How to Overcome Labor, Supply Slowdowns in Development

by Jeff Shaw

Careful and thorough planning processes can get a delayed project over the finish line.

By John Manning and Eric Quinn, KMI International

Senior living construction has seen a significant surge since the turn of the millennium due to people living longer with each passing decade.

The Population Reference Bureau (PRB) notes that the baby boomer generation could fuel a 75 percent increase in the number of Americans requiring nursing home care. With that comes the need for more senior living communities.

This has provided construction managers and owners with an excellent opportunity to expand their businesses while delivering great value to senior citizens. However, the pandemic’s continued spread remains a problematic issue for project managers and owners to nimbly mitigate in the seniors housing space.

It’s no secret that the pandemic has severely impacted labor and supply chains. KMI publishes cost data with regular updates. Construction projects that started with great intentions now find themselves repeatedly delayed or outright suspended due to labor and supply chain shortages.

These issues are not easily solvable and require meticulous planning to navigate appropriately. Don’t let time go by idly if you find your construction project stalled, stuck or otherwise troubled by these issues. With the current additional inflationary pressures, this delay could mean a significant price increase. We recommend beginning with a triage process, as a properly implemented process is key to a successful project turnaround.

Establish the triage team

Given your construction project is already delayed, formulating another team to handle the triage process might seem like a waste. However, proper planning and execution are critical in getting your project back on track. This includes taking the necessary precautions to reduce the likelihood of a coronavirus outbreak.

First, you’ll need to hire a turnaround project manager (TPM). Ideally, this is an owner’s representative with experience in effective turnaround project management, in addition to an ability to properly implement protective procedures to reduce a pandemic outbreak. Ensuring these procedures are in place is necessary to reduce frustrating delays that can be easily avoided.

Next, employ expert legal counsel, because many troubled projects end up in litigation. A cost estimator should be next on the list to coordinate with the TPM to secure adequate funding as required.

With the core of this small team assembled, it is essential to address the next steps together.

Determine owner priorities

It’s paramount to determine if cost or schedule is more or equally important to the owner. They are a key driving force behind planning the project turnaround and will help provide clear direction to the TPM on what they want to prioritize.

However, it is on the TPM to ensure the owner understands the importance of mitigating the chances of a coronavirus outbreak and that shortcuts need to be avoided to maintain some semblance of continuity on the project, regardless of whether cost or schedule is the owner’s priority. Once the priorities are established, the TPM can formulate the foundation needed to move the project forward. Without a clear path forward, the project will never regain momentum.

Additionally, the TPM should conduct a detailed onsite assessment to assess the quality of the work in place to establish what has already taken place and what might need reworking. An analysis of the work in place should include an assessment of costs to correct any deficient work.

Review all contracts/permits

The coronavirus continues to disrupt every aspect of life as we enter 2022, and many project delays could trigger contractual or permit requirements that need to be addressed. It’s in your best interest to review all contracts and permits for the project.

Some contracts might be fulfilled, unsalvageable or may need an extension. Permits could be expired or might need renewing. Assuming someone else will handle it without any provocation or direction would be a failure.

Questions to ask yourself include:

  • What contracts have the owner entered on the project?
  • What is the status of those contracts?
  • How much has been paid?
  • Does a full audit of costs paid to date need to be completed?
  • How does that compare to what has been completed?
  • What permits have been issued for the project?
  • Are those permits still valid?
  • Have code violations been issued?
  • Also, have any safety code violations or incidents been reported?

Review all costs

The supply and labor shortages will not lessen in the coming months. The inflationary pressures due to these shortages are increasing costs on projects. The Omicron variant only adds to the headaches that owners will incur.

However, this does not have to be the death of your project. Reviewing all associated costs is paramount to getting your project back on track. Supply delays and labor shortages continue to negatively impact expenses and labor, with little to no end in sight.

Your cost estimator should be asking:

  • Where does the project stand regarding cost?
  • What was the original project budget?
  • How much do the supply delays and labor shortages affect it?
  • Based on the owner’s priorities and safety precautions, what trades must be paid to get work proceeding once again?
  • Are there alternative materials that could be specified that would be more readily available or a more cost-effective solution in the current marketplace?

The cost estimator should break down every aspect to find adequate funding for what the owner wants to accomplish.

Once the costs are situated, the TPM can find the correct contractors to get work restarted.

Schedule and risk management

Your TPM should spearhead the scheduling in conjunction with the previous points as they aim to execute the owner’s priorities. This includes reviewing what risk management strategies and safety precautions are employed.

The TPM should ask the following questions:

  • Where does the project stand regarding the schedule?
  • How effective are the coronavirus protocols implemented at the construction site?
  • Which contractors should receive prioritization?
  • Do the proposed contractors have adequate insurance, and what do the policies cover?
  • How much of the project is complete, and are there any residents already living onsite?
  • Have those residents received any information on how to live onsite with the safety precautions in place?
  • What are the key target dates the owner must meet?
  • Are those dates feasible today?
  • Where does the project stand regarding the quality of the work in place?

Your TPM should put together a triage report covering these points as well as others for you and the legal counsel to plan a path forward.

The pandemic has dragged the past two years into a quagmire of delays, over-budgeted projects, supply chain delays, labor shortages and endless headaches for project managers and owners in the seniors housing space. However, by implementing a triage team and sticking to our points, this ever-prolonging pandemic does not have to signal the end of your journey; on the contrary, it is likely the beginning.

John Manning is the founder of KMI International and leads the firm’s Dispute Resolution Practice. Eric Quinn is the CEO of KMI International.

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