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Beyond Estimation Market Outlook®
Construction Cost Forecasting, Procurement and Timing Decisions
For a Rising Market
Since 1972
®
Peter Lucking – Associate Chet Lockard – Project Guide Services
North America’s Construction EconomistVermeulens.com
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Service Beyond Estimation
2
AIA Continuing Education
Vermeulens is a Registered Provider with The American Institute of Architects Continuing Education Systems. Credit earned on completion of this program will be reported to CES Records for AIA members. Certificates of Completion for non-AIA members are available on request.
This program is registered with the AIA/CES for continuing professional education. As such, it does not include content that may be deemed or construed to be an approval or endorsement by the AIA of any material of construction or any method or manner of handling, using, distributing, or dealing in any material or product. Questions related to specific materials, methods, and services will be addressed at the conclusion of this presentation.
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
3
Learning Objectives
Cost Reconciliation Tracker Present trends in median trade costs from January 2009 – Current
Macro Economics Understand the Macro Economic impacts on Construction Volume and Cost
Forecast Forecast for Future Construction Costs
Procurement Strategy In light of current market conditions, recommendations on project procurement
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
2000 - Current
4
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
2016120
130
140
150
160
170
180
190
200
210
220
230
240
250
260
270
280
VCC Construction Cost Index
Construction Cost Trendline (3.1%)
CPI
CPI Trendline (2.7%)
Vermeulens Construction Cost Index
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
Jan-90Jan-92
Jan-94Jan-96
Jan-98Jan-00
Jan-02Jan-04
Jan-06Jan-08
Jan-10Jan-12
Jan-147,500
8,500
9,500
10,500
11,500
12,500
13,500
14,500
15,500
16,500
17,5002.7% Trend Line
GDP
(Bill
ions
)
5
High/Low-4.3%
Low/Current+13.8%
Growth Rate of 2.2% for the last 6 Years
US Real GDP
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
6
Code Group VCC CM CM-VCC VCC CM CM-VCC
01 Allowances $1,156,805 $2,422,380 $1,265,575 $2,651,790 $2,672,730 $20,940
02 Site Work $2,636,810 $3,773,428 $1,136,618 $2,918,155 $2,882,279 ($35,876)
03 Concrete $5,840,270 $5,065,081 ($775,190) $5,065,361 $5,065,081 ($280)
04 Masonry $1,547,241 $1,767,385 $220,144 $1,615,526 $1,609,395 ($6,130)
05 Metals $17,945,452 $17,804,383 ($141,069) $15,675,089 $15,577,004 ($98,085)
06 Wood/Plastic $3,172,732 $3,831,671 $658,939 $3,694,276 $3,600,999 ($93,277)
07 Thermal/Moisture Protection $2,903,951 $3,046,873 $142,922 $3,099,398 $3,086,080 ($13,319)
08 Doors/Windows $17,219,666 $15,756,579 ($1,463,087) $15,214,307 $15,299,926 $85,619
09 Finishes $9,635,770 $9,399,224 ($236,546) $10,135,975 $10,137,758 $1,782
10 Specialties $1,335,983 $1,163,012 ($172,971) $1,410,825 $1,418,709 $7,884
11 Equipment $1,127,700 $1,852,358 $724,658 $1,692,000 $1,693,414 $1,414
12 Furnishings $784,846 $302,393 ($482,453) $559,342 $573,596 $14,255
13 Special Construction $300,000 $148,575 ($151,425) $150,000 $148,575 ($1,425)
14 Conveying Systems $4,858,875 $7,212,645 $2,353,770 $5,963,888 $5,993,138 $29,250
15 Mechanical $28,949,381 $35,232,816 $6,283,436 $29,127,187 $29,493,221 $366,034
16 Electrical $15,451,608 $16,700,277 $1,248,669 $16,476,313 $16,451,613 ($24,700)
17 Permits & Fees $19,075,543 $20,452,111 $1,376,568 $20,043,336 $20,051,467 $8,130
18 Contingencies $16,841,472 $14,102,030 ($2,739,443) $15,684,472 $15,697,176 $12,704
19 Enabling $22,704,456 $22,704,458 $2 $22,704,458 $22,704,458 $0
