Building Better Practices: Construction Costs and Lead Times

The term “long lead times” refers to anything that takes significant time to arrive for the builder’s use. This could mean a contractor, building material, custom-made item, etc. During the beginning of the COVID-19 pandemic, builders experienced never-before-seen lead times due to supply-chain disruption. What is considered a long lead time depends on the estimated length of the project. Some believe that if a project is only slated for six months, a long lead time will refer to a one-month waiting period.

In addition, supply chain issues have led to price escalations. This is a clause in a contract that permits a contractor to adjust fees to account for the costs of materials or labor. This can be a tricky situation for contractors and clients. The clause usually allows a client to receive more bids from contractors. However, clients also understand that the prices submitted by contractors aren’t set in stone.

How To Handle Cost Escalation

In construction, the price of materials can change at any moment. It’s important to have strategies when dealing with cost escalation. 

  1. Material Cost – First you need to figure out the cost of your materials/services and identify your fundamental needs. This is a step you can take during pricing negotiations Some companies will also include an escalation clause in their contract. Keep in mind that this could be off-putting to clients/owners depending on the terms.
  1. Analysis – Complete a situational analysis by looking at the market and projections. Try to find information about specific items/services that you believe could cause issues or may likely increase in price. These are items you can include in your escalation clause.
  1. Consult – Consider getting outside help. This can solve your issues by reducing costs and guiding you on how to manage cost escalations effectively. Some support can be in the form of giving you information on where to source hard-to-get or expensive items at a good price.

How To Best Prevent Long Lead Times

When dealing with long lead times, it can feel at times that things are out of your control. However, you can implement certain practices that could lessen the impact of long lead times on your business.

  1. Communicate – Talk with your suppliers and let them know about your current timelines. You might also share with them any upcoming projects that you are bidding on to help suppliers prepare for materials you might need. Owners or clients should consider purchasing items they’ll need to reduce the chances of long lead times, but it could also help avoid escalation costs. This proactive step could mean your construction project is completed on schedule and within the agreed-upon budget.
  1. Shop Local – Using nearby suppliers could lessen the time it takes for materials or services to arrive. Sometimes shopping locally could mean paying more for materials, but it could save you time in the long run. Think about which option makes the most sense for your situation.
  1. Set Terms – When buying items from a supplier, the supplier will list the terms and conditions for the purchase. This will include delivery information. Make sure you read this portion carefully. You need to ensure that your items arrive on time so your project is not slowed down.

Poli Construction: Trust Us With Your Next Project

Poli Construction is staffed with experienced construction professionals. We work to maintain the agreed-upon project schedule and budget with our clients. Our team works to pre-purchase equipment during the design phase so there is no escalation of costs and long lead times that could impact the project. Trust Poli Construction with your next project. Our services include commercial construction, build-outs, renovations, and much more. Contact us by clicking here.

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