Building beyond barriers: Navigating tariffs to ensure project success
Navigating market volatility and tariffs can cause added stress and concern to construction budgets, especially in the education sector. Skanska’s Orlando team recently collaborated with Dave Sharma, chief facilities officer for the School District of Osceola County (SDOC), one of Florida’s largest and fastest-growing school districts, to discuss strategies to reconstruct Reedy Creek Elementary School with available labor and on an expedited schedule. Out of that collaboration, and in partnership with Skanska’s Project Planning and National Strategic Supply Chain leaders, they identified several challenges and best practices that can benefit facilities planners, builders and designers at any level.
While the owner balances many interests as they endeavor to keep their projects on track, they lean heavily on their general contractors to manage key aspects of planning and construction, including procuring competitive pricing through trades in the project planning process. Dave credits relying on data sources like Skanska’s quarterly Market Trends report to advise stakeholders on the trajectory of the market.
“I respect honesty and transparency from a contractor upfront,” says Dave. “Coupled with a broad scope of knowledge around data, vendor relationships, vendor, cost comparisons, market trends – having tangible data to inform conversations around actual cost is key.”
Factors SDOC considered in making construction and scheduling decisions included:
- Stakeholder and political implications, such as funding allocations
- Changing education requirements
- Facility needs and deferred maintenance
- Fixed schedules
- Population growth
- Labor costs
- Changing market conditions and tariff developments
The goal is to open schools on time and have a path forward regardless of potential challenges. “Progress over perfection is my motto,” says Dave.
With population growth in major metropolitan cities like Orlando, and aging buildings that require deferred maintenance, the demand for construction and labor continue to grow. These key items informed the decision for SDOC to construct Reedy Creek Elementary School outside of the normal construction cycle.
By integrating supply chain and market data and remaining adaptable to meet the labor market, Osceola Schools achieved more accurate preconstruction budgets, maximized subcontractor competition, and added a tariff contingency to accommodate legitimate tariff fluctuations for subcontractors on the job.
According to Vice President of National Strategic Supply Chain Tom Park, “we’re learning the uncertainty is more impactful than the tariffs themselves.” Tom continues, “It’s important for construction firms to leverage direct relationships with manufacturers because most manufacturers are working to mitigate tariff impacts by sourcing materials from other parts of the world, and this is keeping the supply chain competitive.”
While most education construction projects aren’t steel construction, many derivative products such as chillers can impact project budget since parts have to cross borders in tariff-impacted countries multiple times before the chiller is completed. These connections help shape budgeting accuracy and support prioritization with capital planning for owners.
Executive Vice President of Strategic Project Planning Steve Stouthamer is seeing more owners adjusting to better collaborate with builders to mitigate material and labor risks. Steve recommends the following for clients and owners:
- Have open discussions with contractors and be flexible with materials
- Review existing contract terms to understand risk exposure
- Establish tariff contingencies
- Implement pricing strategies
- Stay informed and adapt
“When making tough decisions, assess whether the benefit outweighs the risk – then proceed together,” advises Dave.
The Construction Market Trends report is developed by Skanska USA Building’s Project Planning, Strategic Supply Chain and Strategy teams.
The report is published quarterly, each February, May, August and November, with an accompanying Market Trends webinar. View the latest report here.