Seeing the Storm: How Target Value Delivery Recasts Escalation-Driven Risk
Written by: Tammy McConaughy
A special thank you to Chad Waters of Brasfield & Gorrie for his contributions to this article.
The impact of the recent news alert, “U.S. Doubles Steel & Aluminum Tariffs to 50% Overnight,” is rippling across design and construction projects nationwide. According to Boston Consulting Group, this is an extra $50 billion hit to U.S. projects this year alone.
With these constantly rising costs, owners everywhere are asking, “Can we still afford this?” leading to value engineering exercises and scope revisions. Fortunately, Lean techniques provide a potential solution in the form of Target Value Delivery (TVD).
Tariffs: What are they, and what makes this storm unique?
Tariffs are a policy-driven tax that can double material costs overnight, whereas general inflation affects the entire economy more gradually. Construction cost increases tend to rise steadily within specific trades and materials..
Because tariffs shift in one direction and with little notice, they’re far less predictable than the slower, index-tracked movements of inflation or the market-driven spikes of escalation. On a project, that means a tariff creates an immediate budget gap that demands design or sourcing pivots, whereas inflation and escalation are typically managed through longer-term cost indices and escalation clauses.
| What changed overnight (June 4, 2025) | Why it matters |
|---|---|
| Section 232 duties jumped from 25% to 50% on nearly all imported steel & aluminum.
Source: https://www.whitehouse.gov/…/adjusting-imports-of-aluminum-and-steel-into-the-united-states/ |
A 250-ton structural package is suddenly 5–8% pricier before you even call the fabricator. |
| 22% of U.S. contractors already report tariff-related delays or cancellations; backlog slipped in May.
Source: https://www.abc.org/…/despite-tariff-impacts-abc-contractors-…-improve-in-april |
Schedules wobble, financing jitters, trust erodes |
Lean Lens Callout: Tariffs are a constraint; Lean teams exploit constraints to drive innovation & transparency, not reactive chaos.
This sudden, policy-driven cost spike leaves owners wondering, “Can we still hit our budget and get the facility we need, when we need it?” In a market where every headline seems to reroute material prices overnight, the instinct is to play defense—cut scope, slip milestones, or hope contingency saves the day—yet that’s exactly what turns a manageable risk into an open-checkbook scenario.
How can unmanaged tariff risk damage my project?
Unmanaged tariff risk compounds quickly: first it squeezes the GMP, then it torpedoes the schedule, and finally it detonates team trust. According to recent market reports, the average lead time for structural steel warehouse stock has tripled from 3 weeks to 9 weeks since the June 4 duty hike, while switchgear now averages 50-60 weeks and common HVAC gear sits around 45 weeks—roughly double pre-2024 norms.
Every extra week in procurement forces redesign loops, pushes critical-path activities, and drains float; Skanska’s spring trend report estimates that tariff-driven material delays alone are adding 1-1.5 months to milestone dates on large U.S. projects.
This is why disciplined use of Target Value Delivery—planned risk, transparent cost dashboards, and relentless team communication—turns those raw shocks into value-driven decisions instead of last-minute blame games.
What is Target Value Delivery?
What projects really need is planned risk, full cost transparency, and constant communication so decisions stay proactive, not reactive. That’s where Target Value Delivery (TVD) framework shines: by surfacing tariff exposure early, locking the team to a shared target cost, and running continuous “what-if” cost checks, TVD turns external price shocks into disciplined, value-driven pivots instead of last-minute budget bloodletting.
Target Value Delivery is a disciplined Lean approach that keeps design, cost, and stakeholder value synced to a shared target cost— and keeps that target current as the team learns. It rests on the Lean tenets of Optimizing the Whole, Eliminating Waste and cultivating a Respect for People.
Target Value Delivery flips the question from “What will this project cost?” to “How do we give the customer the outcomes they value—within the allowable cost and schedule—while actively managing risk?”
Why TVD Beats Traditional Project Delivery
Instead of lobbing drawings over silo walls and carving out scope when budgets burst, TVD invites every key partner early, surfaces risks like escalation up front, and turns surprises into informed choices—not last-minute value engineering.
The Four Fast Phases of TVD
- Business Case – Nail down the project’s purpose and “why.”
- Validation – Test and align scope, cost, value, and success criteria.
- Value Delivery – Design and build with the right partners at the right time.
- Post-value Delivery – Close out, measure realized value, and capture lessons for the next project.
TVD levers that neutralize sticker shock:
| Focus Area | What to Do | Why it works |
|---|---|---|
| Validation & Target Cost | Set the target cost 5–10% below the owner’s allowable cost. Log each tariff-sensitive package (steel, aluminum curtain wall, switchgear) as a planned-risk line in the Risk & Opportunity Register, with an initial dollar allowance.
Re-price the allowance every time updated quotes arrive; release unused dollars to “Opportunity” once the package is bought out. |
Creates a visible buffer and converts any leftover money into value-add upgrades instead of disappearing contingency. |
| Risk Log + Visual Dashboard | Publish a shared Excel document or Power BI board with three live columns for every at-risk package: Exposure ($), Mitigation Option, Decision Deadline.
Review the dashboard weekly in the Big Room; flag red items and assign “next action” before the meeting ends. Tie dashboard totals directly to the Target Cost breakout so owners see exactly where tariff premiums sit—no hidden cushions. |
Transparency starts on day one, shows how risk is managed relative to the Target Cost, eliminating hidden cushions or surprises. |
| Early Trade Engagement | Kickoff “Tariff Alignment” workshops with steel, curtain-wall, and switchgear trades during the first 0–15% of design to discuss price-lock windows, volume commitments, and alternative sourcing strategies.
Identify long-lead, tariff-heavy work packages (e.g., structural steel, main switchgear) and create early-release design packages stamped “price-lock ready.” Decision gates should be a part of the design planning, typically at 30%, 60%, and 90% design—labeled “Lock price / Pivot / Delay.” |
Early face-to-face alignment secures pricing or at least defines the “price-hold clock” before tariffs move again.
Carving out early-release scopes keeps critical materials ahead of duty hikes, while visible decision gates stop price locks from slipping through the cracks. |
Wrap-Up
Tariffs arrive overnight, giving teams zero runway to be proactive and sparking knee-jerk reactions that derail budgets, schedules, and trust. Yet when every duty-sensitive package is logged in the open, dashboards update weekly, and trades help lock pricing early, those shocks become sparks for smarter design and faster decisions. Target Value Delivery proves that constraints don’t shrink possibilities—they sharpen them. With a clearly defined target cost and a transparent risk log guiding the way, you turn volatility into competitive advantage.
Want to Level Up Your TVD Skills?
Seats just opened for LCI’s 6-Week Virtual TVD Workshop—a live, hands-on program covering risk dashboards, LPS pull plans, and should-cost modeling. Only 50 spots are available; reserve yours today and turn tariff turbulence into a strategic edge.