Tips for Managing Construction Costs Amid Rising Material Prices

The commercial construction industry is no stranger to challenges, but recent years have brought unique obstacles.

Managing project costs has become increasingly complex, from inflationary pressures to persistent material shortages.

For commercial construction firms and their clients alike, understanding how to navigate these issues is essential for keeping projects on track and within budget.

Discover some practical tips for managing construction costs, focusing on the impacts of inflation and supply chain constraints on the industry.

Prioritize Efficient Project Planning

Effective project planning is one of the best defenses against unexpected cost increases. At the outset, prioritize thorough cost analysis and forecasting to account for current material costs and potential fluctuations.

• Budget for Inflation: Consult with your project team and financial advisors to set aside contingency funds for inflation. Adjust your budget regularly based on up-to-date market information.
• Realistic Timelines: Factor in potential delays due to material shortages and price fluctuations. A flexible timeline can prevent you from needing costly, last-minute alternatives or expedited shipping fees.

Use Value Engineering Wisely

Value engineering is a process for identifying cost-effective alternatives that do not compromise quality or project goals. Value engineering can be a powerful tool when faced with rising material costs.

• Material Alternatives: Where possible, consider alternative materials that offer similar performance but are more affordable or readily available. For instance, engineered wood instead of steel can be a cost-effective substitute.
• Smart Design Choices: Collaborate with architects and engineers to identify design modifications that reduce material usage. Simple design adjustments can lower costs without compromising the structure's integrity or aesthetics.

Build Strong Relationships with Suppliers

Reliable relationships with suppliers can give you a competitive edge during material shortages. Establishing these partnerships may result in priority access to materials, flexible pricing options, and early warnings about market changes.

• Negotiate Long-Term Agreements: Where feasible, work with suppliers to lock in prices on essential materials by signing long-term contracts; this can provide more stable pricing and help secure materials.
• Diversify Suppliers: Don't rely on a single source for critical materials. Partner with multiple suppliers across regions to mitigate the risk of localized shortages or price spikes.

Implement Just-In-Time Ordering (JIT) Where Possible

While some materials may require advanced ordering, Just-In-Time (JIT)ordering can reduce the risk of overpaying due to price fluctuations. JIT can also prevent the costs associated with warehousing excess inventory.

• Assess Lead Times Carefully: For materials still experiencing supply chain issues, ordering well in advance may be necessary. For others with more predictable delivery timelines, JIT can help minimize costs.
• Evaluate the Risk of Delays:  Be cautious with JIT on essential or hard-to-replace materials, as any delay could stall the entire project. Weigh the cost savings of JIT against the potential risks and make informed decisions.

Leverage Technology for Cost Control

Advances in construction technology can significantly improve cost control. Technology enables better planning, tracking, and adapting to changing conditions, from project management software to real-time pricing data.

• Use BIM for Cost Forecasting: Building Information Modeling (BIM) can enhance cost estimation and help identify cost-saving opportunities before construction begins.
• Real-Time Data and Analytics: Utilize software that provides up-to-date pricing data on materials, allowing you to adjust budgets in real time. Additionally, AI-based solutions can identify areas for potential savings during the construction phase.

Amplify Your Focus on Waste Reduction

Reducing waste can significantly manage costs, especially when materials are expensive and scarce. Several strategies to minimize waste exist, from careful planning to on-site efficiency practices.

• Prefabrication: Using prefabricated components can reduce the need for extra materials and waste generated on-site. Prefabrication can also save time, helping offset the impacts of delays.
• On-Site Waste Management: Train teams to handle materials efficiently, using only what is needed and reusing or recycling where possible. Minimizing material loss can directly lower costs.

Adopt Sustainable and Energy-Efficient Practices

Sustainable practices often translate into long-term cost savings. Many sustainable materials are eligible for tax incentives and may prove less costly over time due to durability and reduced maintenance.

• Energy-Efficient Systems: Invest in energy-efficient lighting, heating, and cooling systems. While the initial cost may be higher, energy-efficient systems reduce operating expenses in the long run.
• Recycled Materials: Incorporate recycled or reclaimed materials, which can sometimes be more affordable than new resources. Many recycled materials are just as durable and reliable, offering a sustainable alternative amid shortages.

Communicate with Clients About Cost Impacts

Transparent communication with clients is crucial, especially in volatile market conditions. Keeping clients informed of potential price increases and material shortages helps manage expectations, and fosters trust.

• Set Up Regular Updates: Schedule frequent meetings to review the budget, especially when market conditions shift unexpectedly.
• Educate Clients on Market Realities: Help clients understand the industry challenges and the steps you're taking to manage costs effectively. This open communication can prevent frustration over unexpected changes.

Work With Wright Building Systems

Rising material costs and supply chain disruptions impact construction projects worldwide, but careful planning, strategic relationships, and technology can make a significant difference.

By prioritizing efficient project planning, leveraging technology, and fostering solid supplier relationships, your commercial construction company can help manage costs amid inflation and material shortages.

These strategies help keep budgets in check and demonstrate to clients your commitment to delivering value, even in challenging times.

At Wright Building Systems, we can help you determine which method would be ideal for your specific needs and be your partner throughout the process. Greater St. Louis business owners repeatedly trust us with their projects. We are committed to safety and delivering finished products that exceed expectations.

Our dedicated team has the equipment, technical skills, and perseverance to complete your project. Let's get in touch today!