Hamilton (vice president of CPPI). You can view the entire discussion here.

To connect with Matt Dale and/or learn more about how IMPACT can help you evaluate your project, click here.

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