Street Smart. World Wise. Cost Consulting & Project Management, Altus Group Limited 2020 - 4th Street SW, Suite 310, Calgary , Alberta, T2S 1W3 Canada T 403.508.7770 F 403.228.1020 Procurement Risk: Strategies for Cost Mitigation There are always going to be many moving parts when designing and constructing a building; parts that must be executed at just the right point for a smooth process. Recognizing when each part, and therefore player, is to become involved in the project is key, not just for a welltimed project, but to help manage costs of said project as well. The best way to minimize risk of any sort is to proactively understand what risk there is. Below are four areas of common areas where risk has the potential to increase your project costs. By looking at these, you can proactively develop strategies to mitigate costs both in the design and construction of your building. 1. Procurement Cycles Procurement cycles look at when you should be acquiring the goods, labour, and materials for your project. Because of Canadas climate, most companies will do their design work in the winter to help minimize cold weather construction costs (e.g. concrete pours in the cold can be astronomical), preparing for physical construction to start in the spring. As Altus has seen a 4 6% increase on both labour and materials in the past year, you should understand that the best time to start engaging contractors, designers, and subcontractors in your construction process isnt in the spring, or even at the end of the winter. Rather, it should be right at the beginning of the concept / design phase. Doing this, you are able to mitigate costs through proper party engagement, proactive purchase of goods / materials, and by developing a full project scope, limiting last minute changes.
Transcript
Street Smart. World Wise.
Cost Consulting & Project Management, Altus Group Limited
2020 - 4th Street SW, Suite 310, Calgary , Alberta, T2S 1W3 Canada T 403.508.7770 F 403.228.1020
altusgroup.com
Procurement Risk: Strategies for Cost Mitigation
There are always going to be many moving parts when designing and constructing a building; parts that must be executed at just the right point for a smooth process. Recognizing when each part, and therefore player, is to become involved in the project is key, not just for a well-‐‑timed project, but to help manage costs of said project as well.
The best way to minimize risk of any sort is to proactively understand what risk there is. Below are four areas of common areas where risk has the potential to increase your project costs. By looking at these, you can proactively develop strategies to mitigate costs both in the design and construction of your building. 1. Procurement Cycles Procurement cycles look at when you should be acquiring the goods, labour, and materials for your project. Because of Canada'ʹs climate, most companies will do their design work in the winter to help minimize cold weather construction costs (e.g. concrete pours in the cold can be astronomical), preparing for physical construction to start in the spring. As Altus has seen a 4 -‐‑ 6% increase on both labour and materials in the past year, you should understand that the best time to start engaging contractors, designers, and subcontractors in your construction process isn'ʹt in the spring, or even at the end of the winter. Rather, it should be right at the beginning of the concept / design phase. Doing this, you are able to mitigate costs through proper party engagement, proactive purchase of goods / materials, and by developing a full project scope, limiting last minute changes.
Street Smart. World Wise.
Cost Consulting & Project Management, Altus Group Limited
2020 - 4th Street SW, Suite 310, Calgary , Alberta, T2S 1W3 Canada T 403.508.7770 F 403.228.1020
altusgroup.com
2. Contractor Relationships Tied closely with procurement cycles, building relationships with contractors and their subcontractors is crucial to minimizing costs. By bringing the contractor into the process much earlier, they are better able to advise on realistic timelines and whether things can or cannot be done. Through this, you have a much higher chance of getting them on board and on site when they need to be. This shows that there is a respect of their time and needs, as well as their relationships with supply change. This will also remove any last minute tender packages that need to be developed, assessed, and reviewed. You are setting your project up from the start, knowing WHO will be working on your building and WHEN. Bringing collaboration, along with expertise, is crucial to minimizing risk. 3. Government Labour Support Specifically in Calgary, there is a wealth of building projects currently in development, as well as future development. What is happening is that we are finding there is often a constraint on qualified labour to actually (safely) complete the work in a timely and cost conscious manner. However, there is labour coming into the country. Unfortunately, not all are qualified. For instance, if the government allows 4,000 workers in, often, only 3,000 of these individuals will actually be qualified to work on the projects being developed. To mitigate these safety risks and costs, your project should be working with the government for support in receiving QUALIFIED workers. By having qualified individuals working with your contractors / subcontractors, your building is much more likely to meet deadlines (not meeting scheduled timelines always has a cost attached to it), without liability issues.
Street Smart. World Wise.
Cost Consulting & Project Management, Altus Group Limited
2020 - 4th Street SW, Suite 310, Calgary , Alberta, T2S 1W3 Canada T 403.508.7770 F 403.228.1020
altusgroup.com
4. Global Ideas As our world is becoming more connected, we must stop trying to reinvent the wheel when it has been invented elsewhere. Specifically, countries such as the U.K. and Australia have adopted great cost minimization design and management strategies through BIM (Building Information Modelling). How can we, in Canada, look at implementing this same cost and time saving tool, and improve upon it to fit with our own building and procurement cycles? Looking at international best practices can help learn new ways of being proactive, minimizing procurement risks and costs. As materials, software, and techniques continue to improve in the construction industry, it is crucial to understand what is needed to make them work and be effective for you. If you are interested in learning more about cost mitigation or how you can build strategies into your own construction project, contact David Crane at [email protected].
