In our last issue of the Economic Indicator Report, I cited several issues that will dramatically impact the economy in 2022. Specifically, 4 issues were noted by Anirban Basu, Chief Economist for the Associated Builders and Contractors Association:
- less growth in federal spending,
- ongoing global supply chain disruptions,
- rampant worker shortages, and
- an increasing cost of capital.
Implied but missing from the list above is inflation. Because our clients will face inflation challenges, we plan to present specific job cost data throughout 2022 and 2023. Every chance we get to reprice a project, we will share our findings.
This quarter’s case study today is a hotel – the same hotel brand; basically, the same building – built between March 2019 and March 2020 and then repriced in May 2022 (2 years apart). The costs exclude all site work costs to keep the percentage increases as close to apples-to-apples as possible. Over those two years, we experienced and shared with our repeat client a 38% increase in total project cost
Here are few key components of that increase:
I started by looking at structural elements:
- Concrete +95%
- Masonry +74%
- Structural steel +49%
- Carpentry and Framing +117%
Then I immediately jumped to the MEP trades:
- Fire Protection +140%
- Plumbing +19%
- Electrical +4% (we eliminated the structured cabling)
- Mechanical +75%
We have achieved an overall increase of 38% by finding other ways to reduce scope and find additional efficiencies. It is important to note that this is the same hotel brand; however, design changes were made with the final budget in mind. I am afraid that a true building to building comparison would have resulted in some factor much greater than 38%.
In preparation for our next EI issue, we will rebid a set of drawings for a project that we bid and built 1 year ago. I look forward to learning and sharing these results.