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LePanter’s 7 Steps to Address A/E/C Supply Chain Risks

LePanter’s 7 Steps to Address A/E/C Supply Chain Risks

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Construction expert, author, and attorney Barry LePatner advises on need for architects, engineers, and construction industry to hyper-focus on risk management as domestic manufacturing escalates; ‘business as usual’ in a post-pandemic world will lead to costly mistakes.

In a post-pandemic world with more than 30 percent of materials, products and equipment needed for all construction projects still coming from overseas as part of the $1.5 trillion construction industry, owners and their project teams are facing new and significant risks that often go unnoticed or unresolved, notes construction advisor and author Barry B. LePatner. As a nationally recognized consultant to the real estate world and its construction lenders, LePatner warns that the post-Covid era has raised new and troubling new areas of liability and costs.

“Managing risk is much discussed though little performed,” he says. “The A/E/C industry faces a slew of new liabilities as the re-structuring of the global supply chain continues to impact project deliveries.”

Even more worrisome, he notes, is the fact that the industry remains largely unaware of and unprepared for numerous new supply chain regulations, geo-shifting of previously established manufacturers, and the new risks resulting from a large-scale changing of distributors.

As owners become increasingly dependent on their design and construction teams to pay attention to the specification of products, materials and equipment impacted by overseas uncertainties, a few critical questions include:

  • How can contractors and subcontractors today continue to contractually commit to a promised date of delivery for products specified as part of their construction obligations?
  • Who will bear responsibility for delays and cost overruns when owners—who are facing huge interest costs on their construction loans—are forced to delay completion of their projects or required to pay healthy premiums to secure priority on the wait lists of costly domestic manufacturers?

“Business as usual will lead to costly mistakes,” LePatner says.

To address critical changes to the supply chain, the author of Too Big to Fall: America’s Failing Infrastructure and the Way Forward suggests that design professionals who prepare the product specifications and contractors who agree to purchase them for their clients’ projects must take all or some of the following seven steps to show they have done the minimum due diligence or face scrutiny and liability when overseas shipments fail to arrive or are delayed:

  • Identify which of your current products are being manufactured overseas and directly confirm current shipping times to the U.S.
  • Identify those products and materials that are manufactured from critical materials that are in great shortage due to the war in Ukraine or environmental or other legal impediments.
  • Firms should diversify their sourcing, production and distribution networks for each essential category of products and materials, i.e., provide for multiple resources for key architectural, mechanical, electrical and plumbing elements of the project.
  • Filter your specifications by asking which products currently have backlogs that may threaten the timeliness of on-time delivery to your project.
  • Identify products or countries in which they are made that have been included in current sanctions by the U.S.; e.g., not complying with United Nations ILO Conventions that prohibit child labor or hazardous working conditions;
  • Improve the likelihood of avoiding specification of products that represent project risk by developing a proprietary data base that connects data from suppliers’ customers, their upstream suppliers and exposure to countries under sanctions for various reasons. Compiling detailed supply chain data will provide your organization a complete advantage for future new projects and avoid the risk of costly supply chain surprises;
  • Adopting technology to address the multiple threats facing each project’s supply chain is no longer optional but a critical necessity. Firms must explore the use of software platforms such as FRDM.com, which employs thousands of vetted media sources, reports, court records and research from vendors themselves to mitigate risk, improve supply chain transparency and identify potential risks as they are updated.

“The world of design specifications has taken a risk\reward turn that can no longer be ignored by A/E/Cs hoping to successfully navigate projects to a successful completion,” LePatner says. “The continued risk of a turbulent supply chain for the materials, products and equipment ordered abroad will no longer tolerate any degree of complacency.”

About Barry B. LePatner, Esq. 

Barry B. LePatner, Esq. has been a nationally recognized construction attorney and advisor to corporate, commercial, and real estate developers and lenders for more than 40 years. He is also the author of Too Big to Fall: America’s Failing Infrastructure and the Way Forward and Broken Buildings Busted Budgets: How to Fix America’s Trillion-Dollar Construction Industry.

 

 

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