Inflation Reinforces the Value of Preconstruction Planning

Within the past few years, the construction industry has been hampered by volatility and inflation — fueled by the labor shortages and supply chain issues that took a foothold during the COVID-19 pandemic. Design-build teams are now leveraging preconstruction services to identify cost-savings opportunities, minimize delays, collaborate with labor and clients, and ultimately address price spikes.

Between January 2020 and January 2023, the aggregate price of all construction materials increased 40%. Although prices have come down slowly since May 2022, projects with limited budgets or time constraints still require solutions to tackle this turbulent market.

This is the environment in which preconstruction services shine. Although there are benefits to engaging a preconstruction team during the design phase for all projects, preconstruction planning is especially valuable when the chips are down.

Engaging the preconstruction team at the onset of design can be helpful, especially if the team didn’t participate in the initial budget or proforma. The preconstruction team can identify commodities with volatile pricing and equipment with long lead times, while also providing valuable insight for the design team to facilitate target-value-design. During the preconstruction phase, the collaborative design-build team works with the client to define the project goals and understand the needs of the project. Specifically, the team identifies this as a speed-to-market project, a budget-driven project or a combination of both.

After identifying the project goals and project definition, the preconstruction team analyzes the project scope, budget and schedule. This information helps the owner identify which design packages should be prioritized to allow for earlier procurement, which in turn provides earlier cost certainty and earlier project completion.

Throughout the design phase, the preconstruction team also provides progressive cost estimates, early procurement packages and constructability reviews. The early collaboration between the owner and the design team helps prevent post-issued-for-construction (IFC) value engineering and allows the owner to have a continuous pulse on the budget and schedule. With this information, the owner can make informed decisions and manage costs much earlier in the process.

In short, engaging the preconstruction team at the beginning of the design process can ultimately save considerable time and money on a project.

Strategies for an Economical and Efficient Project Execution

While preconstruction services generally focus on outlining project requirements, analyzing budgets, providing constructability reviews, creating estimates and creating a schedule, there are specific activities during this phase that can blunt inflation and improve efficiencies, including:

• Collaboration. Each project is different and unique. Owners and operators of manufacturing facilities, power and utility systems, water treatment plants, roads and bridges, or sports stadiums will all have different goals. Asking questions and understanding the owner’s needs early in the design or constructability process can influence the project schedule and budget, which might otherwise result in increased costs, delayed timelines or canceled projects.
• Designing for procurement. Supply chain issues are not abating. This means procurement times are now less reliable, making it crucial to design for procurement. To effectively design for procurement, the preconstruction team needs to provide lead time and market data to the owner and design team so that equipment selections can be made immediately after design begins. If a particular vendor has longer lead times, the design-build team can work with the owner to identify other potential vendors or other solutions to manage lead times that otherwise could delay projects. Additionally, prioritizing design packages based on price volatility of equipment or commodities is crucial when procuring items with long lead times.
• Applying target value design strategies. When budgets are a concern, target value design is a strategy that can help clients reach their goals by managing construction costs through design decisions, especially when construction materials and resources are constrained due to inflation and supply chain issues. Target value design helps the design-build team and the client avoid inefficient design-estimate-rework cycles by integrating a collaborative "value engineering" process into the initial design phase to keep projects on budget and on schedule.

The wave of market volatility, inflation and global supply chain issues that emerged during the COVID-19 pandemic reinforced the value of preconstruction planning among architecture, engineering and construction professionals. When budgets and time are limited, asset owners and clients can benefit from the creative strategies provided by preconstruction teams. Not only can an effective preconstruction strategy reduce the impacts of supply chain issues and inflation, but the preconstruction manager can also serve as a rudimentary economist, meteorologist and permitting specialist — considering factors such as weather impacts and labor variability throughout the year to improve project efficiencies. These critical path preconstruction activities can help lead to predictable cost/quality and schedule outcomes. This information can help the preconstruction manager and design-build team apply strategies such as target value design and designing for procurement. But above all, collaboration is key. Preconstruction planning gives the asset owner, construction team and design team an opportunity to discuss potential risks, opportunities and goals to ultimately save money and improve efficiencies.

Project success depends on a variety of factors, including procurement and subcontracting plans, site logistics plans, manpower and seamless integration of EPC capabilities.