Deprecated: Assigning the return value of new by reference is deprecated in /homepages/31/d126877800/htdocs/blog/wp-settings.php on line 520

Deprecated: Assigning the return value of new by reference is deprecated in /homepages/31/d126877800/htdocs/blog/wp-settings.php on line 535

Deprecated: Assigning the return value of new by reference is deprecated in /homepages/31/d126877800/htdocs/blog/wp-settings.php on line 542

Deprecated: Assigning the return value of new by reference is deprecated in /homepages/31/d126877800/htdocs/blog/wp-settings.php on line 578

Deprecated: Function set_magic_quotes_runtime() is deprecated in /homepages/31/d126877800/htdocs/blog/wp-settings.php on line 18

Strict Standards: Declaration of Walker_Page::start_lvl() should be compatible with Walker::start_lvl(&$output) in /homepages/31/d126877800/htdocs/blog/wp-includes/classes.php on line 1199

Strict Standards: Declaration of Walker_Page::end_lvl() should be compatible with Walker::end_lvl(&$output) in /homepages/31/d126877800/htdocs/blog/wp-includes/classes.php on line 1199

Strict Standards: Declaration of Walker_Page::start_el() should be compatible with Walker::start_el(&$output) in /homepages/31/d126877800/htdocs/blog/wp-includes/classes.php on line 1199

Strict Standards: Declaration of Walker_Page::end_el() should be compatible with Walker::end_el(&$output) in /homepages/31/d126877800/htdocs/blog/wp-includes/classes.php on line 1199

Strict Standards: Declaration of Walker_PageDropdown::start_el() should be compatible with Walker::start_el(&$output) in /homepages/31/d126877800/htdocs/blog/wp-includes/classes.php on line 1244

Strict Standards: Declaration of Walker_Category::start_lvl() should be compatible with Walker::start_lvl(&$output) in /homepages/31/d126877800/htdocs/blog/wp-includes/classes.php on line 1391

Strict Standards: Declaration of Walker_Category::end_lvl() should be compatible with Walker::end_lvl(&$output) in /homepages/31/d126877800/htdocs/blog/wp-includes/classes.php on line 1391

Strict Standards: Declaration of Walker_Category::start_el() should be compatible with Walker::start_el(&$output) in /homepages/31/d126877800/htdocs/blog/wp-includes/classes.php on line 1391

Strict Standards: Declaration of Walker_Category::end_el() should be compatible with Walker::end_el(&$output) in /homepages/31/d126877800/htdocs/blog/wp-includes/classes.php on line 1391

Strict Standards: Declaration of Walker_CategoryDropdown::start_el() should be compatible with Walker::start_el(&$output) in /homepages/31/d126877800/htdocs/blog/wp-includes/classes.php on line 1442

Strict Standards: Redefining already defined constructor for class wpdb in /homepages/31/d126877800/htdocs/blog/wp-includes/wp-db.php on line 306

Strict Standards: Redefining already defined constructor for class WP_Object_Cache in /homepages/31/d126877800/htdocs/blog/wp-includes/cache.php on line 431

Strict Standards: Declaration of Walker_Comment::start_lvl() should be compatible with Walker::start_lvl(&$output) in /homepages/31/d126877800/htdocs/blog/wp-includes/comment-template.php on line 1266

Strict Standards: Declaration of Walker_Comment::end_lvl() should be compatible with Walker::end_lvl(&$output) in /homepages/31/d126877800/htdocs/blog/wp-includes/comment-template.php on line 1266

Strict Standards: Declaration of Walker_Comment::start_el() should be compatible with Walker::start_el(&$output) in /homepages/31/d126877800/htdocs/blog/wp-includes/comment-template.php on line 1266

Strict Standards: Declaration of Walker_Comment::end_el() should be compatible with Walker::end_el(&$output) in /homepages/31/d126877800/htdocs/blog/wp-includes/comment-template.php on line 1266

Strict Standards: Redefining already defined constructor for class WP_Dependencies in /homepages/31/d126877800/htdocs/blog/wp-includes/class.wp-dependencies.php on line 31

Strict Standards: Redefining already defined constructor for class WP_Http in /homepages/31/d126877800/htdocs/blog/wp-includes/http.php on line 61
8 Ways the Economy is Affecting Construction Costs
Strict Standards: call_user_func_array() expects parameter 1 to be a valid callback, non-static method Document::build() should not be called statically in /homepages/31/d126877800/htdocs/blog/wp-includes/plugin.php on line 339

8 Ways the Economy is Affecting Construction Costs

by Andy Burns on December 2, 2008

Greetings and welcome to our blog at The Burns Companies. I’m Andy Burns, the founder. Our goal with this blog is to help our clients through this challenging economy by talking sense about what’s happening in their construction projects across the United States. We’re a consulting company that acts as owner’s representatives for our clients in large commercial and multi-family construction projects. We’ve seen it all. And we play in the middle, helping our clients coordinate large projects in the most cost effective, timely manner. We’ll be dishing all about that here, along with other interesting topics as we come across them.

