Orion Construction is a Langley, B,.C.-based commercial and industrial building design and construction company.
Cost challenges
Inflation and wage pressures are atop the list of challenges for Orion, which employs 36 people directly and several hundred more through contractors on construction projects. The company has been feeling the pinch of inflation, especially high gasoline and diesel prices, which in turn increase other input costs.
Orion principal Joshua Gaglardi said the company’s costs are up 25 per cent to 30 per cent over the last two years, partly due to ongoing supply chain issues, but largely due to inflation.
“Fuel is a major determinant in our overall budget, and we’ve seen major increases recently,” Gaglardi said. “Really, fuel goes all the way down and manages its way through the entire supply chain. We’re seeing fuel surcharges on concrete delivery. We’re seeing fuel surcharges on delivery of steel and materials.
Unlike some businesses, Orion cannot simply pass on the increased costs to customers, Gaglardi said, due to the nature of the contracts it has with developers.
“We’ve got a limited ability to pass on costs to our customers because a lot of our contracts are based on fixed or stipulated amounts. So we’ve had to become very creative in our approaches.”
Solutions
Orion has ample warehouse storage capacity and has been leveraging it to allow its clients to buy materials like steel, HVAC equipment, insulation and piping well in advance of a project’s construction.
“We know from our suppliers that there are cost increases on the horizon. We then in turn go to our clients and say, ‘This is what we’re hearing from the markets; this is our proposal to alleviate the cost increases.’ And we present them with a solution where they can pre-purchase materials, and we can store them on our site.
“We’ve allowed for them to purchase that material early and therefore hedge their costs against inflation and allowing us to [build] our projects on budget or close to budget.”
Orion is now starting to feel the secondary impact of inflation: wage pressures.
“There is quite a bit of pressure on us to increase wages both for site staff and office staff,” Gaglardi said.
But rather than simply offer contractors more money, Orion offers them an incentive in the form of guaranteed payment for services within 30 days, as opposed to 60 days.
“By doing so, we’re able to provide a level of comfort to our trades and our suppliers and vendors,” Gaglardi said. “It makes them want to work with us.”