20 Total Construction Costs $173,488,558 $182,737,674 $9,249,116 $173,881,696 $174,156,616 $274,920
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market OutlookCost Reconciliation Tracker®
7
Cost Reconciliation Tracker®
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
Typical Institutional Project – Direct Trade Cost
Recession Decline -14.0%2011 +2.0%2012 +4.0%2013 +5.0%2014 +6.0%
Assumes trade-weighted average of individual percentage trade reduction
8
Construction Cost Impact
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
9
http://www.turnerconstruction.com/cost-index
Recession Decline-13.2%
2011 + 2.1%2012 + 2.6%2013 + 4.7%2014 + 4.4%
YTD +3.5%
-14%
+2.0%
+4.0%+5.0%+6.0%
Turner Construction Cost Index
Turner Construction Cost Index
+5.3%
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
High Growth Market Adjustment Cost Recovery High Growth0
250
500
750
1000
1250
1500
1750
2000
2250
2500
2750
3000
3250
3500
3750
950675 675 750 750
1150
1075 10501150 1250
1300
1000650
9501300
MarkupLaborMaterial
3,400
2,750
2,375
2,850
3,300
10
Structural Steel Pricing
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
11
Contingency
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
Project Contingency and Escalation Recommendations
Design Contingency
Preliminary Design 10% to 15%
Schematic Design 6% to 9%
Design Development 3% to 6%
Contract Documents 0% to 3%
Construction Contingency 3% to 5%
Escalation - based on the Market Outlook and Local index
3% to 9%
Bidding Contingency 0% to 5%
Project Contingency (Owner) 5% - 15%
12
What’s Next?
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
2016100
120
140
160
180
200
220
240
260
280
Vermeulens Turner ENR
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
13
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
201680
90
100
110
120
130
140
150
160
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
US Dollar and NYSE
US Dollar and NYSE
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
201680
90
100
110
120
130
140
150
160
0
5
10
15
20
25
30
35
40
45
50
14
US Dollar Impact on Commodities
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
15
10,000
10,500
11,000
11,500
12,000
12,500
13,000
13,500
14,000
14,500
15,000
15,500
16,000
16,500
17,000
0
2,000
4,000
6,000
8,000
10,000
12,000
GDP (Billions) and NYSE
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
16
128,000
129,000
130,000
131,000
132,000
133,000
134,000
135,000
136,000
137,000
138,000
139,000
140,000
141,000
142,000
143,000
0
2,000
4,000
6,000
8,000
10,000
12,000
8.7 M Jobs12.7M
Jobs
183,0
00 /
mth
212,0
00 /
mth
3.0% G
DP G
rowth
2.2%
GDP
Gro
wth
229,000 / month
US Employment (Thousands) and NYSE
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
17
12/31/85 06/23/91 12/13/96 06/05/02 11/26/07 05/18/13
90,000
95,000
100,000
105,000
110,000
115,000
120,000
125,000
130,000
135,000
140,000
145,000
150,000
90,000
95,000
100,000
105,000
110,000
115,000
120,000
125,000
130,000
135,000
140,000
145,000
150,000
3.7% GDP Growth Rate
US Total Employment (Thousands)
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
18
01/01/01 09/28/03 06/24/06 03/20/09 12/15/11 09/10/14 06/06/17
100,000
105,000
110,000
115,000
120,000
125,000
130,000
135,000
140,000
145,000
150,000
155,000
160,000
100,000
105,000
110,000
115,000
120,000
125,000
130,000
135,000
140,000
145,000
150,000
155,000
160,000
6.2M
6.2M
229,000 / month
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market OutlookUS Total Employment (Thousands)
19
20112012
20132014
20152016
0
50
100
150
200
250
300
350
400
450
204K AVG
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market OutlookUS Total Employment (Thousands)
20
20022003
20042005
20062007
20082009
20102011
20122013
20142015
20160
1
