Make sure you account for price increases and extended lead-in times
Shortages of building materials – from steel and timber to cement – have been well-documented as the construction industry re-energises and follows the government mantra to “build back better”.
How can you make sure you keep your projects on track as you compete with other contractors to obtain the materials you need?
With demand high, and costs increasing, you need to address building materials availability head-on. That means getting tighter with your planning as you can expect extended lead-in times. You may need to consider stockpiling materials – provided you have storage available or can factor in storage costs.
The starting point is to review your existing workload requirements. Can you meet your contractual agreements, and can you source materials of the right quality? Start talking to your suppliers now.
Be prepared for poorer quality materials coming on the market. Some companies may be importing raw materials, potentially from new markets, so be prepared too for those longer lead in periods.
If you can buy in bulk, how will that affect your cash flow? It means redirecting cash to different parts of the business, so you need to ensure you still have wages and other commitments covered.
These challenges need to be overcome to ensure you maintain your customer service levels. Talk to your clients and, if needs be, revisit your existing contracts. Many contracts allow you to notify changes – what’s important is being able to demonstrate significant price changes.
If you have a ‘lump sum’ contract, you may have to bite the bullet and look for mitigating measures to offset these cost increases and extended lead in times.
If you’re looking to tender for new work, it’s vital you account for these increases and ways to mitigate materials shortages, while maintaining a competitive edge.
If you need professional support to restructure your cost flow management or liaise with your clients to recover increases, ProQS can help.
Our RICS-regulated quantity surveying experts can assist with your management accounts to help you compensate for these ongoing challenges.
Call us today on 01206 654003 or email: firstname.lastname@example.org.