WHAT AFFECTS THE COST

WHAT AFFECTS THE COST

Global Economics The Cost of Construction is often affected by global economics. Some examples are outlined here:

• Trumps trade war with China has resulted in tariffs on US timber into China. And this had a knock-on effect on timber prices globally because the Chinese are buying timber from sources that we usually use. Coillte Irish forests are under pressure too. We are currently in a timber shortage, and so it has become expensive.

• In 2004 there was a steel shortage globally, which drove the cost up. On a project I was running, the QS suggest delaying the project to redesign the building structure to be a concrete frame, rather than a steel frame, which the client chose to do. Time was sacrificed for cost savings.

• Brexit caused many UK building suppliers to stockhold, and this lead to increased costs of these items.

• The 2008 global recession caused mass emigration, as we all know. Previous recessions and their bounce backs had a shorter time between them. This last one had at least ten years before the banks started to lend freely again and the construction industry became buoyant again. But by this time the carpenters and block layers who had left for Australia, etc, had gotten married or had children in school. It was much more difficult for them to come home. So we still have the staff shortage, and this drives cost up.

Asking designers for reduced rates only allows them to spend less time on your project. You can compare different designers by asking for a broken down list of deliverables, and then compare.

Haggling with a builder would not result in a lower Cost of Construction, just lower profit margins for the builder or his sub-contractors. Tendering is the proper way to get a “best price”. We will jump into detail on that later.

Supply and Demand The previous recession lead to many construction workers emigrating. This shortage of workers also causes an increase in their rates.

If many people are building homes, and contractors are in high demand, they can charge more.

Many people want to carry out minor home renovations starting in September to be ready for Christmas, and so this is a time when contractors are in high demand. It is better to start way earlier in the year.

Skill and Brand If a contractor or designer has been in business for many years, has multiple projects as showcases, and many happy past customers, their reputation would allow them to charge more. You benefit from their experience.

Cost Estimates per sq m

Estimates from a local QS

Tender Returns

Agreed Contract Price

I know I charged less in the first two years of business. I went above and beyond for the people who took a bet on me, so there are pros and cons to using experienced to new businesses.

Qualification If a contractor or designer has extra credentials from a competitor, they can charge more. If a contractor is an expert in a particular skill, for example conservation work, then they have that advantage for that particular project. If a designer has more appropriate skills, like engineering qualification for roads / site works / large structures then they have the advantage there.

TOP TIP:

Remember the note from page 11, Module 1, topic 2 about the three elements?

COST, TIME and QUALITY.

Only two can exist at any one time, at the sacrifice of the other.