2
3
4
5
6
7
8
9
10
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Reserve Assets (trillion) Unemployment Rate (%)
Federal Asset Monthly Purchase
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
21
US Job Growth
0 2 -Jan -8 7 2 4 -Ju n -9 2 1 5 -Dec-9 7 0 7 -Ju n -0 3 2 7 -N o v-0 8 2 0 -May-1 4
-200
-100
0
100
200
300
400
500
600
0
2,000
4,000
6,000
8,000
10,000
12,000
6 Month Average Job Growth NYSE Vermeulens
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
19861988
19901992
19941996
19982000
20022004
20062008
20102012
20142016
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
0
50
100
150
200
250
300
High/LowTotal
-8.7M (-6%)
Construction-2.3M (-30%)
Low/CurrentTotal
+12.2M (+9%)
Construction+964K (+18%)
22
US Construction Employment (Thousands)
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
19861987
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
20164,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
23
Construction Employment and Percent of Total
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
24
Construction Labor Utilization Rate
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
25N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
<70%
70% to 79%
80% to 89%
90% to 105%
>105%
Top Cities by GDP
Construction Labor Utilization Rate
Regional Construction Labor (Thousands)
National(-30% + 18%)
Denver(-26% + 45%)
Houston(-16% + 16%)
Dallas(-19% + 19%)
Boston(-25% + 26%)
26
140
150
160
170
180
190
200
210
220 Dallas
140
150
160
170
180
190
200
210
220 Houston
60
70
80
90
100
110
120 Boston
60
70
80
90
100
110
120 Denver
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
<70%
70% to 79%
80% to 89%
90% to 105%
>105%
Regional Construction Labor (Thousands)
National(-30% + 18%)
San Jose(-33% + 37%)
New York(-19% + 19%)
Seattle(-37% + 36%)
San Francisco(-32% + 33%)
27
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
2016200
220
240
260
280
300
320
340
360
380
400New York
60
70
80
90
100
110
120
130
140 San Francisco
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
201650
60
70
80
90
100
110
120
130
140 Seattle
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
201620
25
30
35
40
45
50
55
60 San Jose
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
<70%
70% to 79%
80% to 89%
90% to 105%
>105%
Regional Construction Labor (Thousands)
National(-30% + 18%)
Philadelphia(-24% + 14%)
Portland(-31% + 23%) Minneapolis
(-37% + 32%) Baltimore
(-21% + 13%)
28
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
2016
20
30
40
50
60
70
80 Portland
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
201650
55
60
65
70
75
80
85
90
95
100 Baltimore
60
70
80
90
100
110
120
130
140 Philadelphia
25
35
45
55
65
75
85
95
105Minneapolis
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
<70%
70% to 79%
80% to 89%
90% to 105%
>105%
Regional Construction Labor (Thousands)
National(-30% + 18%)
Detroit(-40% + 35%)Los Angeles
(-39% + 26%) Washington DC
(-26% + 5%)Atlanta
(-38% + 26%)
29
80
90
100
110
120
130
140
150Atlanta
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
2016100
110
120
130
140
150
160
170
180
190
200 Washington DC
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
2016150
170
190
210
230
250
270
290
Los Angeles
40
50
60
70
80
90
100
110
120 Detroit
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
<70%
70% to 79%
80% to 89%
90% to 105%
>105%
National(-30% + 18%)
Chicago(-32% + 10%)
San Diego(-40% + 22%)
Miami(-49% + 29%)
Phoenix(-55% + 23%)
30
60
80
100
120
140
160
180
200
220 Phoenix
50
70
90
110
130
150
170
190
Miami
Regional Construction Labor (Thousands)
100
120
140
160
180
200
220
240
Chicago
50
55
60
65
70
75
80
85
90
95
100 San Diego
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
<70%
70% to 79%
80% to 89%
