Construction Cost Escalation – Developing a Pre-construction Crystal Ball
Wouldn’t we all like to have a crystal ball? To have the ability to see into the future, to know what’s coming and be prepared? (It would’ve been nice to know about the Cubs – we wouldn’t have had to worry all these years!)
In the construction industry, cost and labor escalation can make or break a project. Well-tuned pre-construction evaluation and overall estimating based on industry trends, current/future economics and past project data is the crystal ball for anticipating potential future cost escalation.
To develop your own crystal ball and properly forecast possible construction cost escalations, make sure to engage a construction partner that can deliver valuable pre-construction services through implementation of the following tools and philosophies:
- Use a combination of state-of-the-art estimating tools that can be deployed in any level of detail that is appropriate for the available specificity of information associated with a project.
- Utilize database generated estimates based on historical cost data, as well as on screen quantity take off, which allow you to leap many weeks ahead of the design progress in order to control the dynamics between engineering progress and budget management.
- Employ an internally generated costing wizard tool for conceptual estimating or conduct detailed quantity take-off of progress construction documents in order to generate detailed estimates that provide valuable information as the design progresses.
- Develop a deep understanding of the material and labor markets, as well as use the information generated in the estimating process described above to make timely decisions that are in the best interest of the owner.
- Place a high priority on management of price escalation with an aggressive, critical path-based procurement process intended to complete project buy-out as fast as possible (locking in subcontractor pricing) while keeping the project team more efficient by limiting how far the buy-out process extends into the “bricks and sticks” construction phase of the project.
PEAK’s crystal ball delivers by applying the tools and philosophies illustrated above which infuse the power of the builder’s market knowledge into the phase of the project where the most value can be gained.