The Impact of COVID-19 on Construction Estimates: From Crisis Comes Opportunity

3 Ways Contractors Can Mitigate the Impact of COVID-19 on Construction Estimates

By Frank Richardson

In times of boom, bust, or even war, the construction industry is accustomed to pricing volatility. But the impact of the COVID-19 pandemic on construction material costs is unlike anything the industry has seen before.   

As “non-essential” manufacturing businesses shut their doors, supplies dwindled, and prices skyrocketed. Now, as the U.S. economy comes roaring back and demand continues to outpace supply, the construction industry remains saddled with high prices and delays.

According to the Joint Center for Housing Studies (JCHS) of Harvard University, the price of structural steel more than doubled since the start of the pandemic. And lumber’s retail price hit an all-time high – up 323%. Meanwhile, in the residential building sector the cost of new and remodeling construction input costs jumped 23% and 21% percent respectively. 

Project holdups are also part of the new normal. The National Association of Homebuilders says that in 2021, more than 90% of builders reported delays and material shortages of everything from concrete to copper wiring.

The knock-on effect is palpable. And nowhere is this more keenly felt than in cost estimation.

Before the pandemic, when a contractor requested a quote from a supplier, they could expect that price to be locked in until the materials were needed – typically a window of several months. But in today’s volatile market, suppliers won’t take that risk. Often, the only way to lock in a price is to buy now, even if the job won’t be completed for years into the future. This places 100% of the risk on contractors. They either buy now or risk a material price jump down the road and cost overruns – a growing likelihood in this exceptionally volatile time. 

Couple these dynamics with an acute labor shortage, and contractors and building owners have a tough time ahead. 

Going forward they must have a contingency plan to control material costs at the outset or mitigate the impact of price fluctuations and delivery delays. Let’s look at their options.

  • Timely, accurate cost estimates

Because dealers and suppliers are only holding pricing for a few days, cost estimators need accurate, up-to-date cost information before the bidding phase. Acuity is responding to this need by updating the pricing in our SaaS-based cost estimation tool, CostCenter, on a more frequent basis. 

With the insight from the cost estimation tool, contractors can set expectations with owners – before they bid – based on the most current data with a timestamp of when the price was sourced and where it originated from. They can also line up potential financing in parallel with the bid process so they can move on the project as soon as possible and take advantage of locked-in prices.

  • Use cost data for more informed, collaborative decision-making 

But estimators can’t just focus on numbers and process. Given the dynamics of recent times, they must become a student of world, look to the economy for cues, and have a finger on the pulse of what’s changing. 

This doesn’t happen in a silo. Each project stakeholder – architects, engineers, contractors, and today’s informed owners – must come to the table together early in the design-build process to consider the impacts of market forces and review cost data to make smarter decisions while controlling costs. With a holistic view of construction costs from start to finish, they can devise solutions to address price volatility and availability. Options can include ordering alternative lower cost materials, negotiating “buy now, deliver later” agreements with owners and suppliers, setting thresholds for the owner’s liability for increased costs versus when the contractor is held liable, and other best practices.

  • Leverage advances in technology

If necessity is the mother of invention, nowhere is this truer than in the construction industry. Although traditionally slow to adopt new technology (the construction industry spends 80% less of its revenue on information technology than other industries), the pandemic propelled firms in this sector to make more use of the technology in their toolkits.

Some of this adoption was spurred by COVID-19, such as cloud-based collaboration platforms and mobile apps that aid in real-time information flow between office and field. Others provide a fix to systemic challenges in the industry. For instance, building information modeling (BIM) transforms cost estimation by allowing contractors to make more accurate and detailed estimates during a project’s conceptual stage. Meanwhile, 3D printing is now in the field, reducing the time it takes to build a house from months to hours.  

It’s hard to imagine a construction job site today without technology. It’s reshaping the industry, filling gaps in labor shortages, mitigating risk, improving accuracy in cost estimation, and helping contractors and owners do more with less. 

Partnership at all levels is key

If there’s a silver lining in the pandemic, it’s that out of crisis comes opportunity. By working together and working smarter, everyone becomes a stakeholder in the success of a project. In this way, the pandemic is changing the nature of relationships between architects, engineers, contractors, and owners – and for the better.

Instead of just tolerating each other; communication, transparency, and trust between owners, contractors, and subcontractors is critical to solving today’s unique challenges and ensuring more successful outcomes.

 


 

About the Author  

Frank Richardson is the Senior Cost Analyst for CostCenter’s database of constructive tasks and assemblies.  CostCenter is an advanced facility lifecycle solution that empowers professionals with cost estimating tools and current cost data.

To learn more visit costcenter.com.

PT&C Releases the First Collaborative Cloud-Based Cost Estimating Solution With Native MII Interoperability

With the rapid rise in cloud computing, the Project Time & Cost (PT&C) team, based in Acuity’s Center of Excellence for Construction Engineering, has rolled out a significant update for their cost engineering cloud suite. This is a milestone release of robust features that include Geographic Cost Index (GCI), accelerated database updates, and native MII interoperability.

The growing PT&C team has provided professional services and technology solutions for commercial and federal agencies for nearly 40 years. While their history focuses on consultancy, this release of PT&C CostCenter software and construction cost data will revolutionize the estimating space.

