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How to Manage Escalation and Supply Chain Challenges

Nov 16, 2021

U.S. Engineering

by Caryn Becker

Director of Business Development

U.S. Engineering Construction

With the current escalation environment and supply chain issues, it makes sense to leverage design-assist or design-build contracts to order materials and equipment in early/phased bid packages. Our team manages material escalation proactively by keeping a pulse on the market and staying ahead of the curve. Here are some of the actions we take to manage escalation.

Caryn Becker on supply chain and escalation issues

Caryn Becker

Bulk Long-Lead Purchasing

Bulk purchasing requires planning. Because of our size—U.S. Engineering is ranked as ENR’s 15th-largest mechanical contractor in the United States—we have buying power. We buy up sheet metal and copper commodities well in advance, anticipating our upcoming work volume. We surround ourselves with experts, like Purchasing Manager Terri McMahon, who has been in the business of purchasing mechanical materials and equipment with U.S. Engineering for 20+ years. Terri is constantly in discussions with major suppliers to anticipate price increases. To secure the lowest pricing, Terri recently initiated packaged acquisition of materials and equipment across multiple concurrent U.S. Engineering Construction (USEC) projects. This focus on purchasing early benefits our clients in several ways:

  • Our knowledge about the market informs what materials we procure for the field and manufacturing. Additionally, we can identify what equipment to purchase to speed construction and optimize budgets.
  • As our purchasing power grows, we receive advanced notice of potential increases in commodities, material, and equipment costs. Generally, we know one to two months ahead of time when pricing will go up. As such, we often can inventory the materials and equipment we will need, especially as a design-assist or design-build mechanical contractor, and secure these items for our projects at the current price well before the price increases.
  • With transparency, we will give our clients as much time as possible to determine if buying early to address long lead concerns or to ward off escalation costs makes financial sense.

Whenever possible, we work with our vendors to forecast and time procurement before increases occur. Here is an example of how we applied these principles with success.

The Current, River North – 3615 Delgany

USEC is providing design-build mechanical and plumbing services through design, preconstruction, and field execution for this 12-story Class A office building at 36th Street and Delgany in Denver’s growing RiNo district. ME Engineers is serving as our design-build partner and engineer of record. Early onboarding of the USEC/ME Engineers design-build team proved instrumental in achieving cost and schedule goals for The Current, River North project. Click here to learn about how we delivered value and mitigated market volatility.

Creative Project Planning

In addition to procuring materials and equipment in early bid packages, our teams find ways to solve problems creatively. Here are three examples:

Multiple and Creative Storage Options. On recent projects, some vendors have offered to store equipment, but not all firms’ facilities have space. Our manufacturing facilities offer covered and uncovered storage. We have also used on-site storage in parking garages, shell space, or storage areas, once these areas have been built.

Alternatives. Our team advocates for our clients and the project, considering alternatives when price increases for a particular component are unreasonable. As a design-assist partner, we approach this as a collaborative team effort. Our goal is to win our clients’ trust by building relationships that promote repeat work.

Transparency. USEC values transparency when it comes to the topic of escalation. We will share the optimal timeframes to buy long lead items, when we anticipate cost increases, and how to leverage savings opportunities by ordering supplies early.

By early onboarding USEC as a design-assist or design-build mechanical contractor, our clients will be able to take advantage of a seasoned partner that is able to adapt to the needs of the project and successfully navigate the uncertainty in the market.

See where our innovative thinkers and expert collaborators can take you.
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