Construction Supply Chain Challenges & Solutions for the Life Sciences Sector
By Jeff Peragallo, Director and Vice President of Operations, Linesight
Fueled by the need to manufacture and deliver COVID-19 vaccines while continuing to supply life-saving therapies for other diseases, there has been a dramatic increase in demand for life sciences projects. To support the industry, US commercial lab space has increased by 12% this year to 95 million square feet. Commercial property owners have also been repurposing empty spaces into medical and research facilities. Unfortunately, the pandemic has created significant problems for the construction industry, where increased demand and activity in the life sciences sector are driving new challenges.
Where Are We Now?
In an effort to manufacture the latest COVID-19 vaccinations and to maintain the supply of critical drugs, the federal government has been incentivizing manufacturing. Currently, drug manufacturing is a globalized process. To strengthen the US economy and avoid supply chain disruptions, the government is encouraging the onshoring of drug manufacturing facilities. Unfortunately, having spent the last two decades investing heavily in offshore facilities, large pharmaceutical companies can find it cost-prohibitive to bring their manufacturing capabilities back to the US. This creates an opportunity for small-to-medium-sized companies to benefit from these incentives, which make domestic manufacturing more financially viable.
This increased spend on vaccine manufacturing, along with other life science project activities, is driving increased demand for skilled construction labor. Skilled construction labor is already in short supply, with construction employment expected to grow by 5% by 2029, faster than the national average for other occupations. In 2019, 80% of contractors were reporting difficulty in finding skilled labor, and the increased demand is exacerbating these problems. It is also impacting the supply of more specialized materials and equipment that are needed in life sciences projects.
Improving Assurance of Supply
In order to make certain that all contractors have adequate resources to complete the project on time, it’s important to establish an open and honest dialogue with them and conduct thorough due diligence as part of the prequalification phase (prior to bid). Clients need to understand the contractor’s backlog of work, their cash flow, labor availability (including what they can commit to the project), and their material supply chain (and risks associated). To secure contracts, contractors should be prepared to include a commitment of workforce resources in their project bids, and these commitments should be a factor in the award of the work.
It’s also important to understand the local and regional labor conditions where the project will be built. This can be done through labor surveys or by joining local construction organizations. Project managers need to understand where the labor for the project is coming from—can local labor be obtained or will labor be traveling to the job site? This will help understand what is needed—including pay, site amenities, and site conditions—to attract and retain craft labor to the project. Prioritize working with locally qualified subcontractors, and expand the search out to state and region, if needed.
If there is a shortage of on-site labor, or if there are risks or regulations around the number of employees allowed on site at a time, it would be beneficial to consider alternative construction models. Off-site and modular construction can help keep the project on schedule, even if there are issues with on-site labor. Off-site labor models allow components of the project to be built by the manufacturing industry, with skilled labor only needed when assembling the components on-site. It has been gaining in popularity throughout the pandemic as a way to keep projects on track, even with physical distancing regulations in place.
In order to mitigate supply chain disruptions, communication and transparency must be maintained. During pre-qualification questionnaires, discuss on whom contractors are relying for critical materials and equipment. Understand the location of suppliers, if they have diversified vendors, and have open conversations about the potential for supply chain disruptions. Contractors need to understand the importance of keeping life sciences construction projects on schedule.
Reducing Supply Chain Disruptions
To meet the demand from the life sciences industry, there is an increased demand for domestic research and development, manufacturing, and distribution facilities. This has fueled the need for builds related to life sciences infrastructure, with substantial new projects and renovations in the pipeline. To meet the demand for these projects, clients and construction organizations must work together to strengthen domestic supply chains and improve the available labor pool. This means increasing the quality of the conversations around contractor financial health, resource availability, and supply chain risks.
Jeff Peragallo is Linesight’s Head of Life Sciences for the US, with more than 30 years’ experience in the pharmaceutical sector, establishing and maintaining relationships with key business leaders, actively contributing to their business strategies, and effectively developing cost reductions and implementation plans. His background includes project management and cross-functional team leadership in alignment with corporate strategy and vision. Jeff’s expertise also includes procurement, contract administration, project and construction management, as well as planning and scheduling.