The COVID-19 global pandemic has created a unique, potentially significant capital plan challenge for engineering managers at food and beverage manufacturing plants across the country. At a time when most industries in the U.S. have had to stop operations, food and beverage distributors are running at maximum capacity. With most of the country still under Stay-at-Home and Shelter-in-Place orders, consumers have put a significant strain on supply chains for grocers and markets in virtually every region of the country. As a result, many engineering managers have had to postpone capital planning efforts just to keep pace with the rapid demand in production.
Now is the Best Time to Secure Contractors For CAPEX Spending Projects
Aggressively pushing back on capital planning efforts has created a significant, compressed spending coil of sorts for many food and beverage facilities waiting for the economy to open back up and for the operational strain to subside. However, putting capital spending on hold until the country goes back to some form of “business as usual” can have dire consequences for engineering managers tasked with appropriately allocating designated budgets before the end of the year.
Once the CAPEX spending coil releases, there will likely be a demand deluge around the country. Top-tier, qualified CAPEX project specialists, engineers, and contractors will quickly find themselves procured on other projects, resulting in a lack of available resources to manage all incoming engagements. To avoid missing 2020 CAPEX allocations and goals, engineering managers should act now, developing a projects queue and engaging the appropriate contractors to ensure they can proactively award contracts before the talent pool effectively dries up.
Best Ways to Position Capital Planning Projects Now
Additionally, beyond already approved spending, engineering managers should also be proactively developing projects outside the already established CAPEX plan in the event additional capital is released. Capital expenditures are based on profit margins, enabling facilities to simultaneously increase business valuation and decrease the tax burden. The massive influx in profits within the food and beverage industry means that many manufacturers will actually experience a surplus to consider in their budget, which will need to be used before the year-end.
Some planning considerations for engineering and plant managers strategically allocating both existing and surplus budgets include:
All engineering and operational managers have a “wish list” of CAPEX projects that are never funded because companies are focusing on bigger expenditures. Painting a room, floor updates, refreshing a breakroom; any of these smaller projects with short-term lead items that never receive funding approval should all be sourced and ready to execute in the event it does receive a green light.
Design and Engineering
COVID-19 has a significant impact on global distribution and supply chain channels for materials needed for CAPEX projects. Engineering managers will need to compress procurement timelines and remove extraneous variables to best source their projects. To avoid unexpected hiccups, facility executives should coordinate the design, engineering, and even ordering of equipment as soon as possible to ensure they are ready for install as soon as the project receives approval.
Spend demands based on increased capital will make it challenging to secure the very best contractors, making proactive planning now essential. Engineering managers should use this time to develop schedules for their projects, without a specific start date, and begin gathering contractor bids to determine duration and cost. Gathering all the preliminary contractor information now will enable facilities to quickly execute once the CAPEX floodgates open again.
Perry Construction Management has the resources available now to help food and beverage manufacturers optimize planning and execution on capital spending projects. Contact the team today to hear more.