It’s an exciting and interesting time for both the food manufacturing and construction industries. Thanks to recent tax reform, a healthy economy and other factors, capital spending is up, and the industrial/commercial construction industry is bigger than it has been in decades. This trend is expected to continue, with U.S. construction projected to grow by 4.5 percent over the next several years.
While many would agree that this is a positive, it can also present challenges for food and beverage companies looking to build new facilities or renovate existing ones. Today’s booming construction market means things move fast and contractors can be more selective.
So how can you ensure you get the best price when seeking out a firm for your next project?
Set realistic timelines and plan ahead
Many owners today have aggressive schedules because speed to market is crucial: They want to get their facility built or renovated and start producing. But getting the best price requires giving the market enough time to react to your project.
When you put out a call for bids, general contractors need time to assemble an estimate and get a variety of quotes from subcontractors. If they have limited notice and response time, many subcontractors may decline to bid because they’re so busy — and the quote you do get may not represent the best value for your project.
The takeaway: Don’t let the fast-paced market and an overly aggressive timeline limit you from getting the best possible price for your project. The sooner you can plan ahead for growth and consumer demand, the more you can save.
Don’t assume past projects are an accurate benchmark for your next budget
Many owners who are looking to build a new facility or upgrade an existing one haven’t done so in a while. It may have been years since their last new food plant or major renovation. However, today’s market is much different than it was a decade ago during the Great Recession.
Of course, a more aggressive schedule is going to drive up costs. (Just like overnight shipping for an online shopping order, a faster delivery time comes at a premium.) But you also can’t assume the variables from past projects will apply to a project budget today.
For example, an overseas company recently wanted to build a new facility in the Midwest to launch a product in the United States. Planning stages for the new product took longer than anticipated, but the company’s end date didn’t adjust due to a narrow window of opportunity. In addition, project characteristics and economic climate conditions were very different internationally compared to the U.S., which presented significant budget challenges. Lack of schedule flexibility resulted in limited market interest, which drove project costs higher than historic indicators were able to predict.
How do you limit your exposure to these risks?
Get your builder involved as early as possible
A good way to get ahead of these pitfalls is to engage a firm that can help you get market-based information and base your budget on this data. The market changes every few years — in fact, a market correction is happening right now. At Stellar, we look at past projects, historical data, market changes, technological developments and more to help clients set efficient timelines and realistic budgets. The earlier we can be involved in your project, the better your outcome will be.
For starters, here are five pieces of information you can give your builder for a more accurate food plant construction budget:
- Facility use
- Food safety
- Soft costs
- Plant technology (now and later)
The more details you can provide up front, the more you can avoid unwelcome budget surprises down the road.