Time, supply and project delays

At Rive Gauche, we are continuing to see significant interest from clients seeking to acquire and develop super-prime properties. But we are also seeing a new source of interest – and that’s from people whose projects are plagued by delays, and they need help.

For most people tackling a development project, there is a perfect storm at play. Brexit, Covid and the Ukraine war have each compounded issues of chronic shortages of materials and labour, and delays in delivery.

The price of some raw materials has risen by 20-40% in recent months – largely because the UK demand for construction materials from the EU is far outweighing supply. Factor in the added costs of unexpected customs duties and huge paperwork at the border. There is also a degree of speculation from some suppliers, who are raising prices simply because they know they can, and a lack of labour, because tradespeople are trying their luck with their prices, or they will go elsewhere.

The result, for the end client, is stress. They are worried over the lack of progress in their project, escalating costs over which they have little control due to weekly fluctuation, and they fear they won’t get what they want at the end, as the process has broken down along the way.

One London investor began their project on site 18 months ago. The completion date was originally slated for the end of 2021, but that came and went. Then it was scheduled for early this year. However, at the end of January the building was still not watertight or airtight due to delivery issues from Europe. When they could see another deadline was going to pass them by, they started to worry – and they called us.

We went in wearing two hats – those of investigator and advisor – to understand what had gone wrong, and what was upsetting the client most. We interviewed everyone involved and reviewed all of the project information in order to identify the causes. There is often tension between the client and the team, so we needed to take a step back, cut through the noise and take an objective view of the situation. There is rarely one person to blame but a series of factors that have caused the issue. Within a fortnight, we had a good understanding of the issues and put together an action plan. The result: the project is finishing within the next few weeks, ahead of the initial forecast, and we have managed to keep the final project costs under control.

In this situation, it takes more than putting a new process in place. It’s our understanding of super-prime projects that enables us to get our hands dirty and identify the priorities and areas of concern, and to find a clear resolution.

Our role is to anticipate. We need to be five steps ahead to second-guess areas of concern and ensure they are resolved before it gets problematic. If you can’t do this, you will always be behind.

Tips for managing a successful development

1. Be prepared – and buy early

In your business plan, stress test your financial model to allow extra time in the project while still making a positive return on investment. There are three types of risk when managing supply chains: a shortage of products, the supplier’s failure to deliver, and price volatility or increases. Keep on top of these potential pitfalls and you will minimise issues in your project.

Procuring materials early, and storing them safely for later use, will mitigate issues with any or all three. Timber, plaster, bricks… all the fundamental building blocks, quite literally, have been hard hit by delays in the past year.  

And developers/self-builders are more aware than ever right now that time is money. Prices for building work are rising by around 5% a month, according to the Government’s Department for Business, Energy and Industrial Strategy. Harder to factor in is volatile price fluctuation – timber saw a 200% hike in price before it fell by 20% in February, according to the National Federation of Builders. But by buying early, you can watch it all happen from a safe distance.

2. Know the source of problems, and possible solutions

Many products are moving more easily through continental ports, now that late 2021’s HGV driver shortage has been eased. But the Ukraine war is leading to rocketing prices of steel, for example, with Russia and Ukraine the combined second biggest steel exporters in the world. Paint is in short supply due to the war, and to Covid lockdowns in China. Knowing what could cause delays in your project makes it far easier to find alternatives.

The fuel crisis brings added problems. The cost of energy-intensive products such as cement and glass are likely to keep rising, according to the Construction Leadership Council (CLC). And this period of fast-rising inflation – the fastest in 30 years – is seeing many suppliers only hold quotes for 24 hours, and a reluctance for contractors to enter longer-term contracts.

To mitigate some of those rising energy costs, consider reusing existing materials, and/or building in added energy-efficiency into the project to mitigate high energy bills in the future.

All these variables need to taken into account in your business plan. Work out the likely worst-case scenario for delays. Calculate the impact they will have on your loan repayments if you have finance for the project. And consider more cost or time-effective design alternatives – a different type of wood, for example; tiles that don’t rely on materials from Ukraine, or energy-intensive manufacturing processes, or more readily available types of glass that won’t take a year to arrive.

3. Stay local

It’s the message that dominates so much about the way we live now – the 15-minute city concept of keeping all elements of your life close to home. There’s the environmental benefit, and the conversational kudos that comes with knowing the provenance of the things that surround you. But it pays to keep your supply chain close to home too, in a climate where supply chain delays are adding several months – and significant cost – to projects. Using local suppliers gives you greater flexibility, more control and less supply chain cost. And you help boost the local economy.

You can further minimise your supply chain by dealing only with local individuals or companies who have control over the manufacture. After 15 years in this business, we’ve learnt that this method is far easier and healthier for your project. Adding middlemen simply removes control.

4. Pick partners with a wide supplier network

While projects are at greater risk right now of delays and costs spiralling out of control, it makes sense to spread the risk and deal with partners who have a wide range of suppliers, in different locations, at their disposal. If there are viable contingencies when one or more suppliers or professionals fail to deliver, then your project will be less impacted. You will also keep costs competitive if you are not reliant on one or two sources. They may also be able to think tangentially and offer viable alternatives if your original plan falls down.

5. Manage relationships and encourage open communication

This is important for any project management role. In the Rive Gauche project we mention above, delays were partly down to a breakdown in communication. There was a clear disconnect between what the client thought was happening, and the reality. We soon realised that each person in the project team had a different understanding of what decisions had to be made. It needed us to intervene to glean the whole picture – and then we were able to get the project back on track.

Our tips to managing supplier relations?

• Be proactive and address problems as soon as they happen
• Be in regular contact. Face to face, where possible, beats emails every time.
• Make sure every party involved understands their role.
• Keep reviewing the deliverables, to ensure the expected level of quality is being maintained.
• Listen to all involved. Their insight could be invaluable.

To understand how we can help manage your project to ensure its completed on time and within budget please get in touch. We at Rive Gauche design and manage projects every day, and we have the experience and a trusted network of professionals to help you navigate this current storm.