As we slowly overcome the anxiety and fatigue of supply chain challenges within the water infrastructure space over the last five years, we can now tack on another layer of uncertainty as we wrestle with a new administration’s approach to rebalancing fair trade through a series of new targeted tariffs. It seems that constant volatility in this industry has become the “new normal,” a term we all collectively cringe to hear but recognize that there is some truth to it. Clients, contractors, and vendors up and down the supply chain have been preparing for what the experts have advised was to come and, over the course of just a few days, the same businesses have shifted and pivoted to subsequent adjustments, starts, and delays. Regardless of where it all lands, we know eventually this tidal wave is headed our way and no amount of wind in our sails is going to allow us to escape it.
So, what can be done to minimize the impact and create the best win-win situation for all parties? Thankfully, the execution models made available through collaborative delivery allow us to strategically manage the known unknowns of the looming tariffs that appear to be inevitably drifting our way. The primary mitigation tactic available is right there in the name, collaborative. One of the best ways to anchor a team and create a win-win scenario in this volatile environment is to collaborate. We don’t have to take the “us-versus-them” approach under this model. Rather, we are encouraged to work as a collective team, share concerns and ideas, maintain open lines of communication, and build trust. Furthermore, we ALL should do our homework to understand in depth what these tariffs represent and how they are expected to impact execution. Once we’ve conducted the research and thoroughly evaluated our findings, it’s time to engage our in-house experts including legal, tax, commercial, and logistics, and we shouldn’t be shy about cracking open that address book to enlist some of our out-of-house partners who can offer unique perspectives, experiences, and guidance. This amassed collection of input from numerous resources will undoubtedly arm the team with the critical data points necessary to develop a watertight execution strategy and set the stage for success.
Now that we’ve established a strong foundation, we can begin homing in on some of the more particular components to navigating tariff uncertainty. Let’s start where we naturally would on any project—design. The first line of defense is to take all steps possible to avoid these impacts where feasible. There is no reason we shouldn’t consider all opportunities that will allow us to eliminate, or at least minimize, the use of material and equipment vendors located in regions directly affected by the tariffs and to take action to minimize their potential impacts where they cannot be avoided. A typical procurement team knows where most of the common scope items are sourced, so why not sidestep those regions through strategic design and scoping whenever feasible? This approach can be even more effective within the confines of a collaborative delivery model given that these strategic design decisions aren’t made in a vacuum. All parties, including the contractor, owner, and owner’s engineer share input and control of the project’s destiny as they work together to progress the design with an understanding of how decisions may affect the work, and the geopolitical environment should be top of mind.
As we move into the bidding phase, we can customize our vendor RFP packages to specifically isolate pricing line items and other factors that may be impacted by the tariffs. This approach of requesting targeted data points would aid in establishing unique evaluation factors so the team can better understand how each bidder is impacted and help paint a more holistic picture of how the project may be impacted. This is yet another step in the process where collaboration can bring about great opportunity for full transparency among all parties to evaluate the information and make decisions that create a win-win scenario across the board.
Tariffs are not a new concept and we all have dealt with them on capital projects whether we realize it or not. The current environment will eventually settle down and clarity will overcome. It’s easy to get overwhelmed by the unknowns, but the great news is that we do have resources available to plan for, manage, and mitigate the volatility that comes with this uncertainty. What is even more comforting is that with collaborative delivery, each party doesn’t have to devise its own siloed scheme—we can tackle these challenges as one collective team.