BATTLING RISING CONSTRUCTION COSTS (as published in CIP 8/2006)

Written by: Michael J. Metz

As 2006 reached its midway mark, industrial construction was being buffeted by a strong updraft in building costs. Rising global demand for building materials, a limited capacity to produce many of those items and soaring energy prices fed this phenomenon.

Capacity has also become a major issue. Waiting time for steel beams longer than 65 feet and pre-cast concrete panels can take months for delivery. The faster components can be ordered and delivery accepted, the faster prices can be locked in and future increases avoided.

In some cases, costs can be trimmed and the whole project moved ahead more quickly by designing the building to use products that are available on shorter notice.

It can pay dividends to seek out a contractor who has a good handle on the outlook for material prices, and can take appropriate action to lock in on materials. A knowledgeable contractor can anticipate where prices might actually retreat in the coming months.

Subcontractors play a central role in the battle to contain rising material prices. Getting them involved early in the planning process can shave weeks off the order date, and lower the exposure to future increases on materials.

Contractors and owners are advised to build a reasonable contingency provision into the project budget to allow for material cost increases. However, the more quickly a project can move from concept to completion, the less time there is for prices to rise.

By adopting a pro-active approach to accelerating construction and material purchases while carefully selecting the components used in the project, it is quite possible to reduce costs by 10 percent compared to those of a project undertaken with a more traditional mindset.