Bringing a Project Into Budget

By: Mary Beth Hewett
Construction News Reporter – Builders Exchange

It’s time to REGROUP! Unexpectedly high bids can send an owner scrambling for solutions to bring their project into reality.  Whether they decide to reject all bids, revise the project to stay within budget or find money elsewhere – these are the decisions an owner faces when seeing the gap between what they predict a project should cost and what price the construction industry places on it.

After the economy crashed and construction went from a torrent to a trickle, cost of building products began creeping up. In particular, the cost of materials such as concrete, electrical wiring, and steel, coupled with the rising cost of petroleum products, transportation and insurance have made estimating projects a wild card.

Two years ago it was not unusual to report bid lists in excess of 10 to 15 primes. Bidding was at rock-bottom prices, and bid cheaply just to keep enough work to employ their key people. But they were bid too cheaply and these unsustainable low prices have caused subcontractors, and general contractors to go out of business, tightening up the pool of qualified bidders.

Most of the time bids come in higher for several reasons:

  • Unforeseen, unknown items that might or might not be in the drawings, in particular older buildings
  • Overtime projected on the schedule will drive costs up
  • Material pricing is stale-dated
  • Labor Pool – who is available, location of project, travel related expenses
  • Project underfunded, but bid with the intention of identifying a contractor willing to work within their budget

Ways to bring the project into budget include:

  • Redesign – something may be taken out of the project, re-scoped
  • Value Engineering  – reduction in cost of construction without redesign; alternate product type
  • Sub-pricing – clarification on drawings in order to achieve supplier/subcontractor savings

The key to having a project come into budget requires clear communication from the owner to the design team, and the design team evaluating the materials and systems to be used as they are integrated into the design. Input of knowledgeable contractors can be especially useful. This is where you can realize the full value of changing products, prior to bidding.

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