Lately we’re seeing how the economy is affecting all construction projects in one way or another. Recently, I was asked by one of my clients to comment on construction costs. His question was: “given the dramatic drop in oil prices and sudden lack of demand for new construction projects…”

And we thought that starting a conversation here would be a good way to explore how we see construction costs being affected by our economy. Let me know if you agree or disagree with what we are seeing:

1. Toss the Old Construction Cost Data Books.
Unless you subscribe to streaming RS Means Building Construction Cost Data or have a crystal ball, construction budgeting is more of an Art than a Science than it has EVER been. Pricing and cost control is a “boots on the ground” process these days – requiring us to attend frequent meetings with contractors, subs, and material suppliers to go over all costs on an on-going basis.

  • For example: The price per pound of prime scrap steel recently dropped from 35 cents to 6 cents in 8 weeks. On one of our projects the original demolition contract negotiated went from being a net payment to Ownership (due to scrap steel value) of about $600,000.00 to a payment from the Owner of some $1,000,000.00. On another project from bid time to commencement copper went from $3 per pound to $1 per pound, resulting in an opportunity for significant electrical scope savings. The markets are so uncertain that if projects that have been bid do not proceed immediately we are having to re-bid the work just to be certain we have the latest pricing. If you don’t take the time to do that, you could be paying more than what you should be paying.

2. Contracts Need to Include De-Escalation Clauses.
We are advising the inclusion of de-escalation clauses in contracts, along with escalation clauses. Much of this makes for an increased, but necessary, bookkeeping effort. On a recent site work project, in a matter of weeks from contract signing, liquid asphalt rose dramatically from about $350/ton to $600/ton (a 67% increase). However, by phasing the project we are able to take advantage of a very recent decrease in the liquid asphalt price – although it still lies above the contracted allowance.

In fact, a recent article (requires an account or view PDF here) in the Banker & Tradesman noted that it is getting cheaper to build, and it could be as much as 10% decrease on total project costs.  The article noted a Boston project that was $450M could be decreased by $50M, now costing $400M in this economy.  Now that’s something worth revisiting.

3. Competition is Fierce, Material Markets Uncertain
Fees and profit margins are being cut by the contractors we are dealing with. Competition is getting fierce for any “real” project. The form of Contract (ie: stipulated sum, cost plus a fee, etc.) must be evaluated carefully by each Owner/Representative Project Team given the uncertainty of the labor and material markets.

4. Tight Credit Markets are Straining Relationships
The financials of all parties are receiving much greater scrutiny than ever, as are the contracts for construction. There are reports throughout the industry of projects that have been suddenly stopped, mid-construction, holding up payments due, and putting contractors, subs and material suppliers in financial jeopardy. This situation has created a tension and certain dynamic of mistrust amongst Owners, Lenders, and Contractors we have rarely seen. Someone is needed to be in the middle to help facilitate the next steps between the parties, and find creative ways to get these jobs done.

5. Change Orders Need to Be More Scrutinized
Change Orders are receiving much more scrutiny on our projects. This goes directly to first making certain that all A/E plans and specifications are reviewed and vetted completely for constructability and coordination issues. We like to remind all of our clients and anyone reading this that (other than in some cases of design/build contracts) the Owner is first in line in responsibility for misinformation in the plans that may lead to extra costs. Remember that Change Orders have always been a profit center for the smart “low bidder” on any project. And in this current climate, vigilance is required on the part of the Owner/Representative Project Team when it comes to claims for extra pay.

6. Anticipate Payment Defaults
We are advising Owners to be aware and take steps to guard against payment defaults by contractors, material suppliers, and subs – and to have a plan in place to handle this eventuality. This is an unfortunate reality for project Sponsors and Owners. It is important to stay ahead on payments; obtain lien waivers, and get signed releases from all tiers of project providers. Make sure contractors are not “front loading”, along with making sure that payments are only made for “work in place” is required.

7. Performance & Payment Bonds Are the Rule Now
Requirements for Performance & Payment Bonds are the rule rather than the exception now. This adds cost to projects and should be evaluated by each Owner/Representative Project Team.

