A colleague of mine is constantly entertained at the stream of quotes and colloquialisms I use. So, in the spirit of authentic sharing, I’ll drop a couple here for you:
“What’s in a name? That which we call a rose
By any other name would smell as sweet.”
— William Shakespeare, Romeo and Juliet, Act II, Scene II
“You can put your boots in the oven, but that don’t make ‘em biscuits.”
- Old Texas Saying
Those are two sides of the same coin, I say. If two things are truly the same, the name might just be irrelevant, or at least able to be worked around. But, if they’re not, no amount of good intention will suffice. We flip that coin when materials are substituted on our projects, whether we know it or not.
Costs of materials are rising
For a variety of reasons, we are in a time of elevated risk with regards to material substitutions.
All cost escalation presents higher risk of materials being substituted, whether the cause of the escalation is inflation, tariffs, a global pandemic, or supply chain impacts caused by climate events like Winter Storm Uri back in 2021, or a logistical problem like the Evergreen container ship stuck in the Suez Canal back in 2023, or even political events like the 2020 coup in Papua New Guinea.
At this point, we all feel like we must have seen it all, but I’m sure there is some new scenario lurking just around a corner. We are a highly interconnected world, and when the proverbial butterfly flaps its wings halfway around the world, the chance that we feel the impacts on our own projects is very real. As one result, materials get substituted. Optimistically, I think most substitutions are not malicious, but rather are the result of folks just doing their best to get the job done. No matter the intent, substitutions can have serious impacts.
In this situation, it is up to builders to understand the impact of substitutions and put the processes and technologies in place that allow them to be prevented, identified, and/or managed. But how?
The management of substitution impacts is done in three steps: Identification, Understanding, and Risk Mitigation.
Material substitutions need to be managed
The management of substitution impacts is done in three steps: Identification, Understanding, and Risk Mitigation.
First, project teams should work to identify potential problems before they become a serious risk:
- From the earliest stage of subcontractor contact, facilitate ongoing conversations about materials. The sub is closer to their supply chain; they can tell you in greater detail what their particular concerns are. Listen to them. Make sure to talk through potential challenges and adapt as needed. This proactive strategy will go a long way towards preventing and mitigating the impacts of materials issues.
- Know and understand the specifications and contractual requirements. In addition to the absolutely necessary practice and discipline of reading the full specs and contract, this understanding can also be augmented with technologies that allow project teams to “chat” with their contract to identify specific requirements ad hoc. Consider the value such a tool could bring in terms of errors avoided.
- Understand what has been approved through the submittal process and then go on to cross check materials deliveries against those approvals. Pay close attention to submittals that have been returned and marked “Approved as Noted”. Be sure your subcontractor has addressed these notes prior to material release.
- Trust – but verify. As an extension of the earlier conversation about supply chain challenges, project teams must work closely with their subs to track materials as they make their way to your site. This may take the form of ongoing conversations, but there should also be documentation to back up what you are hearing, and you should be provided with that documentation in the form of emails, invoices, etc. A material tracking log will serve as a baseline to organize and prioritize these conversations.
Monitor material substitutions
The next step in identifying these risks happens when the materials are arriving on site. Project teams must:
- Know not only the type of materials expected; they must know the quantity. What is supposed to arrive on site today AND how much of it? Either the wrong material OR the wrong quantity of material can be a serious red flag that should not be ignored.
- Have a robust process for acceptance of materials that provides the aforementioned cross checking. In most of the industry, this is still a manual process, but tech solutions to assist in this process are emerging.
Understand the reasons for material substitutions
At first sign of variation from what is expected, do a deep dive on root causes:
- Was it a simple accident or error?
- Is the sub struggling to acquire the right material?
- Is the sub struggling to buy enough material?
- Is your sub in financial distress? And if so, is this stress localized to the current issue i.e. caused by the escalation, or are there other, larger factors in play? In other words, do you need to solve for this specific one-off problem? Or for this subcontractor partner overall?
Perform risk mitigation
Then assess options:
- It may be possible to discuss the problem you are seeing with the sub and never have the problem again. I have seen it many times. Just bringing the problem to their attention, letting them know you are aware and watching, can solve a lot of problems. So, to drop another common saying “if you see something, say something.” Have the conversation, provide notice if appropriate, and document all of it.
- If the problem requires more, once you understand the nature of the challenge, work together with your subcontractor partner to make a targeted risk mitigation plan for that specific challenge:
- Is the challenge financial? Explore options for direct purchase or whether the sub is owed a change order to address the escalation.
- Is the challenge related to Supply Chain? If so, are there alternate suppliers? Can you work through the approved substitution process to arrive at a material that is more readily available?
- Is the challenge labor related? Is your account being well managed? Has the sub lost a key team player, is there someone new or less experienced managing your account? Explore whether there is there someone on their team they trust to take the reins? Alternately, you may decide to assign a project resource to help manage alongside your sub’s team.
Of course, all these items are best understood and addressed proactively. Cultivate a focus within project teams on prevention, early risk identification, and targeted solutions. Having up-front conversations to identify potential challenges allows you to put those same risk mitigation strategies in place in advance and avoid the problem altogether. All of this may seem like a lot of extra effort on the part of an already busy project team, but, as Abraham Lincoln is attributed to have once said, "Give me 6 hours to chop down a tree, and I will spend the first 4 sharpening the axe."
