For general contractors, subcontractor performance is everything. And with tighter project schedules more common across the construction industry, procuring and fabricating materials globally the new norm, and the growing need to use materials that are sustainable and manufactured safely and to code, not managing your subcontractor's supply chain can cost you.1
Trust but Verify
Supply chain management isn't just about knowing where materials are being sourced or fabricated, how they're getting to the project site, or when they will arrive. It's knowing these things within the context of your project specs and requirements that's the key for risk mitigation planning (RMP), particularly when the subcontractor is smaller in size and/or if it's the first time you're working with them. Is the subcontractor using the right raw materials? Are products being manufactured to job specifications? Can you inspect a sample? Is what's being produced the same as what was ordered? Did the job ship? Can we see the purchase order confirmation? That's the depth you need to go to verify that what you've been promised verbally is what's being done.
Managing all aspects of your supply chain means baking in quality controls and assurance checkpoints throughout the project to make sure subcontractors deliver on your—and your clients'—expectations and avoids project delays, shoddy work, and other compromising situations. It allows you to catch and correct issues right away and ideally helps you anticipate and/or avoid issues altogether. It can also help you develop best practices and differentiate you in the market as a strong quality provider in the construction industry. (See "Construction Quality: Project Specific Quality Plans," June 2017.)
Avoid Costly Kinks in the Subcontractor's Supply Chain
How possible is it really to control and assure supply chain quality on your construction project? Projects vary so much from one to the other. They have so many moving parts and codes to adhere to. They require so many different skill sets, laborers, and materials. There can be several diverse and dispersed trade providers contributing to a subcontractor's product whom you may not know well, if at all. Yes, supply chains can be long and involved to protect, but when there's a failure in quality, which impacts your productivity and profitability overall, customer satisfaction and your reputation can be at stake. So, it's a business imperative to get the comfort you need. Consider the following "no control" scenarios and how easily they could have been avoided.
Crossing the wrong "finish" line.The contractor on a multifamily residential project was awaiting cabinetry from China. Samples were provided, shop drawings were approved, and a mock-up and full fabrication were completed. Once the material was packed and shipped stateside and delivered, it was discovered that the finish/color for the entire order was incorrect. This resulted in valuable time lost to reprocure the work and pushing out the project completion date. While it may be difficult and/or expensive for a project team member to verify material prior to overseas shipment, there are third-party consultants who provide inspection/verification services for foreign-sourced materials.
Do these vertical lines make me look tall?Curtain Wall Extrusions procured a curtain wall for a commercial installation in a northern US city. It was fabricated and coated in a factory in South America. The coating had a linear striation finish. Submittal was provided and approved, but when the material arrived on-site for installation, it was discovered that the striation on the finish was running the wrong way, going vertical instead of horizontal. This would have been noticed easily had it been installed on a mock-up. Submittals in isolation may not tell the whole story on the quality of materials. So, when fabricating long-lead items, particularly of proprietary materials like a curtain wall, not taking the necessary quality control and assurance steps to avoid mistakes can severely impact the project schedule and budget.
There's a right and a wrong side to punch out. Casework for an institutional fabrication project wound up needing postshipment field modifications. Why? While samples were provided, the shop drawings approved, and the full mock-up and entire run of fabrication completed, after shipment, it was discovered that the prefabricated punch knockouts were incorrectly located in the fabricated casework. Take the opportunity to verify that materials are compliant prior to shipment or during fabrication (e.g., color, size, details, etc.) so that a whole order is not completed incorrectly. Course correcting in the field not only causes delays, it can result in a lesser-quality finished product.
Think about areas of vulnerability in your subcontractor supply chain. How can you sidestep potential quality pitfalls and be confident that you'll hit your punch list on time and with accuracy?
There Are Controls for this!
There are many quality control and quality assurance approaches to help effectively manage and safeguard your supply chain and your project's outcome. They all begin with being proactive. While there are many detailed steps you can take depending on the kind of project and requirements, consider the following key activities as a core approach to build on and customize.
Start with a plan.In my June 2017 column, I detailed the importance of drafting a project-specific quality plan (PSQP) at the start that thoughtfully addresses how to apply quality best-practices specific to each project's needs. This is the best mechanism for ensuring that your project-specific quality risks are on the radar and the team will implement best practices to effectively manage them. The PQSP's emphasis is really about identifying risks in the supply chain specific to your project and commuting to an intentional means of managing them.
