Early Works Strategies in a Volatile Market

by | Jan 16, 2023

When the supply chain faces pressure and creates a volatile market for utility-scale construction projects, challenges arise for project teams seeking solutions to long-term wastewater treatment facility expansions.

In the midst of a construction management at-risk (CMAR) wastewater treatment facility expansion in the Midwest, the project team identified two key early works strategies to avoid project delays and potential price hikes.

  • Utilize cost modeling efforts in order to release earlier GMPs and optimize procurement schedules.

By implementing cost modeling and two separate GMPs (one for procurement and the other for installation), the team was able to secure pipe while it was finishing design drawings and completing city and county reviews simultaneously. Early procurement locked in orders and manufacturing slots, ensuring a timely delivery of pipe materials.

Due to supply chain constraints, the ductal iron was experiencing 10-to-12-month lead times. Waiting until a traditional guaranteed maximum price was completed would have delayed the project significantly. Splitting the GMP in two enabled the team to navigate challenging times and shave two to three months off the schedule.

During a CMAR procurement approach, cost models are completed at 15%, 30%, 60%, and 90%. Traditionally, pricing from recent past projects can be utilized to give the project a starting point in the early cost model stages. In today’s market, commodities fluctuate drastically; therefore, securing current market pricing and manufacturing timetables is essential for accurate costs and tentative procurement durations.

During cost model efforts, the team discovered that electrical is a year to potentially 16 months out for transformers and switch gear. The team pulled in earlier GMPs in order to accelerate design and plan to purchase a portion of the electrical gear just prior to 60% in early 2023.

  • Although unconventional, acquire off-site storage facilities to house jobsite materials.

In the past, teams leveraged a just-in-time delivery method for materials. A volatile commodities market means teams are forced to make unconventional business decisions. Off-site storage locations would rarely have been considered in the past, but in today’s market, they present themselves as a solution for ensuring materials are available when needed.

Through collaboration with the owner and engineer, the team prioritized design in certain areas in order to purchase materials with excessively long lead times like electrical and process-related equipment.

The nature of collaborative delivery is open and honest communication throughout the contract chain and throughout the design and construction period. The cost models give the team a greater opportunity to have discussions about risk allocation in a volatile market.

Collaborative delivery methods like CMAR and design-build are becoming the preferred project delivery methods due to the ability for an owner and delivery partners to work together and tackle tough project issues. Mitigating supply chain risks with early works strategies is an aspect to this collaboration that enhances the benefits of the delivery model.