“Cost estimation is both an art and science,” said Frank Richardson, Senior Cost Estimator. “You need reliable cost data and the ability to make immediate adjustments to accommodate unpredictable environments. We’re setting a new standard with the transparency of our cost data by showing you the source of our data and when it was updated.”

The team that supported major parts of the Tri-Service Automated Cost Engineering System (TRACES), including MII and Area Cost Factors, aims to provide engineers and managers an innovative cloud solution with their newest features.

Architecture, Engineering, and Construction (AEC) teams can leverage the various applications within PT&C CostCenter to ensure they have access to up-to-date information for accurate detailed estimates. Along with construction cost estimation functionalities, seamless USACE/TRACES MII interoperability allows agencies to gain maximum value from their investments. AEC teams, regardless of their physical location, no longer need to worry about MII file versioning and the time required for rework. With PT&C CostCenter, users get a single source of truth to keep projects organized, a view of progress, insights on key financial indicators, and have real-time collaboration for accelerated productivity.

“To empower estimators, our responsibility as engineers and cost experts is to keep our cost database current,” explained Andy Reape, VP of Engineering & Consulting. “For us, it is also essential to provide users a tool where they’re not bound to a single device and can develop complex estimates with teammates spread across the world.”

In this release, PT&C is rolling out an industry-leading white-glove pilot program, a tailored onboarding experience offering users a dedicated success representative, priority support, and a direct line of feedback on product roadmaps. This is an open pilot program that comes with training benefits at no cost and grants users firsthand experience with the newest improvements.

PT&C has delivered solutions within the engineering field for decades and their recent expansion is indicative of the advancements in construction technology. AEC firms that assess their technology stack today, and implement specialized tools sooner, will find it easier to remain competitive. A peek at the larger roadmap within the PT&C CostCenter tools includes exciting capabilities such as assemblies, parametric modeling, and even advanced analytics backed by artificial intelligence.

About Project Time & Cost, LLC:
PT&C is a leading provider of professional services and solutions to U.S. federal government agencies and commercial clients. The company provides consulting, project management, and technological development services. For additional information visit construction cost data. 

PT&C Announces New Cloud-based Software Solutions – Collaborative Construction Cost Book and Estimation SaaS

Project Time & Cost, LLC (PT&C), an Engineering News-Record Top 50 Program Management firm, today announced the launch of PT&C CostCenter. This cloud-based software as a service (SaaS) offers an integrated set of tools for agencies and commercial enterprises who need up-to-date construction cost data and efficient solutions for collaborative cost estimating – one of the most secure and advanced cost estimating toolboxes available at market.

PT&C CostCenter acts as an information hub for its cost engineering applications and provides an overarching view of key performance indicators. As users integrate additional PT&C applications into their company workspace, they will find an E2E facilities cost lifecycle ecosystem at their fingertips. These innovative solutions include PT&C CostBook, PT&C CostBase, and PT&C CostPro.

“The tools we’re delivering to market today represent a full integration of capabilities that will reduce risk in cost estimating for construction management,” according to CEO Bob Stalick. “With price volatility in material and labor costs being greater than ever before, we deliver a solution to meet industry demand head-on, with a cost estimation process that is fast, safe and accurate.”

PT&C’s 40 years of experience in providing specialized program management services are the foundation for delivering this capability in a cloud-based platform with deep insight into more than 35,000 cost elements, including historical trends and geographical adjustments. The tools are backed by a team of seasoned cost professionals to support any client need.

“Our users gain increased visibility and efficiency of enterprise facilities management through a centralized application suite,” according to Andy Reape, PT&C vice president. “This built-in modularity allows users to use only the applications they need, giving clients a solution to create detailed estimates based on current, accurate, and defensible cost data.”

PT&C’s mission is to provide the construction industry with smart estimation solutions. The construction software is designed specifically to help solve coordination problems for owners, contractors, engineers, and architects. Regardless of the size or complexity of a project, construction teams can have confidence in the accuracy of their cost data, simplified workflows, and better collaboration. With these tools, project managers and developers will have better cost estimates built on up-to-date data reflecting current market trends and labor costs.

PT&C CostBook, which works seamlessly with either estimation solution, provides transparent construction cost data. Maintained by experienced cost engineers, this out-of-the-box solution features over 35,000 searchable constructive tasks alongside an extensive catalog of modern construction materials.

PT&C CostBase is designed to build out simple estimates quickly. PT&C CostPro is a comprehensive cost estimating platform built on decades of expertise calculating accurate assessments of complex construction costs to help customers work efficiently.

“Offering these software tools to our clients will help them do their job better, faster, and with less rework required,” said Reape.

For nearly 40 years, PT&C has provided project management, cost engineering, and custom digital solutions, primarily for federal agencies and large commercial clients. Comprised of a team of dedicated professionals, PT&C has been repeatedly named to ENR’s list of the Top 50 Program Management firms and Top 100 Construction Management-for-Fee firms.

About Project Time & Cost, LLC:
PT&C is a leading provider of professional services and solutions to U.S. federal government agencies and commercial clients. The company provides consulting, project management, and technological development services. For additional information visit ptcinc.com.