90% to 105%
>105%
31
Wyoming Regional Labor (Thousands)
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
32B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
<70%
70% to 79%
80% to 89%
90% to 105%
>105%
Wyoming(-20% + 2%)
Wyoming Regional Construction Labor (Thousands)
Wyoming
33
Colorado Regional Labor (Thousands)
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
Colorado(-34% + 37%)
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
60
80
100
120
140
160
180
200<70%
70% to 79%
80% to 89%
90% to 105%
>105%
Colorado
34N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
5000
5500
6000
6500
7000
7500
8000
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Employment
Unemployment Rate
Construction Employment and Unemployment Rate
Construction Employment and Unemployment Rate
High/Low
Total -37%Infra -15%Res -66%Non Res -41%
Low/Current
Total +42%Infra +18%Res +67%Non Res +53%
35
Jan-02Jan-03
Jan-04Jan-05
Jan-06Jan-07
Jan-08Jan-09
Jan-10Jan-11
Jan-12Jan-13
Jan-14Jan-15
Jan-160
250
500
750
1,000
1,250
Put In Place Construction Annualized Billions)Non Residential Residential Infrastructure
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market OutlookUS Construction Volume
Jan-93Jan-95
Jan-97Jan-99
Jan-01Jan-03
Jan-05Jan-07
Jan-09Jan-11
Jan-13Jan-15
0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%5.5%6.0%6.5%7.0%7.5%8.0%8.5%9.0%
Put In Place Construction (% of GDP)Non Residential Residential Infrastructure
PeakTotal 8.2%Infra 2.0%Res 4.7%Non Res 3.0%
CurrentTotal 6.5%Infra 2.0%Res 2.3%Non Res 2.2%
36
US Construction Volume % of GDP
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
2016
0 1 -Jan -0 0 3 1 -D ec-0 0 3 1 -D ec-0 1 3 1 -D ec-0 2 3 1 -D ec-0 3 3 0 -D ec-0 4 3 0 -D ec-0 5 3 0 -D ec-0 6 3 0 -D ec-0 7 2 9 -D ec-0 8 2 9 -D ec-0 9 2 9 -D ec-1 0 2 9 -D ec-1 1 2 8 -D ec-1 2 2 8 -D ec-1 3 2 8 -D ec-1 4 2 8 -D ec-1 5
700,000
800,000
900,000
1,000,000
1,100,000
1,200,000
1,300,000
0
2,000
4,000
6,000
8,000
10,000
12,000
37
Construction Volume (Millions) and NYSE
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
38
Indicator Bottom Increase
Equities March 2009 +143%Commodities February 2009 - 16%GDP Q2 2009 2.2% Annual Employment February 2010 12.7MNon Res Volume February 2011 + 53%
Economic Summary
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
39
Forecast
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
40
2008 Peak to Bottom 2010: - 14.0%Change in 2011: + 2.0%Change in 2012: + 4.0%Change in 2013: + 5.0%Change in 2014: + 6.0%
Low Growth
MarketAverage
+ 5% + 7%2015:
High Growth
Market
+ 10%+ 4% + 6%2016: + 9%
Forecast
+ 3% + 5%2017: + 8%
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
41
Fast track projects no time for 100% Contract Documents prior to starting construction
Busy construction markets CM relationships required to get subcontractors to bid on your project
Financing requires a GMP in order to proceed
Complicated renovations or additions interfacing with operating facilities
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market OutlookCM @ Risk
42
15%
10%
5%
0%
>>>>
1. GMP at DD • 10-15% premium• End costs vary depending on completeness of
documents, relationship of Owner to CM, cost control process
2. GMP at CD • 5-10% premium• Proponents provide estimate of costs and
commit to general requirements and fee
3. Modified Bid • 0-5% premium• Proponents provide GMP based on completed
construction documents
4. Lump-Sum Bid • 6-8 pre-qualified general contractors submit lump-sum bids for complete scope of work
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market OutlookCM @ Risk
43
What Are The Added Costs
CM @ Risk
Construction Contingency 2% to 5%
General Conditions & Requirements 2% to 5%Higher Service LevelHigher Insurance Levels
