09 Jul Estimators Must Project the Future
Estimators Must Project the Future: Each time an estimator prepares an estimate he is asked to predict the future. They take a set of drawings and specifications, define work to be done, then offer, often in detail, a cost of what the project might cost at some time in the future. That future cost window can be 30 days or several years.
Over the last five years, those cost predictions have not had to anticipate the dreaded unknown – “inflation”. However – times are changing.
Historically, in the first part of the construction cycle, subcontractors are typically working to establish a reliable backlog of work. Material suppliers are matching inventories with demands. Consistently the first nine (9) to twelve (12) months of a commercial construction cycle will experience competitive contract on pricing. June 2013 is the 7th month of the current cycle. As trade contractors fill their backlog and material suppliers match production to demand, the tendency is to be less aggressive in pricing for new work. When this happens we see price increases start entering the marketplace.
So what does all this mean? First, we should see a general tendency for pricing of products and services to increase over the next 6 months. Contractors will pass along those increases of cost to their clients, resulting in increased construction costs. We are also advising Owner and Lender clients that they should expect to see the same increase from design and consulting firms as their backlog increase. We note that successful design and consulting firms have already anticipated these conditions and have raised their prices and hourly rates to maintain their margins.
Furthermore, we anticipate a larger volume of work will be initiated as the trend for interest rates start upward. Typically this trend causes Owner clients to accelerate the decision process. As a result now is the best time to borrow money – it will not be this cheap for the next number of years.
One last note – general thinking of the economist I tend to follow is that we will see an increase in construction activity through the 1st quarter 2014 with a leveling off of construction volume for 2 quarters followed by a significant growth through 2017 – May they be right “this time”.
Changes at DRB Consulting
Since my last newsletter, there have been several changes including new projects, additional staff members and a new website design.
DRB Consulting is very excited about being engaged to provide services for multiple projects.
- Silver Slipper Casino is about to embark on a new hotel expansion at their Mississippi location. DRB Consulting is working with Full House Resorts to provide project advisory services for the design and development of the exciting hotel located directly on the Gulf.
- International University located in Casablanca Morocco is being constructed by the Laureate SOMED Education and financed by OPIC. DRB Consulting has been retained to provide project advisory services overseeing the design and construction of the entire University program. Phase one should be under construction in 2014 and completed in 2015. Phase two will follow the completion of the initial development.
- Hampton Suites Hotel and Retail Center, Dunwoody GA – DRB Consulting has been retained as the Program Manager for this development. Featured as part of this development is the new style Hampton Suites product plus multiple retail outlets and parking facilities.
- Atlanta History Center Expansion includes a new entrance and exhibit halls for this Atlanta Landmark. DRB Consulting is providing project estimating support for the owner’s development team.
Ed Thigpen has joined DRB Consulting as a Senior Project Manager for our expanding development programs. His experience includes working as a project manager for both owner clients and as a general contractor. Having worked in Las Vegas, Connecticut, Bahamas and Atlanta, Ed brings to the team a significant level of project experience.
Every business requires a professional and easy to use website. As we continue to expand our business, we are constantly looking for ways to help our clients. We wanted clients to easily find us and the projects we have accomplished. Visit our website (www.ConsultDRB.com) and provide us some feedback.