Carol's Corner

Condo-Co-Op Hotline: Looking Ahead in 2021

About one-third of the buildings six stories or more in the city are in active Cycle 9 Façade Inspection Safety Program (FISP). Beginning on February 21, the number of buildings will basically double. The Cycle 9 schedule is:

Sub-Cycle 9A — Blocks ending in 4, 5, 6 or 9 Filing window: February 21, 2020 to February 21, 2022

Sub-Cycle 9B — Blocks ending in 0, 7 or 8 Filing window: February 21, 2021 to February 21, 2023

Sub-Cycle 9C — Blocks ending in 1, 2 or 3 Filing window: February 21, 2022 to February 21, 2024

For boards looking to perform repair work in 2021, there are pros and cons. According to the Associated General Contractors of America, New York lost some 41,600 jobs. That might suggest that there is an opportunity to have work done in a less costly manner.

However, the difficulties in the supply chain for construction may drive costs up. Large construction firms are investing heavily in artificial intelligence (AI) and sophisticated software to manage the supply chain, including identifying, ordering, cataloging and sequencing receipt of materials and equipment. This transformation of the supply chain arises out of efforts to save money based on the reality that each construction project is unique. The quantity of materials differs on every project. Moreover, the equipment requirements vary from project to project, so the size, capacity and quantity are different on every project. The sizing of windows and elevator cabs often varies as well.

The sequence for the need of various materials and equipment is specific for each project. Sometimes boilers are needed when the foundation is being constructed because the boilers need to be installed before the first floor is poured. In other cases, the boilers are called for later. In some situations, the sizing of equipment impacts other purchases, such as panels and the size and quantity of conduit and cable installed. In other instances, installing finishes, such as flooring or carpet, acoustic and sheetrock ceilings and electric outlets, switches and fixtures, is dependent on having windows installed and the building water- and weather-tight. Elevators are needed at different times in projects depending on the temporary vertical access, if any is available.

As construction costs and competition have increased, contractors have tried to manage waste, damage and losses in materials and equipment. That has led to a demand for more precise estimates of materials and equipment and more exact sequencing and scheduling. With AI, this is now possible in an efficient manner project by project. More companies will adopt this approach until it becomes an industry standard.

This more exact estimating, combined with waste and loss reduction, has put pressure on suppliers. Construction and material suppliers are asked for less inventory with tighter delivery times. Prices per unit are rising. Manufacturers make less product and hold less inventory due to reduced demand, so the per-unit cost increases. Manufacturers, too, are facing tighter timing demands. That costs money as well.

The ratio of labor to materials and equipment varies by the type of job, but materials and equipment are often between 35% and 45% of the project. With the foreseeable stresses on the supply chain, price increases in materials and equipment are a hard reality of the post-COVID-19 world.

Boards and property managers must adjust to the new pricing based on the changes to the supply chain. The best approach to manage this issue may be to take a page from the contractor play book and have the building design team do a tight estimate and schedule so that the supply chain issues may be properly forecasted and managed.

This column presents a general discussion. This column is not intended to provide legal advice. Please consult your attorney for specific legal advice.

Carol A. Sigmond
Porzio, Bromberg & Newman P.C.
156 West 56th Street, Suite 803
New York, NY 10019

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