2013 Saskatchewan Real Estate Forum SESSION C3 MANAGING CONSTRUCTION AND DEVELOPMENT COSTS IN THE SASKATCHEWAN MARKET kbanadyga@numberten.com
Sask. Dev. Costs - Context Capital Construction Price I ndex: Sask Trends Monitor Sask Trends Monitor has Annual Rate of Price Change, Sask Trends Monitor developed a simple index to Capital Construction Price Index, Saskatchewan, 2003 to measure price change in the cost 2012 8% of capital construction. The index includes changes in the cost of both labour and materials. It is 7% published in the monthly newsletter. 6% The index has grown by an average of 3.8% per year from 2003 to 5% 2012. 4% average 3% 2% 1% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 April 15, 2013 1 kbanadyga@numberten.com
Sask. Dev. Costs - Context The Perfect Storm kbanadyga@numberten.com
Demand – Mining, Oil & Gas Capital Investment in Construction of new Buildings and Facilities, Excluding Housing, Saskatchewan $8 $ billions $7 mining, oil $6 and gas $5 $4 all others $3 $2 $1 $0 2003 2005 2007 2009 2011 2013 intent kbanadyga@numberten.com
Demand – Wage Gap Average Weekly Earnings Including Overtime, Hourly Paid Workers in Saskatchewan $1,400 $1,300 Heavy and $1,200 Engineering Construction $1,100 $1,000 $900 $800 Non-Residential Building Construction $700 $600 $500 2005 2006 2007 2008 2009 2010 2011 2012 kbanadyga@numberten.com
Demand – Materials vs. Labour Annual Change in Price for a Basket of 31 Construction-Related Commodities 15% percent change Construction from a year ago 12% materials similar Labour costs 8.7% 9% increased 6% 3.5% 3% 0.2% 0% -0.1% -3% -6% -7.5% -9% 2009 2010 2011 2012 2013 YTD kbanadyga@numberten.com
Demand - Construction kbanadyga@numberten.com
Supply - Historical kbanadyga@numberten.com
Supply - Demographics Gap caused by outmigration kbanadyga@numberten.com
Supply - Immigration kbanadyga@numberten.com
Supply - Immigration kbanadyga@numberten.com
Design-Bid-Build Traditional Method ADVANTAGES Competitive Tendering ? Lowest risk factor- >Owner DISADVANTAGES takes longer to complete adversarial or confrontational relations High risk –> Contractor Competitive tendering not guaranteed kbanadyga@numberten.com
Construction Management Variations Relationship Based Team Approach CM as Advisor CM as Agent CM as Constructor CM at Risk kbanadyga@numberten.com
Construction Management ADVANTAGES Early commitment of Final costs – early scarce resources Opportunity to fast track Better value the design and constr’n. Less confrontational Owner and Architect have direct relationship Less complex /risky > DB select constructor based on ability vs. price alone Expertise at early stage Less litigious Better able to manage budget and schedule Risk and management with Contractor vs. Owner Value Management kbanadyga@numberten.com
Design Build DB with Bridging Consultant kbanadyga@numberten.com
Integrated Project Delivery TRENDING “ a project delivery approach that integrates people, systems, business structures and practices into a process that collaboratively harnesses the talents and insights of all participants to optimize project results, increase value to the owner, reduce waste, and maximize efficiency through all phases of design, fabrication, and construction.”* * American Institute of Architects kbanadyga@numberten.com
Integrated Project Delivery PRINCIPLES Mutual Respect and Open Communication Trust Appropriate Mutual Benefit and Technology Reward Organization and Collaborative Leadership Innovation and Decision Making Early Involvement of Key Participants Early Goal Definition Intensified Planning kbanadyga@numberten.com
Q & A kbanadyga@numberten.com
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