What Keeps Me Up at Night
By Gregory J. Offner (08/07/2007)

Offner

Instinctively, savvy shoppers know a bargain when they see one, but the winners in today's economy understand the concept of value purchasing — purchasing ahead of the need.

My mom is the finest example of a value purchaser that I'll ever know, and I think most moms are instinctively value-minded. I remember as a young boy the spring ritual of riding with mom to purchase a new winter coat. She knew that in April you could get the past season's styles for 20 percent of the regular cost.

Unlike speculation buying for resale or profit, which investors might do with real estate or securities, value purchasers like my mom acquire products and materials in advance of the actual need, to take advantage of lower prices and availability. That same philosophy can be applied to create savings during the construction of justice facilities.

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Researchers predict an additional $27 billion in corrections spending during the next five years, according to a study by Pew Charitable Trusts. In view of this, common sense should tell us that as the justice facilities construction market grows, competition for materials and products specific to our industry will increase.

As industry consumers, each of us understands when products are in demand, prices go up. When product availability is scarce, prices rise even higher, and you'll have to wait in line to get them.

Should facility planners think about market conditions as they develop projects? I know that as my projects move forward from the concept stage to a design phase, the opportunity to acquire materials within my project schedule and budget is greatest if I purchase early and, if needed, reduce the scope of the project later. If I wait until I'm in the construction phase, I'm in a survival-shopping mode.

Consider these factors to value purchase equipment and materials:

Building Type: Look to pre-purchase the quantity and quality of materials and finishes normal for a justice facility, such as detention hardware, precast or steel cells, and even courtroom millwork, which can be premanufactured and stored until it is time for installation.

Schedule: Try to optimize scheduling to meet the economy. Predesign the materials, and look at early procurement of products you will eventually furnish to the contractor to install. This can save you up to 5 percent in material prices and markups and more if the products are sales-tax exempt.

Economy: PVC products are affected by crude oil prices. Transportation costs continue to rise, steel products are once again on the endangered-products list, and prices are on the upswing. Contractor's costs and professional services rates will rise with the economy, as well. Shop for those services early.

During the early design phases of a project, a design and program management professional is capable of working with the development team to establish the type and quantities of construction materials necessary for a project.

Some of the materials identified may be off-the-shelf products available at local hardware stores. Materials, such as PVC piping, steel conduit, metal studs, gypsum wallboard, copper wire and piping will be necessary. Typically, most construction contractors are used to taking a value-purchase approach in the procurement of equipment and materials for these common products.

The early purchase of products in bulk, before they are actually required on the job site, can add 3 percent to a contractor's bottom line. For the average speculative home builder and commercial contractor, pre-purchasing and warehousing these materials have become standard operating procedure in today's marketplace.

As the justice facilities construction market grows, competition for these off-the-shelf products will also be fierce. Depending on the size of the project, planners should consider value purchasing a year in advance of groundbreaking, and plan on possibly making purchases two years before the product or material will be incorporated into the work.

Off-the-shelf materials are not the only products common to a construction project that will be in short supply. In analyzing value purchase opportunities for past and current clients, there are several products I usually consider for early purchase because they are historically in short supply.

I encourage my clients to think outside the traditional-materials box and focus on the essentials. These ideas could expand the value-purchase approach if a client decides to utilize the pre-purchase method to get a jump on the market.

When it comes to value purchasing, two lessons I have learned are: Don't pre-purchase nonessentials, and shop early locally, purchase early globally.

Most areas in the country do not have enough global purchase clout to get the best value in a nationwide or worldwide material competition. International marketplace value purchases are becoming more and more practical for bulk purchase of items in short supply locally, but may be subject to global market spurts and could disappear at a moment's notice.

Consider locally procured items and the use of centrally located warehouse facilities to provide and store normal construction materials for a project. Items would include traditional products such as cement, structural steel, reinforcing steel, brick, concrete masonry units, glass, insulation and roofing materials.

Detention locks, security hollow metal products and stainless-steel products are also good early purchases. Other expensive, long-lead purchases, such as emergency generators and switchgear, are finding their way into the early purchase and warehouse category as well.

Another method to enhance value purchase can result from standardization of certain types of equipment, such as pumps, valves, electrical equipment, fire-protection equipment, and other mechanical and electrical products currently in use at other facilities. There is likely a considerable amount of purchasing history for these products from other projects that planners have worked on.

The selection of materials for your current project will have a known availability base for quantity and delivery. Maximizing the use of these types of materials in constructing a new project will increase purchasing power by possibly utilizing existing negotiated contracts for materials and services. This makes economic sense to the facility operator, as well as the taxpayer.

Gregory J. Offner is vice president of DMJM H+N – AECOM located in Arlington, Va., and a member of the Correctional News Editorial Advisory Board.

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