The Prolonged Impact of Inflation, Supply Chain Issues, and Labor Shortages on Municipalities
DURATION 5 min read
As a result of the pandemic and other economic factors, we are seeing firsthand the effects of inflation on expenses and operations in the water and wastewater industry. With inflation surging to a 4-decade high, District’s water and wastewater systems may find themselves in a perpetual cycle of rising costs. The ability to maintain normal services for our communities is greatly impacted by the supply and cost of labor and goods. Rising costs and increased scarcity of supplies and equipment will affect every step of water and wastewater system operations. Here we will review the challenges Districts are facing and offer practical solutions to mitigate operational delays, equipment shortages, rising energy costs, and more.
What Are Your District’s Cost Per Thousand Gallons for Water & Wastewater Operations?
When reviewing the operational impacts of inflation in your district, there are various categories of expenses to consider. For example, commuters such as operators, contractors, and engineers, are experiencing high fuel prices. Gas prices in Texas have increased from $2.10 to $3.00 a gallon since November 2020 and reached a record high of $4.70 in June 2022. Companies that rely on heavy equipment and truck use are now commonly requesting a fuel surcharge be added to their fees. Many workers in the industry can attest that this inflation has had a negative impact on business and personal budgets. In addition, costs for water treatment chemicals such as chlorine and caustic soda have increased. Chlorine prices, for instance, increased 350% to 400% since April 2020. If you haven’t calculated your cost of water and sewer lately you should consider doing so to see how the increased costs are impacting your cost to produce, treat, and deliver water and wastewater.
Common Shortages and Delays Districts Are Experiencing
Not only is there an increase in material costs, but there are also labor and equipment shortages, resulting in significant delays for both long-term projects and day-to-day operations. Since the pandemic, organizations have had difficulty acquiring adequate labor to fulfill their project demands, such as access to experienced and qualified engineers or contractors.
In addition to labor, material and equipment shortages result in considerable project delays. Acquiring water and sanitary sewer system components such as water meters are delayed up to four months, and possibly even longer for larger orders. Lead times for components such as gate valves, flushing hydrants, meter boxes, and inflow preventers can be expected between two to six months. Electrical components such as variable frequency drives, surge protection devices, meter cans, transfer switches, and generators have experienced lead times of up to a year.
Since Districts are experiencing such delays, it is best to take some precautionary measures when ordering materials and managing stock. Districts should work closely with suppliers to maintain stock and consistent purchase volumes for items that are used most frequently. For products that are difficult to obtain, it is recommended to buy them before the project begins to help avoid delays and additional costs mid-project. Districts should consider ordering critical components that have long lead times and high consequences if they fail prior to their failure to ensure limited-service interruptions. Districts should consider authorizing engineers and operators to have more oversight when making equipment purchases to allow more flexibility when supplies are limited. Lastly, it is beneficial to increase communication with contractors to ensure price expectations are clear and cost security is achieved, especially on large-scale projects. This mutual understanding will reduce the risks associated with cost increases and result in a more transparent and efficient project schedule. In these highly dynamic market conditions Districts find themselves in, serious consideration should be given to proactively manage water and wastewater system maintenance and planning. There may be a hesitancy to make needed repairs or begin projects knowing these concerns, but deferred maintenance and delaying needed project, may still ultimately result in higher prices, or emergency failures.