5 Ways to Reduce Cost Escalation

By Wayne Litton, Vice President of Project Development

It’s not uncommon for regulatory or financing issues to put industrial projects on hold for six months, a year, or even longer. If only market conditions could likewise stay frozen in time.

Unfortunately, material and labor costs fluctuate (usually upward), workforce availability shifts (usually downward), and construction risks pile up. By the time owners receive the green light to move ahead, the projected budget can be much higher than when they started planning.

But that outcome isn’t inevitable. Here are five strategies to regain lost momentum with less risk and cost when your project is ready to fire on all cylinders:

Move ahead with engineering and design. Instead of putting everything on hold when a project is paused, use that time to complete the engineering and design work. Yes, it adds some risk to the owner, but playing catch-up is one of the largest sources of cost escalation. Moving ahead with engineering clears the path for smoother sailing when the project is ready to proceed.
Engage your construction team early in the process. Contractors can offer valuable insights on constructability and material selection. Early collaboration between engineering and construction teams reduces the risk of missed details, costly change orders, and avoidable delays. When the entire scope is available to experienced contractors, the construction teams can develop a more effective sequencing plan that incorporates the needs of future mechanical scope installation. This is especially crucial when making up any lost time.
Complete pile testing. If your capital project requires deep foundations, engage a knowledgeable deep foundations team during planning. The team can provide guidance on the most appropriate, economical, and reliably engineered piles for the site. If the project is put on hold, the team can use that time to complete pile testing to optimize design. As a result, you’re ahead of the curve when the project is ready to move forward.
Allow for early procurement. Long lead times for materials continue to hold up projects for weeks and even months at a time. Allowing early procurement of key materials prevents material-related delays after the project resumes.
Involve local subcontractors. Local subcontractors have the inside scoop on specific material and labor availability in the area. Use this to your advantage by inviting local trade partners to assist with specification development. Designing to the materials and capabilities that are available locally will save weeks of delays in the crucial early phases of the project and costly rework during the remaining phases of construction. Relying on your local trade partners can also help clear hurdles to permitting and approvals, as they are knowledgeable of local logistical challenges that must be balanced with the greater public needs.

Collaborative Strategies to Reduce Your Risk

At BGCI, we advocate early involvement in the planning process whenever possible. Collaboration between all disciplines leads to better results for the owner, every time. Our processes mitigate risk, production hurdles, and specific challenges that plague projects. For example, we:

Maintain a deep bench of highly qualified and credentialed craftworkers who can be rapidly mobilized when project operations commence
Assemble project teams with subject matter experts on the scope of work
Use proactive planning to effectively procure, manage, and install correct materials
Eliminate surprises through frequent and proactive communication with clients and owners
Partner with our clients to help them navigate obstacles
Take care of our trade partners and suppliers so they are ready, willing, and able to respond to project needs as they arise

Every project requires effective strategy, planning, preparation, and execution. Preparation in early phases of the project is the key to success. It allows production to move forward in a controlled, deliberate manner and reduces the likelihood that a project will devolve into an environment of reactive acceleration, needless conflict, and highly inefficient schedule recovery. The best projects in the industry are employed using the concept of “slow is smooth, and smooth is fast.”

5 Ways to Reduce Cost Escalation

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