Supply Chain Disruption and its Impact on the Cost of Your Project

The COVID-19 pandemic brought the world to a standstill and changed the way we work forever. Offices began the migration from the workplace to the home office while warehouses and other distribution hubs lost employees. The latter caused significant delays in both deliveries and production lead times.

Contractors have continued to feel the heat of supply chain disruptions over two years later, making preventative measures necessary to avoid costly project delays.

Materials Shortages Still an Issue

In many cases, materials that were traditionally available at normal cost and with normal delivery times became expensive with a lengthy wait in the post-COVID world.

Two years later, contractors still must make substitutions to maintain their budgets and schedule. Recommendations to mitigate the risk of material shortage delays include:

  • Communicate timelines with suppliers
  • Order early
  • Anticipate longer lead times

Lessons Learned

Material disruption typically means a project will go over budget.  

One common project management solution to limit the impact of this disruption is to collaborate with engineers and architects during the design phase to avoid selecting materials that might not be available when it is time to mobilize and procure.

Additionally, it’s critical to maintain positive relationships with suppliers to secure materials in advance. This may require exploring substitutions to stay within budget constraints, ordering materials as soon as possible to lock in costs and delivery windows, and revisiting the traditional procurement contracts to include incentive/damages clauses.

What’s Next?

The only certainty is that uncertainty will continue. In today’s constantly changing world, successful teams and projects are ones that adapt, innovate and collaborate.

If you run over budget, that will affect your bid and can result in missing out on potential work. Working in collaboration with your broker will be key to continue navigating today’s unpredictable environment. Solutions such as supply bonds and contingency plans are just scratching the surface. Reach out to your RCM&D representative to learn more about how this can affect your surety and insurance program.