Strategies to mitigate rising construction costs

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Early planning, particularly aided by early contractor involvement (ECI), results in early commitment for critical materials and equipment, while the collaborative approach ensures design-stage decisions are coordinated to match actual products ordered .

Graucor

While the food and beverage industry continues to face challenges ranging from labor shortages to transportation and supply chain issues, to disruptions due to natural disasters and extreme weather conditions, there were some positive indicators overall.

McKinsey recently reported “since 2019 the [grocery] The market has grown an impressive 15 percent.” The U.S. Department of Agriculture (USDA), along with the Food and Drug Administration and other federal and state partners, closely monitors the food supply chain, and the USDA website states, “there is currently none statewide Food Shortages”, and points to the avoidance of widespread disruption due to “food production and manufacturing”. [being] widely scattered across the US.” However, this production and manufacturing capacity depends on a network of built-in infrastructure, which itself faces supply chain and cost challenges.

In the food and beverage market there was no reduction in housing starts; In fact, a variety of market changes are leading to increased demand for new construction, expansion and modernization of plants. Key changes include a pandemic-driven increase in home cooking and a surge in consumption of packaged goods. Fresh food delivery, farm-to-table movement and Ready-to-Eat (RTE) goods are transforming the marketplace. “Ghost kitchens,” or commercial spaces that prepare food for home delivery rather than investing in storefronts or dining rooms, are also changing the landscape of food consumption. Broader consumer-centric trends include the pursuit of greater sustainability and a reduced carbon footprint in all types of structures. In addition, plant designs must respond to an increased interest in cleanability and the separation of production lines to reduce contamination risks. All of these factors and more require food processors and suppliers to not only invest in more square footage, but also in different types of manufacturing, warehousing, and picking/packaging equipment.

On time, on budget

Completing construction on time and on budget requires a rethink of business-as-usual as competition for labor and materials is intense. The large volume of space under construction was highlighted by Commercial Edge in April 2022, when the group reported that “the industrial construction pipeline was 640.1 million square feet statewide and represented 3.7% of the existing U.S. industrial inventory.” The most volatile commodities for the construction of food plants continue to be metals (both rebar and components), mechanical equipment, piping, electrical equipment, and wires and cables. The volatility comes from these materials touching every discipline in every market. Store restrictions are also an important consideration as current store hold times are typically only a week or two at best and commodity price holds are often only current prices. In addition to material availability and in-store restrictions, product transportation is also becoming increasingly strained, adding another layer of availability concerns.

Owners are striving to exercise greater control over the value chain, collaborate with industry partners for more robust front-end planning, and be more involved in sourcing decisions. Early planning, particularly aided by early contractor involvement (ECI), results in early commitment for critical materials and equipment, while the collaborative approach ensures design-stage decisions are coordinated to match actual products ordered . In addition, general contractors bring a deep understanding of long lead time items as well as material availability and pricing. Often these contractors have strong relationships with vendors, subcontractors and suppliers that allow the team to improve hold times based on a letter of intent.

A great way to mitigate supply chain issues is to run different build scenarios and balance competing considerations throughout the build timeline. The owner and his team should balance availability issues with other concerns such as safety and quality. For example, choosing bolting over welding reduces variables that can impact quality, resources, and supply chain issues. This is because bolts are generally easier to install and require nothing more than a quality starting product and a proper tightening procedure. On the other hand, welding requires significantly more material control (e.g. temperature control and separation of welding wire furnaces, control of welding gases, welding machine calibration, etc.) and welders must have skills that require testing and certification. Welds also typically require some form of non-destructive testing, depending on the applicable design code. An additional advantage of the bolts versus welds example is that the reduction in specialized training or skills opens the field to a larger pool of resources, thereby alleviating the challenges of labor shortages. Project-wide there are many similar design elements that can be selected to reduce the need for special training or skills.

With modern food plants using some of the most sophisticated automation and robotic solutions available, front-end activities should spend adequate time understanding how a given set of equipment impacts facility layout, utility and power requirements, and more. Owners and design partners should work with original equipment manufacturers to understand proprietary equipment requirements.

While technological tools are no longer new on most job sites, they will only be fully optimized when all team members are aligned and invest in their collaborative use. Products ranging from construction management software to drones to light detection and ranging (LIDAR) can improve communication, data collection and tracking. Building Information Modeling (BIM) remains one of the most useful technologies. When used early in the design process, BIM can help standardize material sizes and configurations, as well as accommodate constructability or material changes aligned with supply chain availability. Using BIM can allow the team to use early order placement more efficiently, take advantage of material availability, or compensate for long lead times.

Safety, quality and efficiency risks are inherently greater with on-site manufacturing than with controlled workshops. Because of this, prefabrication and modularization can help reduce on-site resource availability, including shortages of construction workers. However, pre-engineered items require more pre-engineering design time to support sourcing, so pre-engineering activities should investigate timing issues related to material and store availability constraints.

ECI is a fundamental strategy for reducing supply and cost constraints and improving project outcomes. With this collaborative approach, the team can weigh all project variables and run informed scenarios to determine the most efficient and cost-effective approach to a given problem. You can also make smart use of existing technologies.

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