Commercial construction's labor shortage - the local impact
One of the most dominant headlines in commercial construction has been the labor shortage we've experienced ever since the economy started recovering from the Great Recession. Filling construction positions, from skilled tradesmen to management staff, is more difficult than ever thanks to strong construction activity levels paired with a workforce depleted by professionals leaving the industry during the downturn. As a national commercial contractor, I can tell you the labor shortage is real and widespread; however, its impact on executing a construction project definitely varies depending on the market's level of construction activity and depth of the local subcontractor network. For suburban Chicago business owners and developers planning a commercial construction project, the good news is the local labor crunch is nowhere near the level other markets are experiencing. The labor shortage is still impacting local projects in key ways, including:
Pumped-up pricing: The first place our suburban clients feel the impact of a diminished labor pool is costs. The simple fact is the leaner capacity of most local subcontractors, paired with the number of construction projects out there for bid, puts these firms in high demand -- so they can afford to pump up pricing. Anecdotally, we can compare suburban Chicago projects to similar jobs five years ago and see a 10 to 20 percent increase in costs associated with subcontractor partners.
While this pricing trend isn't likely to change until construction activity flattens out, one strategy we discuss with clients is scheduling construction projects for off-peak times. If there's flexibility on overall timing, we may be able to negotiate better pricing with subcontractors -- particularly if these firms can squeeze work in when they are traditionally slower.
Tightening schedules: Another local symptom of the labor shortage is lack of wiggle room in subcontractor scheduling. It is not unheard of for some subcontractors to decline a project because it conflicts with a job they already have on the books -- and they don't have staff to handle both. We have even had occasions where, after submitting a bid, a subcontractor tells us they need to know within 24 hours if they have the job -- otherwise they'll commit to another project.
This issue is most likely in a competitive bid scenario, because bidding subcontractors aren't vested in a project until they are awarded the work. One way to avoid this scenario is working with your general contractor on a negotiated bid basis.
Dealing with delays: It is very common for a commercial construction project to be held up between the bidding process and actual start of work, whether due to unanticipated issues with permitting, finalization of funding, or even last-minute revisions to drawings. But with subcontractors in such high demand, it's possible they may decide to move on to another project rather than wait out a delay. Similarly, recovering from any construction delays becomes more complicated if short-staffed subcontractors don't have extra manpower to shift to the job and play catch up.
The best advice we give clients is to have everything as buttoned up as possible in the decision -making phases of a project. Eliminating uncertainty and change orders goes a long way toward eliminating delays. Also, it is crucial to identify important milestone dates early-on, and for project managers to do two-week "look ahead" reports. That way, we can do our best to keep the project on track and hit key dates from a critical path standpoint.
• Chuck Taylor is director of operations for Lemont-based Englewood Construction, a national commercial contractor.