May 9, 2019 at 1:54 pm
Shelly Clark ·
Comments Off on Spring 2019 MEREDA Index Commentary – THE CONSTRUCTION COMPONENT – Richard Brescia, Cianbro
Richard Brescia, Vice President of Cianbro recently provided insight for the Spring 2019 Edition of the MEREDA Index by sharing his perspective on the Construction Sector over the last 6 months.
In late 2018 and early 2019, Cianbro continued to see strong construction demand, including increased interest and investment from sources outside of Maine. What’s more, the demand wasn’t concentrated in our largest metropolitan markets, but stretched statewide, putting added pressure on construction resources and – subsequently – costs.
The building market was extremely active, especially in corporate office, senior living, and institutional markets, including healthcare, higher education, government, and life sciences. While we feel these markets will continue their momentum in the coming months and years, private development may be tempered by rising costs, particularly for labor and materials.
The driving forces behind increased construction costs can be attributed to a number of factors:
• Supply & Demand – Contractors and subcontractors are extremely busy. That means there are fewer bidders for any given project, which in turn means pricing is likely to be less competitive. Construction materials are also in high demand, affecting both pricing and availability.
• Skilled Labor Shortage – As older craft workers retire, there are far fewer young people entering the trades to replace them. To help remedy the situation for us and our clients, we
created the Cianbro Institute where we educate our employees in a variety of trades, from rigging and welding, to carpentry and electrical. Hopefully we’ve started a trend.
• World Economy Uncertainty – Tenuous international trade agreements and commodity tariffs have led to some significant cost spikes in widely used construction materials such as steel and aluminum. That means items including I-beams, rebar, window casings, ductwork and exterior metal panels are now more expensive.
Considering that budgets for today’s construction projects may have been developed a year or two years ago, the cost increases are sobering for owners. Looking ahead, Cianbro believes contractors can mitigate this by employing creative solutions such as lean construction principles and a collaborative construction management (CM) delivery approach.
The CM model is based on the owner and design and construction firms working together as a team from the conceptual stage through project completion. Most notably, it involves an iterative design and budgeting process that enables the project team to monitor real-time pricing at each design stage and, when necessary, make changes to materials, program or scope to attain the desired guaranteed maximum price (GMP) quoted by the constructor.
Add to that lean construction principles utilized by the CM and subcontractors, such as just-in-time material deliveries, modular components, advanced technology, smart construction practices and proper sequencing, and you have a recipe for optimal efficiency that will keep projects on schedule and within budget. In today’s robust construction market, these will likely be the keys to success for savvy owners and astute contractors in Maine.
Click here to download the full report. For more information and a video on the MEREDA Index, please click here.