8. Mitigate Project Risks with an Experienced Owner’s Rep
Working with an experienced Owner’s Representative in this climate will ensure that your project is well managed, stays in budget and on schedule. We often see that clients cut back on projects, take on the ownership and responsibility with all these moving parts, and end up paying much more in the long run. There are too many back doors that can increase project costs when the market is unstable. In our work, we find that a methodical approach to project management helps mitigate risk, reduce costs, and save time over the course of a project. It is strategically important that each construction project is proactively managed to evaluate and manage costs on a continuous basis, assure that key milestones are achieved, and push to complete projects within established time lines.

So, those are just a few of the things we wanted to share. How does this stack up to what you are seeing?

{ 47 comments… read them below or add one }

Dee Regan 12.02.08 at 7:36 pm

Congratulations on your first blog - very impressive!

Mike 12.03.08 at 2:47 pm

Let me ask you what your feelings are in this economy on having your clients spend extra monies to have a new or remodeled building commissioned. Not from a LEED mandatory viewpoint, but from the viewpoint of hiring a set of trained professionals to performance test and document the MEP systems prior to the owner or tenant moving into the building.

Owners representatives seem to be split on the subject, some feel that in this economy spending extra to re-evaluate and test what the design engineers and contractors are supposed to be doing is a waist of money. Others feel that knowing the project is to be commissioned and an additional set of technical eyes, specifically dealing with the MEP systems, gives them the knowledge and confidence that before the owner occupies the building, the systems will be operating correctly.

Do you feel it is the owner’s representatives interest to suggest commissioning to their clients in the pre-design phase to allow the commissioning firm to be on board from conception through completion.

Andy Burns 12.05.08 at 9:46 am

Thanks, Dee.

Hi Mike:
Thanks for the comment. We are recommending commissioning to all our clients whether their properties are existing, remodeled, or new. And yes, we fully encourage our clients to consider all phases and aspects of commissioning: Retro-commissioning (for existing facilities that have never been commissioned); Re-commissioning (facilities needing tune-ups that had been commissioned at a prior time); Warranty-commissioning (this would be a short term monitoring program to assure ownership of performance and operations - and alert installation contractors of the need to fix problems), and; Continuous-commissioning (this would be an on-going structured program throughout the life of the facility).

We absolutely push our clients to understand the need for early intervention by qualified commissioning agents in the design phase (and throughout the project until acceptance) for any significant remodeling or ground-up project. We believe that pretty much every building is a one-of-a-kind environment and therefore establishing design requirements, and baselines of performance and expectations early in the design phases allows the A/E team to better integrate systems with the facility’s other programming goals. All too often MEPs are kinda plugged in afterwards - this is a bad approach and owners need to be educated to the simple fact that it will cost less, and be less disruptive, to fix a problem during design than during construction or after occupancy. We suggest all building systems be commissioned - but when budget issues limit your targets, the systems we aim for at minimum are: HVAC equipment & controls; Life Safety & Security system; Lighting equipment & controls, and; Electrical equipment & controls.

As to LEED - the project does not have to be a target for LEED certification to benefit from a smart commissioning program. Will be talking more about LEED projects here. Stay tuned.

Kevin 01.20.09 at 10:18 pm

Thank you for the article. I would be interested in how the de-escalation/escalation clauses could be structured to benefit all parties.

Andy Burns 01.23.09 at 1:35 pm


Although the clauses can be bookkeeping nightmares - they are thought by some to be a very fair way of handling the contracting process - especially for projects of long duration. Obviously, the perception is that the escalation clause will benefit the contractor - the de-escalation clause the owner. There is alot to it.

You know what, you have raised a really good question that would warrant a deeper explanation than in a comment. New blog post coming.

Fibre glass sheets 12.19.10 at 8:55 am

We live in a world in which our fuel resources are shrinking
rapidly, growing constantly more expensive and are prone to
frequent disruptions in power supply. Apart from hese direct
influences, combustion of fuel is causing immense and
irreversible harm to our environment, depleting the
all-important ozone layer and adding to the Green House
Effect, which is resulting in Global Warming and abrupt

changes in climatic patterns all over the world.

Alvamcrhhsl 11.25.13 at 6:59 am

home remortgage 03.10.15 at 2:49 am

I do consider all of the concepts you’ve presented in your post.
They are really cconvincing and will defnitely work.
Still, the posats are ttoo quick for starters. Could you please lengthen them a little from subsequent time?
Thank you for the post. 06.05.15 at 8:28 pm

However, microwave as essential catering equipment is not far behind along with pasta boilers, soup kettles,
rotisseries and toasters. If you don’t feel comfortable using this or exercise, you can purchase a stationary indoor bike or spinner.
If you haven’t even bought your kids play equipment
yet, then always look for a manufacturer who supplies
foam protection as standard.

