You’ve probably heard plenty about the supply chain, especially the ways that it affects the construction industry. It can put your contracting business in difficult positions, so you should know what the risks are. Here are a few things you’ll need to know, and some ideas to help you solve them.
The most obvious example of the supply chain problems in action are the increased costs for supplies. You’ve probably noticed that common construction materials like lumber or steel have been quite volatile over the last couple of years. It makes sense if you think about it. When supply is down, but demand remains the same, people who are in great need of the supplies may be willing to pay more to get them. Until the supply side regulates or increases to meet the demand, access and pricing are at a premium. That’s why lumber skyrocketed in the middle of 2020 and gradually dropped as supply improved.
For many years, experts in construction have said that project delays are the norm, not the exception. But the supply chain problems make it worse. If it takes you much longer to source the materials that you need, you’ll need longer to complete the project. Once you factor in the long-term labor shortage, you might fall significantly behind your original estimates. This can be a source of tension between contractors and clients, even those who understand the situation. It’s forcing a lot of contracting businesses to reevaluate the way that they budget their time, and requiring them to estimate a bigger cushion for unexpected delays.
Concerns With Material Substitutions
With the supply chain issues, there have been delays and there have been shortages. For some materials, you can wait a little longer, but you’ll still be able to get access to them. For others, you might not be able to get them for a specific project at all. Of course, whenever you have to deviate from the original plan, you put yourself at risk for claims that you failed to meet specifications. In addition, even clients who are understanding of the need for substitutions may be more likely to raise a dispute, especially if those substitutions don’t turn out to work as well or last as long as the original.
Breach of Contract Claims
Of course, all of these problems can lead to clients or other construction firms claiming that contractors are in breach of contract for their failure to deliver according to the specifications. Dealing with these claims can be a complicated and expensive process, particularly as it takes time away from other paid projects you could be working on. As such, contractors are better off if they do what they can to be realistic about what they can deliver and clear about their needs and expectations in contract language.
How to Minimize Problems
Ultimately, contractors should make sure that they are accommodating issues like the labor shortage and the supply chain into their contract language. When clients claim that a contractor has breached contract, they may cite a lack of clarity that shows that the contractor could delay project completion due to unforeseen circumstances. Being clear about this language, and the exceptions that may come up can help contractors and clients better understand what is expected for the duration of the project.
The supply chain is likely to be a problem for some time, so contracting businesses need to prepare. For more information about what you’ll need to succeed as a contractor, visit CSLS today!