The 5 Critical Issues Facing Commercial Construction Managers Right Now
Rising costs, tight labor, procurement uncertainty, and greater scrutiny of capital are making commercial construction less forgiving. Here are five issues Construction Managers should be watching and what they can do about them.
Whether you’re opening a restaurant, renovating a hotel, building a senior living community or developing a new retail or automotive location, the fundamentals haven’t changed. The project needs to open on time, perform as expected and stay within the approved budget.
What has changed is how many pressures can affect those outcomes.
According to the Associated General Contractors of America (AGC), nonresidential construction input costs were nearly 9% higher in August than a year earlier. At the same time, projects are being postponed, scaled back or reconsidered, putting additional scrutiny on those that are moving forward.
Here are five issues that deserve attention.
1
Construction Costs Are Moving Faster Than Some Budgets
A construction budget prepared six or nine months ago may no longer reflect current costs. Steel, aluminum, copper and other materials have experienced significant increases, so some parts of a project may have much greater exposure than the overall inflation number suggests.
What you can do: Revalidate older budgets before making major commitments. Identify the materials, equipment and trades with the greatest cost exposure rather than relying on a single escalation percentage.
2
Skilled Labor Is Still a Schedule Risk
Softer demand in some sectors hasn’t eliminated skilled labor shortages. Recent AGC research found that the vast majority of contractors with open craft positions are still having difficulty finding qualified workers.
That makes subcontractor selection about more than price. A restaurant with an opening date or a hotel renovation planned around occupancy can’t afford to discover halfway through construction that a critical trade doesn’t have enough people to maintain the schedule.
What you can do: Ask about manpower and capacity during pre-construction. An established local subcontractor network also gives your project more options when labor gets tight.
3
Procurement Decisions Can’t Always Wait
Long-lead items aren’t new. The combination of lead times, changing prices, tariffs and sourcing uncertainty is making the timing of procurement decisions more important.
Commercial kitchen equipment, elevators, mechanical systems, electrical gear and other specialized equipment can affect several trades when delivery dates slip.
What you can do: Identify long-lead and price-sensitive items early. Know which selections need to be finalized first, where acceptable alternatives exist and which purchases may need to be released ahead of the rest of the project.
4
Every Capital Project Has to Work Harder
Many national and regional brands are being more selective about where they invest. Expansion plans may be moving more slowly. Some projects are being renovated rather than replaced. Others are being reduced in scope or postponed.
That puts more pressure on the projects that receive approval.
What you can do: Pressure-test the project before construction begins. Make sure the scope, budget and schedule support the business case. And approach value engineering carefully. A lower initial cost isn’t necessarily a better value if it increases maintenance costs, affects operations or shortens the useful life of the investment.
5
Predictability Has Become More Valuable
Construction Managers can’t control material markets, labor availability or every supply chain disruption.
They can control how prepared the project is to deal with them.
A realistic schedule, current budget, early procurement planning, qualified subcontractors, local market knowledge and clear communication all help reduce uncertainty.
What you can do: Bring the construction team in early enough to identify risks while there is still time to address them. Ask hard questions before the answers become expensive.
Reduce the Unknowns
The biggest challenge facing Commercial Construction Managers isn’t any single issue on this list. It’s managing all five at the same time.
After 25 years of building commercial projects, we’ve learned that successful projects rarely happen because nothing unexpected occurs. They happen because the team plans carefully, communicates early and has the experience and local relationships to respond when conditions change.
You can’t eliminate uncertainty from construction. You can keep it from running the project.
That’s a big part of what Building Confidence means at Englewood Construction.
Why Englewood
For 25 years, Englewood Construction has helped restaurant, retail, hospitality, senior living, automotive, entertainment and other commercial clients manage these challenges across 45 states. Our national experience, network of more than 20,000 local subcontractors, and focus on planning, communication and consistent execution help clients reduce risk and bring greater predictability to every project. That’s what we mean by Local Expertise. National Experience. And it’s how we continue to Build Confidence for our clients.
