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Moving Past COVID-19 Shock: Three Lasting Impacts on the Construction Industry

The pandemic can have long-term effects for not only your employees but your entire business model.
By Samuel Giffin
June 6, 2023
Topics
Markets

For participants in the construction industry, the 2020-2022 period can best be described as a roller-coaster ride in which no one seemed to know where the tracks were leading. The unprecedented economic shutdown caused by the COVID-19 pandemic was soon replaced by an extraordinary economic recovery. This V-shaped level of commercial activity triggered record levels of employment and growth, but also led to massive supply-chain disruptions and a huge spike in inflation.

Between project delays, cost volatility, resource constraints and supply-chain hiccups, project owners and construction professionals have gritted their teeth and held on tight. The good news is that costs are stabilizing or even regressing in many categories. There are a number of indicators that the industry has entered a post-COVID period. Materials costs remain high but are showing signs of regression to pre-pandemic stability, while labor is still tight, but major projects are now underway with funding and the proper workforce in place.

But it’s not all a bed of roses for the construction industry. While costs may be stabilizing, lasting impacts have shaken loose core components of the once-balanced workflow. This disruption is forcing project owners and construction professionals to be even more intentional when approaching and executing construction work. Here are three important areas of impact that project owners and construction professionals will need to manage this year.

NEW CHALLENGES WITH PROJECT PLANNING, SCOPING AND BUDGETING

The success or failure of a project is arguably determined before work begins. The planning phase is foundational to project outcomes, and it is therefore critical that plans be accurate, detailed and thorough. Yet in the post-pandemic environment, several factors are creating new challenges when planning, scoping and budgeting construction projects:

Long lead times and availability of materials: Lead times can have a huge impact on the pace of construction and the overall timeline of a project. Planning ahead will allow for better timing of purchase orders, proper consideration of possible materials substitutions and strategic phasing of construction work. Lead times can push projects out six to nine months in the worst cases. Accelerating the purchase of key, long-lead items (such as mechanical systems, electrical components or roof insulation) can ensure these materials are onsite and allow the project team to stay ahead of looming price increases. To avoid stop/starts and continual mobilizations, owners are often making sure to have the materials on hand prior to having contractors onsite. The contractors are then able to complete work seamlessly and with fewer delays.

Labor/contractor availability: Even if the materials are on the jobsite, work does not move forward without scheduled skilled labor. The construction industry is suffering an unfortunate shortage of skilled labor, which delays projects and can significantly impact the overall timeline and budget. At worst, the scarcity of skilled labor can even result in the cancellation of less critical projects. Project owners should be especially aware of seasonality for certain types of projects, like concrete asphalt work, as well as the need to compete for project timelines in the ideal months for weather conditions or facilities traffic. Low availability and high demand have caused an increase in labor rates that can be higher than prevailing rates in some cases and should be considered when budgeting for projects.

Meeting project and budgeting deadlines: If state or federal dollars are allocated to specific projects or budgets, those funds must be spent by an associated date. Project owners should set clear but flexible deadlines and go into projects with these new procurement and execution challenges in mind.

Not every project can be a priority. Prioritizing projects is a critical element of successfully managing these additional challenges in the planning, scoping and budgeting phase. The most critical projects are always the ones that pose a safety risk or health concern. These emergency projects should be top priority.

PROJECT PROCUREMENT AND EXECUTION

There are many methods for procuring construction services, and each one was designed for specific purposes and is best utilized for certain types of projects. According to a recent study conducted by Gordian and NIGP: The Institute for Public Procurement, job order contracting (JOC) reduces procurement time significantly by using one competitively awarded contract for a variety of projects. Because the JOC method is designed to complete a succession of pre-defined construction tasks, it is perfect for repairs, renovations and maintenance work, especially when short timelines or fixed budgets are involved. JOC, however, isn’t typically an ideal choice for new construction. Knowing these nuances and best practices for procuring construction services can greatly benefit project owners and help them complete successful projects on time and on budget.

Remember that contractors are in high demand, so when it comes to project execution, they need to move swiftly. This requires a lot of coordination and communication between stakeholders. The idea of showing up and completing the project as quickly as possible is important for meeting deadlines and turning a profit while still delivering fair costs and quality work to the owner.

GRAPPLING WITH ONGOING MAINTENANCE, OPERATIONS AND REPAIRS

Deferred maintenance is a huge issue across the nation. Now that there is funding available to better maintain and tackle the backlog of work, the added dimension of scheduling conflicts for both labor and materials is complicating true success and jeopardizing facility health. Project prioritization and timing needs to be scrutinized to ensure winning outcomes for project owners and communities.

Strategic project prioritization and communication are the most critical skills to tackling the lingering effects of the pandemic on the construction industry. Project owners and construction professionals know the dangers of scope creep, budget overruns and deferred maintenance, and the importance of risk mitigation. Owners and contractors who are utilizing reliable partners, best practices, accurate data and insights and problem-solving skills will be best equipped to manage the lingering challenges facing the construction industry today.

by Samuel Giffin

Written by Samuel Giffin – Director of Data Operations at Gordian

Contact Info: s.giffin@gordian.com

Samuel Giffin is responsible for leading and developing engineering, research and professional services teams in providing data to power Gordian's construction estimating and procurement solutions.

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