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HomeMy WebLinkAbout101706 Construction Budget DrivBudget Cost Drivers – Construction October 17, 2006 Overview Construction Cost Trends ? Additional Project Cost Drivers ? Project Estimates ? Getting the Best Construction Price ? Construction Cost Trends Construction Costs have risen approximately 38.7% since ? 2004. Material price increases affect both City Capital Projects and routine maintenance. Increases have occurred for some of the most common materials used ? in Roadway and Building Construction. Concrete–Since 2004; up 27.8% ? Asphalt –Since 2004; up 113.5% ? Steel–Since 2004; up 68.5% ? Other Materials that have seen large increases in costs since 2004. ? • Aggregate (Gravel), Copper, Gypsum, and Lumber (Although Lumber Prices have seen a slight decline in recent months). Some Industry experts expect a moderation in construction cost ? increases. Construction Cost Trends (Continued) Additional Factors Which Influence Construction ? Costs: Increases in Labor Costs ? • Increases in Salaries and Overtime. • Increases in Health Care Costs. • Construction volume is increasing at a rate faster than the workforce. Construction Cost Trends (Continued) Global Influences (Competition for Resources) ? • Over the last 20 years, China has been evolving into a more industrialized nation. To construct the infrastructure needed to support their new economy, China has consumed over half of the available concrete and over 36% of the available steel. National and Regional Influences ? • Catastrophic events, such as Hurricane Katrina, impact material availability and draw on labor resources as they are shifted to the impacted region. Construction Cost Trends (Continued) Fuel ? • Long term cost trend is up. • Although fuel costs have recently gone down, diesel fuel has seen a 26.6% increase over the last 12 months. • Higher prices impact equipment and transportation costs. Higher Construction costs affect both Capital project ? construction and many Maintenance activities. Additional Project Cost Drivers For many Capital Projects, Construction costs often are only 40% -60% of a project’s Total Project Cost. Property Acquisition, i.e. Right-of-Ways and ? Easements • City Real Estate values have increased 57.45% since 2003. • Purchase of Right-of-Way and easements from numerous properties for City building and roadway projects. • Buildings: Need for optimal location or need for parking. • Roadways: Acquisition ranges from total takes to temporary easements. Dependent on length of roadway, can exceed 100 property acquisitions per project. Additional Project Cost Drivers (Continued) Private Utility Relocations ? • City must purchase Utility Easements/Rights-of- Way if utility is currently located in a valid easement. This is in addition to right-of-way and easements needed for the construction of the roadway. • . Undergrounding vs. Overhead relocations Undergrounding of Private utilities can cost 2-3 times more than overhead relocations. Utility relocation costs continue to escalate based on labor, equipment, and material cost impacts. Additional Project Cost Drivers (Continued) Project Enhancements ? Public Works is committed to providing projects ? consistent with a Quality Physical Environment. This includes: Pedestrian, Bicycle Safety, and Trails ? Landscaping ? Streetscaping ? Essential Facilities Designed for Category II ? Hurricane Construction Impact Limitations ? Additional Project Cost Drivers (Continued) Federal Transportation Funding requires the ? study, design, and potential construction of Soundwalls. This impacts design, right-of- way, and construction costs. Environmental Impact Reductioncan add to ? construction costs and often requires additional acquisition and design for mitigation areas. Project Estimates What should be recognized about Project ? Estimates? • Initial project budgets and schedules are updated throughout. • The Project Development Process can take from 4 to 12 years to complete for major projects. Urban reconstruction projects may take even longer to complete. • Even with modest inflationary rates, total project costs will escalate over the life of a project. Project Estimates (Continued) To illustrate these considerations, let us briefly ? review the Princess Anne Road/Kempsville Road Intersection Project Development Process to date: In FY1999-2000 (Project was re-introduced in CIP) ? • Study Only, No Design • Total Project Cost (TPC) $15.1M (S.A. -$2.5M, Const. $10M) In FY 2001-2002 ? • Design Complete to 35% Stage • TPC $27.7M (S.A. -$6.8M, Const. $17.0M) In FY 2006-2007 ? • Design Complete to 90% Stage • TPC $55.8M (S.A. -$23.5M, Const. $21.3M) Getting the Best Construction Price The goal is to make sure the City gets the best ? construction price for its projects, in any market conditions. What are we doing to get the Best Construction Price? • Focusing on initial Project Planning to better identify initial project requirements and set initial scope, schedule, and budget. Developing a cost database for tracking cost trends for project cost estimating purposes. Getting the Best Construction Price (Continued) • Surveyed local contractors and Architectural/Engineering firms for input. • Materials, labor, and fuel are fixed costs and subject to market conditions. • Insure that construction documents are clear and unambiguous. • Assignment of risk for unforeseen conditions. Getting the Best Construction Price (Continued) Focusing on Quality of Construction ? Documents • Project team constructability reviews at major milestones • Review of construction contract documents for coordination/correlation of plans and specifications. • Reduce certain project risks prior to construction . • Identify and pre-coordinate utility conflict resolutions. • Provide clear and workable maintenance of access and maintenance of traffic plans. Getting the Best Construction Price (Continued) Use most suitable contract method for ? project delivery . • Design-Bid-Build • Prequalification of Bidders for specialty construction • Design/Build • PPEA and PPTA –Funding mechanism for Design/Build, not project delivery. • Construction Manager at Risk Summary Construction labor, material, and fuel costs have ? increased substantially over the last several years. Since 2004, Construction costs have risen approximately 38.7%. Other factors besides construction drive total project ? cost. One of which is Site Acquisition, which has risen 57.45% since 2003. In any market, the focus is on Getting the Best ? Construction Price. Questions ?