上原亜衣動画 09.18.16 at 7:20 am

Can I just say what a comfort to discover an individual who genuinely knows what they’re discussing on the internet.
You definitely understand how to bring a problem to light and make it important.
A lot more people should read this and understand this side
of the story. I can’t believe you’re not more popular because
you certainly have the gift.

Ottawa Senators Reebok Premier Alternate Jersey Black 09.04.18 at 10:09 pm

Mitchell and Ness 27 Steve Atwater Authentic White Road Mens Jersey NFL Denver Broncos 09.04.18 at 10:09 pm

youth minnesota vikings nick easton nfl pro line purple player jersey 09.04.18 at 10:09 pm

big tall niles scott 67 san francisco 49ers jersey 09.04.18 at 10:10 pm

nike limited mitch morse 61 kansas city chiefs jersey 09.04.18 at 10:10 pm

Mens Carlos Gonzalez Authentic GreyPurple Majestic Jersey MLB Colorado Rockies 5 Cool 09.04.18 at 10:11 pm

minecraft 09.09.18 at 2:20 am

It’s going to be ending of mine day, but before end I am reading this impressive post to increase my know-how.

mens chicago blackhawks tanner kero fanatics branded red breakaway player jersey 10.20.18 at 2:21 am

nike mercurial superfly 6 pro cr7 fg a1009193 10.20.18 at 2:21 am

women trainers uknike wmns tennis classic prmblackblack 10.20.18 at 2:22 am

2018 2018 New Washington Redskin DaRon Payne 95 Derrius Guice 29 Jersey Men Oakland Raiders P.J. Hall 92 Panthers Julius Peppers 90 Jerseys From 10.20.18 at 2:22 am

NFL Jordan Poyer Ash 21 Buffalo Bills Nike One Color Pullov 10.20.18 at 2:25 am

united states vans women velvetfloral black skate shoes black 8emqsobotherineconsult 10.20.18 at 2:25 am

big and tall game coleman shelton 77 san francisco 49ers jersey 10.20.18 at 2:26 am

brain dead x vans vault 10.20.18 at 2:27 am

womens elite jace billingsley 16 detroit lions jersey 10.20.18 at 2:28 am

ทุบตึก 10.26.18 at 4:50 pm

This article is actually a pleasant one it helps new internet visitors, who are wishing in favor of blogging.

จดลิขสิทธิ์ 11.15.18 at 6:26 pm

If some one desires to be updated with hottest technologies then he must be pay a quick visit this
web site and be up to date all the time.

indoor football shoesbotas de futbol umbro sala pro 03.24.19 at 4:16 pm

ultimate villain showdown shaw vs volkoff vs quinn 03.24.19 at 4:17 pm

l酶bejakke fra newline moreshop denmark 04.26.19 at 7:53 pm

tommy hilfiger fw0fw03311 st酶vle 04.26.19 at 7:54 pm

gargantilha de ouro 18k olho grego com zirconias micheletti joias 04.26.19 at 7:54 pm

brown army pants 05.21.19 at 7:12 am

womens cell cases 05.21.19 at 7:12 am

adoretex womens solid modified wrestling singlet unitard swimsuit wms01 navy l 05.21.19 at 7:13 am

converse all star low tops white 05.21.19 at 7:13 am

womens nike superfly 5 indoor 05.21.19 at 7:13 am

scarpe originali uomo maison margiela 22 ace low vintage sneaker bianco 05.21.19 at 7:13 am

black kids fedora hats 05.27.19 at 5:06 am

mens zephyr black gray college football playoff two tone zwool snapback hat 05.27.19 at 5:07 am

michael b. jordan sis jamila brighten our day with their smiles 06.05.19 at 2:41 am

under armour mens ua ignite slides steel high vis yellow 06.05.19 at 2:42 am

adidas x 18.4 turf uk 3 06.05.19 at 2:42 am

vans vans x nasa nasa sk8 hi 46 mte dx space voyager space voyager skating high white white white men 06.05.19 at 2:43 am

褋褍屑泻邪 写谢褟 屑褟褔械泄 kappa 褑胁械褌 06.18.19 at 8:54 am

pengeluaran sgp 08.27.19 at 2:13 am

Di Kunjungi Situs Pengeluaran Sgp
Dan Data Sgp Tercepat ,
terakuran, dan terupdate di dunia

pengeluaran sgp

Leave a Comment

You can use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>