Dedicate a "quality" resource. A dedicated quality control/quality assurance director/engineer who is focused on all things quality for every project is key to driving the long lead material procurement plan; managing shop drawing scheduling; submitting quality control reviews; conducting the factory visits; monitoring, expediting, and inspecting material; warehouse management; project completion documentation; and other functions as determined.
Carefully review the submittals and shop drawings. These procedures are designed to identify inconsistencies between project specifications and the final product. Diligent oversight of the submittal process should include confirmation of production commitments, product finish status information, storage conditions, correctness/adherence to specifications, test reports, quality notes, photo documentation prior to project arrival, verification of stored materials, adherence to a fabrication schedule, etc.
Show up. Set forth a schedule to make factory visits or arrange for third-party visits to subcontractor/supplier manufacturing facilities. This will ensure progress is as reported and meets your quality assurance/quality control requirements.
Preselect alternate subcontract/suppliers. Make "worst-case scenario" plans to engage alternate subcontractors/suppliers in the event that a default occurs somewhere along the chain and the work cannot continue. Who does what? Who's on the short list? Just like an emergency response plan, if you never write it or think about it beforehand, it will cost you time. Even if circumstances change (and it's guaranteed they will), any time you spend identifying duties and plans in advance will be a major time save.
Plan for worst case/unforeseen scenarios. Uncontrollable factors (e.g., hurricanes, natural disasters, uncommon foreign holidays, etc.) can dramatically affect contemplated lead times during the course of the project. It is key to build enough time around key materials into the schedule, have a plan for local storage/stockpile, and continuously monitor for changes in lead time.
For large project packages requiring significant fabrication, add the following to your plan.
Monthly scorecards will ensure that both the fabricator and the subcontractor are aware of their performances.
Continually do the following.
Confirm that the subcontractor is current with its major vendors (ensure that you have contractual cut-through provisions to these vendors if needed).
Monitor field production. The labor force in the field will possibly only work to the amount of panels/units that are on site in the case of financial distress—trying to avoid layoffs.
Review bank lines and all long-term debt of the firm (get a letter of verification at the start and regularly throughout the project).
Periodically send a member of the operations staff to verify that the product is being produced in sufficient quantities to ensure that it won't adversely impact the schedule. This should be done weeks or months in advance of the first shipment to the job site.
Prior to delivery/mobilization in the field, visit the plant. Reviewing the production schedule is no substitute for being in the plant, physically verifying production, and making sure there are sufficient materials to complete the production run.
And If There Is a Default?
Act swiftly to immediately reprocure. Every day is critical. A few working days can mean the difference between the open spot in an alternative production line or a delay of months.
Quality Is Not Just Another Brick in the Wall
It's not enough for you to just know your subcontractor's supply chain, you need to take it one step further and control and assure its quality all along the way. By owning the quality aspect and valuing its impact to your project goals, you will have comfort knowing that you can mitigate risk throughout the scope of the project under the most unforgiving of project parameters.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
The author would like to acknowledge and thank coauthor Bill Lane, construction risk engineer at XL Catlin, for his contributions to this commentary.
In the push to deliver projects cheaper and faster, general contractors find themselves at an increased risk of default when making what seems like deals with the devil to deliver on such tight expectations. In fact, XL Catlin is seeing increased losses as it relates to construction supply chains.
Schedules are so tight that there is virtually no room for error. Add to that, supply chains are heavily taxed, particularly those producing core products in the construction industry—think commercial glass and PVC piping, for example. Chances are there are only a small, finite number of providers that can source/produce the materials you need or that can step in adeptly at the last minute to get a project back on track quickly when a component suffers a failure. Suffice it to say that rebounds to any errors, delays, or defects in orders can be lengthy and, therefore, expensive. And, the time and headache of having to reprocure materials because of an issue that could have been avoided greatly impacts the project. It wastes materials, can sacrifice overall project quality, hurts the client, and, ultimately, can be a hit to your reputation. So, taking control and assuring quality at key checkpoints along the way with your subcontractor is critical.