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Industry Perspectives Op-Ed: All stakeholders can play a role to mitigate supply chain issues and price volatility

Ken Lancastle
Industry Perspectives Op-Ed: All stakeholders can play a role to mitigate supply chain issues and price volatility

With price volatility and supply chain issues remaining a significant challenge for the construction and mechanical contracting sector, and changing daily, the Mechanical Contractors Association of Canada (MCAC) is reminding all stakeholders of the measures that can be taken to mitigate the effect and negative impact of these issues.

At its most recent board of directors meeting, the association identified price volatility and supply chain as a major issue affecting members across Canada.

The association is calling on all stakeholders, including owners and consultants, to consider the various ways they can ease these challenges.

“We have heard from our members across Canada that price volatility and supply are having a significant impact. In some cases, regional challenges are only further exacerbating these issues,” said Dave Holek, president and chair of MCAC. “These impacts extend beyond just price increases or lack of supply. They can negatively affect productivity, while placing a significant burden on contractors. There are some efforts that can be taken at all levels to reduce these negative effects, and we would encourage all stakeholders to give consideration to these.”

Steps to be considered include timely and early communication, contractual considerations as well as modifications to procurement that can mitigate the impact of sudden price fluctuations.

As an example, involving contractors early in project budget and design can help identify supply chain issues and pricing, as contractors and suppliers can often provide real world examples on both the availability of products and supplies, and any price fluctuations in the market. The same can also be said for project timelines and schedule.

From a procurement perspective, shortening the validity period for bids can provide more price certainty, as many subcontractors and suppliers are only being provided as low as two-day terms on their pricing and, in some cases, only up to when the material arrives.

A shortened award period can help reduce the likelihood that price fluctuations can significantly impact a bid.

Contractually, another step that can be considered is the inclusion of price escalation and/or reduction clauses to provide confidence for bidders and buyers that price increases/decreases can be managed in a fair manner for all.

As one example, MCAC has shared a bid qualification clause on its website related to price increases as a result of the COVID-19 pandemic, which is publicly available online.

Most importantly, regular and constructive communication between all stakeholders remains paramount. Communication can ensure parties are aware of any potential or unforeseen challenges, while illustrating how price uncertainty and supply chain can affect not just the parties to a project, but the project itself.

“While these are only a few steps that can be taken, each encourages ongoing collaboration with all stakeholders,” Holek added. “With the unique circumstances driving price volatility and supply chain issues around the world, now more than ever is the time to work together to address these issues.”

Ken Lancastle is the chief operating officer for the Mechanical Contractors Association of Canada. Send Industry Perspectives comments and column ideas to editor@dailycommercialnews.com.

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