Construction costs are very stable in the current market due to low interest rates, static material prices and abundant skilled construction workers. But how long will these conditions prevail? Regardless of market conditions, there are always some practical solutions that can further reduce costs on your projects.
Construction projects traditionally take many months to design and often the construction of buildings commence in a different market cycle from when they were designed. It is therefore important not to rely on the current market conditions to achieve competitive tender results.
Whilst we are experiencing some relief from inflated construction prices over the past 10 years, there is still potential to further reduce costs by driving out poor value design in order to maximise these improved market costs conditions.
There are many ways that costs can be reduced on projects resulting in increased value at no loss of quality. However, many excellent ideas are often not realised during the design development. The challenge, therefore, is managing the emerging design so that saving options can be reviewed and incorporated during the design phase.
In order for cost savings to be realised, there are a number of key activities that need to be undertaken:
Here are 10 practical ways to reduce construction costs:
Standardising components to reduce the number of “one off” elements will reduce costs in a number of ways including the ability to bulk buy and the ability to achieve economies of scale through repetitious construction.
2) Proprietary products
Use proprietary “off the shelf” products of standard stock sizes that are readily available. Bespoke products tend to be harder to buy and are more expensive with less oppurtunity to get a discounted price.
3) Reduce waste
Consider stock sizes when designing so that finished products are produced from the base material with minimal waste. Good examples include sizing the width of stone bench tops to suit standard sheet sizes or block wall heights in modules of 200mm to avoid cutting head blocks.
Where possible use repetitive design layouts that stack functional areas above one another. For example, in residential projects, multiple identical floor plates will achieve very efficient structural and services design, reduced slab thicknesses and elimination of “transfer costs” in both structure and services components.
5) Modularization and Prefabrication
Construction of component modules “off-site” can be cost effective where high levels of repetition is possible. It will also save time and money on-site as the installation component is usually much quicker.
6) Improve efficiency
Building shapes and volumes have a dramatic effect on cost. To demonstrate, changing a buildings shape to reduce the facades “wall to floor” ratio by 10% could save as much as 2.5% on the overall building cost.
7) Design to market
Building costs are made up of commodities that are subject to the laws of supply and demand. It is therefore critical to design with trades that are competitive in the current market and avoid or minimise trades that are over heated.
Use an experienced design team as they will use lessons learned from their previous experience to deliver benefits and improved value to your projects at a lower cost. Any premium you pay for more experienced designers will be returned through project design savings.
9) Fully document lump sum
Fully documented, lump sum contracts traditionally result in more competitive tender prices as documentation is very detailed and therefore is inherently less risky for contractors. Tenders are therefore discounted due to lower risk allowances.
10) Standard Form of Contract
Use industry standard contracts where possible as bespoke contracts are unknown by contractors and present additional risk that may be priced into their tenders.
Dave Liddle is a Director of Turner and Townsend, a global programme management and construction consultancy that supports organisations that invest in, own and operate assets.