Steel Advice - The Fabricator's Resource
Staying within the working budget
Negotiating Partial Purchase Orders
Building owners and their contractors continue to deal with financing restraints into this new year. Projects that do go forward are being managed according monies that are released by the bank in stages. Staged financial activity forces contractors to award work in segments to the subcontractors. Steel fabricators receiving partial release purchase orders from the contractors face yet another challenge in this difficult market.
An innocent bystander might think that partial release of projects is no different than being awarded the whole project at once. The level of uncertainty created by the bankers will manifest itself in the activity of the steel fabricator's subcontractor and suppliers.
Fabrication schedules may be impacted as our subcontractors take on other work to fill gaps in their production. Suppliers may sell out their inventory and material prices could increase. All of the pricing advantages that helped you to create a successful bid could be lost due to a staged project release.
What to do about it? Find out as much as you can about the planned stages. Create pricing budgets according to that plan. Create a schedule according to that plan including shop detail drawings, material order and fabrication schedule. Get your suppliers and subcontractors working with you on the proposed schedule early. Work closely with your customer to ensure that the progress is staying on track.
As the project moves along, monitor the activity closely. Pay particular attention to how both accelerated and delayed dates will affect your production. Notify your customer immediately if the project is impacted.
While this sounds like lots of work it is the only way for you to be sure that the project will stay within budget and be able to be fabricated and delivered on time. Partial release projects that are left unattended will surely run over budget while the job manages you.
Staged project release inhibits shop work load
Continuity is the key to making money off any job in the shop.
Managing the shop work flow with partially released projects will be more difficult than dealing with the subcontractors and suppliers.
Labor hours for the extra starts and stops on a project will impact the fabrication budget.
Material staging adjustments for fabrication on stalled projects create unplanned labor hours too.
Work with your shop staff to find ways to prevent overtime and layoffs. Post and maintain the anticipated schedule for staged projects so that everyone can plan accordingly.
While getting partial awards is not a favorite way of doing business, it is still work for the shop. Managed correctly it may even still be profitable.
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