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Constructing to Budget in an Inflationary Economy

April 10, 2023 by Matt McGregor and Sean Duncanson in School Business Affairs

This article originally appeared in the April 2023 School Business Affairs magazine and is posted with permission of the Association of School Business Official Association (ASBO). The text herein does not necessarily represent the views or policies of ASBO International, and use of this imprint does not imply any endorsement or recognition by ASBO International and its officers or affiliates.

Designing and constructing your school district's project to fit within a budget can prove challenging at times. Doing so in an economy that is fluctuating significantly presents a new set of issues.

When your district is working on pre-referendum and planning, but not actually doing construction for two to three years, how do you build potential financial shifts into the budget? Here are four factors that can lead you to a path for success.

1. Flexibility
Leaders must realize that, in the planning and implementation process, certain items will likely need to change in order to either meet budget or accommodate scheduling. Factors such as supply chain issues and inflation have significantly changed the construction landscape.

To prepare for these issues, build in allowances, contingencies, or inflation factors based on the current market and the complexity of your project.

Keep in mind that, due to supply chain inconsistencies, installation of certain components may not follow the typical order of construction sequencing that provides maximum efficiency.

For example, the ceiling grid may be installed before the walls are painted. That would not be the normal preference, and it may cause some minor issues or a small amount of rework in the future. 

Another example would be that the power supply may not yet be operational, but it may make sense from a scheduling standpoint to proceed with installing the HVAC units. Again, not the order we'd prefer, but we need to be nimble and always ready to adjust.

It is important for the project team to know where they have the ability to be flexible, and what activities must occur exactly as scheduled or planned. Additionally, it needs to be clear what must be completed to ensure a school can open on time and what items might be considered optional.

2. Prioritize
Be certain from the beginning that you have a prioritized list of goals. Some aspects of the project may be non-negotiable, so make your team aware of what those are. Also remember that if everything is a priority, nothing is a priority. Be realistic and forthcoming about what matters most. 

Different projects have different emphasis or intent. Some district's projects are focused on increasing student safety, while others may strive to improve a certain curriculum, or their main goal may be to improve or maintain the infrastructure of their buildings.

Having these discussions with key stakeholders in the planning stages provides a much needed "North Star" for your construction team. 

3. Construction Sequencing
Break the project down into manageable portions. This will provide you with the needed options to pivot or modify scope if needed to stay on budget or schedule. Looking at your school's masterplan holistically will allow you to envision how you might shift if needed -- moving projects to a different season, if necessary -- while potentially utilizing your same referendum budget, or other funding sources.

Additional funding sources have included ESSER Funds (Elementary and Secondary School Emergency Relief), specific state funds, capital improvement funds, as well as interest earnings. 

We commonly break up large school projects by grade and sometimes by classrooms. Site work is always considered a separate portion, but it can further be broken out into areas such as parking and playgrounds. When obstacles and challenges surface, it is easier to pivot if these have already been divided up. 

4. Communicate
Communication has always been a critical element of construction projects. During challenging times, communication plays an even greater role. Always communicate issues to the entire project team to engage more minds in creating solutions. 

For example, subcontractors who regularly bid, install, and service equipment can often offer valuable advice and insights. Mechanical, plumbing, and electrical engineers may be unaware that specified systems and fixtures might be difficult to obtain and subcontractors might offer equally effective alternatives. By communicating with a multi-disciplinary team consisting of construction, engineering, and design professionals, you'll benefit from everyone being engaged. You'll also be more likely to ensure effective execution of your plan. 

Case in Point

Clintonville Public School District in Wisconsin provides a good example. The district completed planning and pre-referendum work through 2020, bid the project in 2021, and built over the course of the following two years. This was all done during this time of supply chain challenges, staffing trials, and inflation. 

Keenly aware that these issues could have paralyzed the project, here are some steps the district took:

  • Proactively addressed bar joist and deck manufacturing lead-times. During construction, the lead time to acquire bar joist and decks was in the 12-16 months' timeframe. A manufacturing slot was purchased during the design process to ensure the materials were available in time for construction. This provided time for the team to determine the necessary specifications.
  • Pivoted to accommodate chiller challenges. This project was scheduled around the cooling season needed for the building. With continuous schedule delays from the manufacture, the district and the design/construction firm had to be flexible and extend the project to the following season.
  • Purchased materials early to ensure items were available when needed. This meant identifying and obtaining larger than normal storage space. Extended warranties were purchased because the materials were not utilized as quickly as usual. 
  • Accentuated the positive. It is important to look for opportunities to get students, teachers, and the community engaged. With the length of time that it takes to complete a project, they need to see, hear, and experience progress. In Clintonville, the raising and placing of the final beam was a community event. In another school district, students and staff were invited to to sign the concrete floor prior to placing the wood gym floor over it. These activities created energy, synergy, and excitement. 

Over the Hurdle

You likely honed the skill of critical thinking as you led your district during COVID-19. You altered instruction, increased air flow to classrooms, cleaned your spaces in new ways, and implemented a myriad of solutions to unprecedented challenges. 

Utilize similar skills to tackle this obstacle and be certain to be flexible, establish priorities, break your project into manageable portions, and communicate feverishly. You'll leap over your construction budget hurdle like a pro! 

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