Working Around Scarcity
Material prices were relatively static for a while after the Great Recession, according to James Isom, commercial construction manager at Burns & McDonnell, but in recent years they have begun moving sharply. As the construction market has picked up pace, suppliers are busy, and pressure is applied to the availability of certain in-demand items.
“There are issues that have arisen around the availability of materials and equipment, particularly when we need to buy them directly or when our subcontractors are buying major equipment packages," Isom says. "That can cause us to potentially look at contingency plans or identify areas where we can be more proactive in our approach to a project,” Isom says.
For example, a large air handler unit that used to have a 20-week lead time could take a year to acquire now. What can be done about that?
“Maybe if you went with a simpler design or picked a different unit, you could get back into that original time range,” Isom says. “What do we need to change in other portions of the building, other elements of the design, to accommodate that request?”
These questions are worth asking when a particular element is a showstopper for the project and the extra time cannot be accommodated reasonably.
Isom notes that different project delivery approaches can help mitigate such challenges by incorporating elements of lean construction and greater integration of services. By bringing more project partners into the process early and probing different perspectives on identifying the most efficient systems, designs and more, a road map to a more efficient solution can come into focus. And greater efficiency leads to less waste, which is even more important when prices are escalating.
“While we can’t accommodate all requests, it’s our job to take everyone’s requests and formulate a recipe that is optimized and makes the most sense,” Isom says. “We’re finding that getting feedback very early on helps uncover a lot of things.”
Identifying constraints early and utilizing the full team’s brainpower and resources helps plan effective mitigation strategies to manage issues before they are encountered in the field.
One of our philosophies for mitigating construction costs for utilities is to have a solid, simple plan that can be repeated.
Assembling the Building Blocks
Similarly, modularization is an execution strategy that can help accelerate construction and cut down on material waste.
“If we can modularize part of our construction scopes off-site in supplier facilities, that also saves on some of the need for construction labor on the job site,” Jeffcote says. “We’re finding that to be very beneficial.”
Modularization can help mitigate material cost challenges in more ways than one.
“One of our philosophies for mitigating construction costs for utilities is to have a solid, simple plan that can be repeated," says Jackson Cutsor, a utility consultant in power system planning at Burns & McDonnell. "If you have everything in stock and have a standard conductor size, you simplify your warehouse and minimize time out in the field."
Modular substations are an innovative example of the approach, which aims to mitigate the risk of stranded investments.
“They have 40% of the footprint of a traditional substation but a comparable ratio of capacity,” Cutsor says, noting that modular substations have been used in newer areas where the developer might not need full capacity right away.
He cites the example of a new subdivision that expected to need a huge substation but recognized the possibility it might never be fully utilized.
“Instead of building a $20 million to $30 million substation right off the bat, they built small substations at a couple million dollars apiece as the subdivision grew out,” Cutsor says. “Not only are you saving on capital cost and reducing investment risk, but you’re also extending the useful life of the assets because you’re spreading the age over multiple locations instead of one.”
Raw material costs might not typically be a key factor in determining whether a substation project will proceed, but the modular approach offers the flexibility of rightsizing capacity and greater ability to keep backups in stock.
“If you have six modular versus one regular substation, components are relatively small and inexpensive enough that you could have parts in your warehouse and replace components very quickly if something were to fail,” he says. “Larger substations, however, cannot keep spare transformers on standby. They must build redundancy on-site or order them as needed, which could take many months.”
What will prices do in the interim? It’s a good question, and one that smart planners always keep in mind.