March 7, 2022

Strategize To Manage Materials and Labor Costs

The COVID-19 pandemic’s ongoing impact on supply chains and labor have made managing project costs increasingly difficult for construction companies. Over the past two years, we’ve seen materials costs skyrocket and the availability of supplies and skilled labor plummet.

In today’s climate, getting supplies and people to jobsites when they’re needed calls for more planning. Here are some strategies to consider.

Prepare for supply delays

Manufacturing delays can’t always be predicted. Whether it’s a new variant of the virus or a natural disaster, production can stop on a dime in certain plants or regions.

The same goes for shipping. In 2021, we saw container ships get stuck in canals and blocked from entering ports. Be proactive and flexible when considering different materials, systems or manufacturers, so you can pivot if a supplier fails to deliver.

Build a catalog of vetted providers you can turn to as emergency supply sources. The first step is to evaluate vendors you already work with — some may have expanded their offerings to include products and services you’re not aware of. Ensure your list includes local suppliers.

Build contingencies into contracts

When bidding a project, include a backup plan of two or more alternative supply sources. When negotiating the contract, ask for a deposit to buy and store materials before construction begins. Procuring materials in advance helps mitigate risks of escalating prices and poor availability when work starts.

Also, determine whether the owner would agree to a price escalation provision in the contract. It would allow you to adjust the contract price to reflect actual costs if market prices increase over the course of the project.

Review crew structures

Having the right people in the right positions can lessen the strain on supplies and reduce waste. For example, if a team lead is excellent at electrical work but is instead overseeing a lesser-skilled group, your company is wasting labor resources and payroll. Hold regular meetings with project managers to stay apprised of employees’ evolving skill sets.

To reduce downtime, consider cross-training workers to handle multiple aspects of a job. For instance, if crew members are skilled in both framing and concrete work, they can move to one crew or the other while waiting on a lumber truck or a load of concrete.

Retain skilled labor

With the skilled labor shortage exacerbated by the pandemic, and “the Great Resignation” hitting businesses of all kinds, it’s just as important to keep experienced workers as it is to recruit new ones. Make sure you’re offering a competitive salary and benefits package.

Provide training opportunities to help employees grow their skills and map a career path. Set up a mentoring program to help transfer knowledge from seasoned employees to newer hires. Keep lines of communication open between the job sites and the executive suite so employees feel heard and connected. Having a tech-savvy company culture can also help attract and retain younger workers.

Keep hope alive

Although there remains hope that we’ll eventually see the economy and labor market stabilize this year, it may take longer than expected for that to happen. Rely on your leadership team and professional advisors to strategize your way through ongoing materials and labor challenges.

The content featured in this article originates from our bi-monthly Contractor Newsletter. Subscribe below and stay in the know.