How to Adapt and Control Rising Construction Material Costs
Rising construction material cost is an unavoidable part of the construction industry, especially in summer. With more temperate weather and longer daylight hours comes an increase in demand for both materials and labor, driving up the price for both. The construction industry is facing an increase in construction costs year after year, making profit margins slimmer than ever. In this article, we will discuss methods for companies to adapt and control rising construction costs by increasing efficiency, using smarter technology, and minimizing wasted time and materials.
Construction material costs are facing a year-round pricing increase, rising nearly 5% during the 2018 calendar year. Also, tariffs and rising fuel prices are helping drive costs upwards, and a shortage of skilled workers results in higher rates charged for their labor. According to chief economist Ken Simonson, “The new construction materials cost data likely under-reports actual price increases, since federal officials collected most of their data in the first half of the month, before new tariffs affecting many construction materials started. Contractors are paying more for the materials they use and workers they employ but aren’t able to pass most of those new costs on to their clients.”
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Modular Building
Although construction material cost is out of our control, controlling rising costs can be achieved by finding smarter ways to manage materials. By minimizing the margin on construction waste and inefficiencies, construction project managers can better manage the budget to reduce unnecessary spending. A popular method for controlling costs is using prefabricated materials. Prefabrication eliminates the need for traditionally sourced construction materials which are assembled on-site, resulting in less waste. As the raw materials are assembled offsite and shipped partially assembled, prefabrication reduces the cost of labor, further offsetting the rising cost of materials.
Modular building, in particular, is gaining popularity in the construction industry. There is a modular hotel currently being assembled by Marriott in New York, set to stand 26 stories high and significantly reducing the cost of labor and materials for the company. By using prefab components, Marriott can minimize waste and labor costs, as the building is set to complete in just 90 days. The building is set to cost around $70 million to construct, compared to the $100 million it would typically cost to construct a comparable building in New York City.
BIM
Another popular method of controlling construction cost is using building information modeling, or BIM, to visualize the construction project at each stage in its life cycle from conception to finishing logistics. BIM combines technology and construction to help contractors and companies visualize and make real-time changes to the scope of a project. It can also reflect the cost and material differences that each shift in the scope would cause. This level of integration can help streamline the construction process and therefore reduce the wasted materials and time that results from making changes to the scope of a project. Additionally, BIM can integrate with prefab modular construction to further reduce construction material cost and wasted labor hours.
Construction Management Software
Construction field management software is also an effective way to control rising construction material cost. It’s common knowledge that technology is hugely shaping the construction industry. Particularly, field management software is gaining popularity for its ability to streamline communication and minimize inefficiencies. Using construction management software helps project managers manage in real-time and eliminates communication errors between workers on the job site.
Additionally, cloud-based storage allows all workers to secure access to necessary documents from their mobile devices, helping eliminate time-wasting activities. There is a high ROI on-field management software due to its ability to reduce waste, ease communication, and minimize the time spent doing tedious paperwork. It also helps reduce reworking, which can be both costly and time consuming for a project and can be a massive source of wasted materials and labor.
Conclusion
The construction industry is facing a labor shortage that is resulting in firms paying higher salaries to attract workers. Nearly 80% of respondents to a survey in August 2017 report that firms are having difficulty filling hourly craft worker positions. With the shortage of labor and rising demand for materials, the construction industry faces an unavoidable increase in construction costs. However, firms can minimize the impact of these rising costs and maximize their profit margins by streamlining their construction processes. Using methods such as modular building, BIM, and construction management software, firms can minimize inefficiencies and wasted labor hours, therefore helping them control rising construction costs.
