On the Inside with MEP: MEP in the Procurement Phase
The supply chain climate has changed over the past few years, and this has altered the MEP procurement phase. Planning early is more critical than ever. Making equipment decisions sooner in the process can not only keep projects on schedule, it can also translate into significant cost savings.
In this episode of On the Inside with MEP, DPR experts discuss the increasing supply chain demands and how they have affected the procurement process.
This episode of On the Inside with MEP, included the following DPR experts (in order of appearance):
- Raj Komuravelli, MEP Coordinator
- Michael Curreri, Senior MEP Estimator
- Andrew Metzger, MEP Estimator
- Eddie Spinella, MEP Estimator
- Blair Calhoun, Project Executive
This discussion has been edited for clarity.
Raj: So when it comes to procurement, planning, planning, planning is really important in these market conditions, with the supply chain demands increasing so much.
Michael: Custom air handlers were once 20, 24, 28 weeks. Now we're running 48, 50, 52 weeks to get these custom air handlers.
Raj: When we order a piece of equipment, we have about 10 to 15 vendors at least. When we order that and the order goes through, it takes a number of weeks for those suppliers to order those pieces of equipment because we are in line.
Michael: Pumps, air handlers, boilers, chillers, cooling towers all have chips in them, and that's driving delivery times to be longer than what we've traditionally seen in the past.
Raj: The assembly takes a day, but one small component, one small chip, if that component gets delayed, the whole assembly gets on hold.
Andrew: Certainly in the current supply chain climate, getting anything and paying more is kind of out the window. In fact, a lot of vendors are taking away their, "Hey, pay to be at the front of the line," type of situation just because they can't predict what they're going to get.
Raj: The mega vendors, they are mass purchasing and making mass deals with the vendors and the vendors' reps. Due to that, all of the production and all of the materials are already in line because of the relationships which those folks are making with these vendors. And they're cutting these deals in advance so that they're in line, in queue.
Eddie: So imagine if you're trying to put a chiller into this beautiful data center and you've got all the trades ready, and the chiller's late. It's like, well, you're kind of sitting around and, you know, time is money with these guys.
Blair: We still have a quite sizeable capital project portfolio compared to any individual company. So, if we start taking the same approach, it's simply saying, "Yes, we've got 10 clients that match up to be one Google, but those 10 clients still need all the same major pieces of MEP equipment. So, why don't we do similar to what our big players are doing?"
Andrew: What you have to consider is that the MEP systems in the buildings that we put together are 50% to 80% of the cost of these buildings. So, making a decision early on equipment and being prepared to lock that in can really save you some money down the road in the long run with that facility. You're taking advantage of the fact that you've locked in one of the more expensive components of your building at an early date, and you're saying, "Listen, we're willing to be flexible, you know, and potentially compromise on a couple of other features of the building in order to maintain that budget that we were first looking for."
Blair: Because that's the bigger risk. The risk is not really the individual units. That's another change in how we think about them. When you think about the cost of an individual, let's say, chiller—$200,000 to $300,000—but the cost of a schedule hit of a week, two weeks, three weeks, dwarfs that for most of our significant clients. So, that's why we have to rethink how we view the cost of waiting on procurement until the end.
Raj: Right from the pursuit phase, when we are going to this presentation with the owners, designs are there. Designs are getting developed—30%, 50%—whatever that phase is when we go to the pursuit phase.
Blair: So, it used to be procurement of our major MEP units was during the buyout phase with our trade partners. The new thinking is that will happen before we actually get to our trade partners.
Raj: Push for getting our trade partners on board just for purchasing the equipment. Or, if there's ability to purchase directly through DPR OES, do it.
Blair: And what we're now saying is that the risk will be shared in a different way.
Michael: You start getting one immediate cost feedback, right? You get constructability experience that's taken from past projects that we've done and bringing them to the table to tell a project team, a design team, or an owner, "Hey, this works well," or, "This doesn't work really well." We are bringing real-time cost knowledge to the table so that your decisions, that owners' decisions, aren't specifically based upon design. They're based upon design, cost and constructability.
Posted on May 8, 2023
Last Updated May 5, 2023