Whether it’s at the grocery store, the gas pump, or buying a car, the impacts of supply chain disruptions have been felt everywhere by just about everyone. The construction industry has taken a particularly hard hit since the beginning of the pandemic and continues to struggle to meet the rising demand for materials and labor.
A survey by the American Water Works Association reports that 72% of 416 water utilities nationwide are facing difficulties obtaining materials and other infrastructure components. Like other utilities, EPWater has been forced to develop new policies and procedures to manage supply chain issues and get projects done.
This spring EPWater collaborated with El Paso Electric to host a forum on supply chain challenges and strategies to mitigate construction delays. The event was attended by contractors throughout the region.
Oscar Renda Contracting (ORC) provided a guest presentation that highlighted the chain of disruptions from the pandemic, port backups, trucking industry challenges, and geopolitical tensions that are all having impacts on the supply chain process.
“Recovery from the pandemic has been unbalanced and markets are not recovering in stable ways,” said Michelle Renda of ORC, citing that Asia, one of the world’s largest suppliers of materials, is only reaching 50% of its overall output.
Additionally, contributing factors such as inflation, market volatility, sanctions on other countries, and even the war in Ukraine have exacerbated problems even further. All of this equates to a perfect storm resulting in labor and materials shortages, transportation bottlenecks and sky-high prices.
“This presents a challenge because it’s harder to accurately price out materials and labor,” EPWater’s Interim Chief Operations Officer for Production and Treatment Gilbert Trejo said. “Quotes for supplies can change quickly, and we found that policies were not equipped to allow us to process purchases before those price quotes expired.”
Cross collaboration is key
ORC highlighted the close collaboration between owners and contractors have been key to keeping costs down and efficiently executing projects.
“We need to change the way we approach construction projects and focus on what is in our control,” said Trejo. “Having honest conversations between the contractor and the utility is beneficial for everyone.”
The use of master service agreements, large scale procurement efforts, diversifying suppliers as well as conducting procurement planning in design phases have proven to be effective solutions.
EPWater recently adjusted its own policies and operations to include increasing the President/CEO’s bid authority, pre-purchases of critical materials, securing various warehouse options and stockpiling high use materials.
“From an inventory standpoint, we’ve started to build up our internal warehouse, and we are trying to anticipate demand for supplies 2-3 years into the future,” said Trejo. EPWater also hired a strategic procurement and logistics advisor to ensure that all facilities have their own fully stocked warehouse.
EPWater has also reevaluated how projects get bid out. Trejo says the traditional design-bid-construct model for a single project is not conducive to the current climate. Now, EPWater’s capital improvement manager is tasked with identifying and grouping similar projects together and bidding those out as a single package. This method helps eliminate redundancies in the process and saves money.
Because there is no telling when conditions will stabilize, utilities are thinking outside their typical practices for the sake of customers.
“Water reliability is essential,” said Trejo. “It’s the customers who are affected by our work, and it’s not an option to blame a disruption on the supply chain. At the end of the day, we have to do what it takes for the customer to win.”