Riding the wave of construction cost fluctuations

If there was any time when architects, builders and property owners needed cost control certainty for their building projects, that time is now.

The question is clear: how does the construction industry avoid budget blowouts when a global pandemic has resulted in a ‘new normal’? When Russia is throwing its geopolitical weight around? When inflation is steeper than an A-frame roofline? When the cost of residential timber products is skyrocketing? And when imported hardware and components are either on backorder or on a very slow boat.

The answer may come as a surprise: talk to a quantity surveyor.

What?! Does a QS have a cure for Covid, or a plantation of pine to mill for trusses? No, but they can offer some healthy financial peace of mind for your next construction project because a professional quantity surveyor is up to date with the costs of building materials and labour in New Zealand.

Who pays?

Material costs have always fluctuated in the construction industry but in the past builders factored these into a tender or quote by simply adding a contingency allowance to the total. On some jobs, they would need to use the contingency, on others they wouldn’t. Swings and roundabouts, right?

But now, the potential fluctuations are significant enough that a traditional contingency of 5-15% might not be sufficient to cover the price increases. That’s resulted in many builders shifting the responsibility of those unplanned charges onto the property owner. The project still costs what it costs — but who’s paying for what has moved. And that uncertainty doesn’t always sit well with a property owner.

Watching closely

A quantity surveyor can begin to smooth out a project’s financial peaks and troughs by identifying which materials are most likely to fluctuate in cost during the construction process. Higher-risk line items can potentially be reduced in quantity, swapped for alternate products, or price-locked before building even begins. If these steps are taken for the major materials, any price fluctuation within lower quantity or lower cost items will not become a debilitating headache.

Having a QS keep a close watch on construction costs, before and during the project, lets builders get on with what they do best — the building. It’s like a race car driver concentrating on the track ahead whilst the crew chief takes care of fuel and tyre supplies. Everybody works to their strengths.

What will change?

When we look ahead, there are several factors which are bound to further impact — hopefully for the better — the current fluctuating costs.

One is New Zealand’s borders opening again. Soon we should be able to say that the pandemic is behind us (fingers crossed!). This could lead to new suppliers entering our materials market. Competition within any industry is healthy and the building industry is no exception. Increased competition can result in broader product offerings and significant cost savings.

Another factor is the recent council decision to make more bare land available for residential development. When more housing stock becomes available it will help ease the red-hot housing market, thus taking pressure off the stretched building sector.

Inflation was mentioned earlier, and when that begins to stabilise, as it is expected to, it will be another helping hand taking the sting out of a construction project’s price volatility.

Help is at hand

The best time to engage a quantity surveyor is before a project begins. The pre-construction certainty a quantity surveyor can offer includes services like a review of the proposed construction price, comparing it against current market rates. Or a review of the building contract. Or making sure the payment plan schedule aligns with the construction programme, which then fits the bank’s terms and conditions.

But if you find yourself knee-deep in the middle of a project and costs seem to be snowballing, help is still at hand. You might be surprised just how affordable a QA’s expertise is; it’s an investment in your construction project’s peace of mind.

James Cameron is a professional quantity surveyor, licensed building practitioner (carpentry, Site 3) and director of Property Values Ltd.


021 288 1311

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