Fees 0% to 1%
Sub Contractor Selection/Pricing 2% to 5%High Level of Service & QualityHighly QualifiedScope Holds
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
44
Procurement Strategy Texas A&M Engineering Education Center
430,000sf Project
150,000sf Addition340,000sf Fitout90,000sf Shell
565,000sf Project
230,000sf Addition415,000sf Fitout150,000sf Shell
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
45
Procurement Strategy Texas A&M Engineering Education Center
Cost Model Concept SD DD CD 100% CD80
85
90
95
100
105
110
115
120
125
130
135
140
145
150
155
160
V DraftV ReconciledCM DraftCM ReconciledBudgetAnticpated Buyout
$ M
illio
ns
Jan 2014 Jul 2014 Sep 2014 Feb 2015 Aug 2015 Oct 2015
$50M MEP
$48M MEP
$40M MEP
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
46
Procurement Strategy Texas A&M Engineering Education Center
180
190
200
210
220
230
240
250
260
270
Vermeulens Index Estimates
Revised GMP
BP3 Remainder Structural
Initital GMP (DD)
BP1 Demo & Utilities
BP2 Structural
BP3 Remainder Structural
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
47
Procurement Strategy Texas A&M Engineering Education Center
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
48
Procurement Strategy Texas A&M Engineering Education Center
Procurement Outcome
CM @ Risk with DD GMP cost premium of 8% - 10%
CM Fee & Markup 1.5% - 2.0%CM Holds & Changes 1.5% - 2.0%Change Order Pricing: BP-3: 2.5% - 3.0% CM Contingency: 2.5% - 3.0%
8.0% - 10% GMP held no significance
Cross Pollination of Trades (Steel & Electrical) cost $3M-$4M
Early Steel Package saved the Schedule 6 months – 8 months
Owner should be able to buy +$5M of alternates
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
49
Procurement Strategy Texas A&M Engineering Education Center
Mitigate market risk and scope creep with Design AlternatesTarget 10% from Program: ‘90% - 105%’
Carefully Plan and Co-ordinate Bid Packages Requires Timely input from Users
Ensure the CM has MEP preconstruction estimating talentPotential to eliminate with Bidding Contingency
Recommendations
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
50
Jan-03Jan-04
Jan-05Jan-06
Jan-07Jan-08
Jan-09Jan-10
150.0
160.0
170.0
180.0
190.0
200.0
210.0
220.0
230.0
240.0
250.0
Enabling Package (Slurry Wall & Excavation)
100% CD GMP
Early Steel, Elevators and Design Assist Enclosure
+0.6% +8.5% per year -14.0%
Procurement Strategy Dana Farber
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
51
Recommendations
Distinct early packages (no cross pollination)
Detailed concept design options to marry program and budget
Timely decision making at conceptual design – avoid escalation
Use of bidding contingency to mitigate market risk
GMP 100% Documentation = lowest cost
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market OutlookProcurement Strategy Dana Farber
20122013
20142015
20162017
220
Construction Trendline (3.1%)
CPI Trendline (2.7%)
High
Low
Vermeulens Index
52
SD DD CD
Enabling
Structure & Envelope
Interiors & MEP
Concept Design
Procurement Strategy
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
Strategic Early Procurement Packages
Escalation is extremely variable across the country
Plan and Program ‘90 to 105’
Watch Job Creation for Continued Growth
53
Recommendations
B o s t o n w T o r o n t o w S a n A n t o n i o w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook
Track Record
Project Volume & Benchmarking
Consensus Approach in Reconciliation
Market Outlook
Conceptual Estimating
Trusted Advisor
Why Vermeulens
56N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
Beyond Estimation Market Outlook
Service Beyond Estimation
North America’s Construction EconomistsVermeulens.com
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