The cost of building materials is expected to rise at a rate of about 1% per month throughout the year, according to Chris Harrison, executive vice president and general manager of Weitz Co. The exception is steel and rebar, for which costs are trending. down.
Harrison and Doug McMillan, president of zumBrunnen, pitched their ideas at the 24th Annual Ziegler LeadingAge National CFO Workshop in New Orleans last month. According to the executives, who spoke at a session titled “Construction Update and Forecast for the Retirement Housing Industry,” rising costs for building materials, freight and wages, combined with labor shortages and longer lead times needed for materials, are the main pressures. against the industry. The session was detailed in Ziegler’s Senior Living Finance electronic newsletter for the week of May 2.
Suppliers can use certain strategies to keep construction projects running smoothly, experts said.
First, Harrison and McMillan suggested working with experienced internal and industry partners.
“There needs to be a dedicated team focused on delivering successful project execution and a team that consistently focuses on consistent and consistent reconciliation of scope, schedule and budget,” wrote Lisa McCracken, Director of research and development of residences for the elderly at Ziegler.
Second, smart building contracts are essential, Harrison and McMillan said. Contracts must be “win-win” for the supplier and the contractor.
“Important elements include insurance arrangements, liquidated damages, timing arrangements, requirements for condition reports, documentation, payments, etc. and change order management, among other things, McCracken wrote.
Third, plan for various project contingencies ranging from fixed costs, soft costs (such as design and marketing/sales) and internal contingencies within the guaranteed maximum price contract.