the newsletter of tbd consultants - edition 7, 3rd qtr 2007

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In this Edition

Fly Me to the Moon
Cost Estimating & Cost Management
Escalation Trends
Embassies

Construction Management Specialists
111 Pine Street, Suite 1315
San Francisco, CA 94111
(415) 981-9430

www.TBDconsultants.com

 

Fly Me to the Moon
Geoff Canham

You've been on a world tour, now where do you go on vacation? How about a trip into space? That has become a reality for a privileged few, but it is likely to become available for many more of us in not too many years, and that is leading to the development of space ports around the world.

 

   
 

Cost Estimating & Cost Management
Niall Durkin

What is the difference between cost estimating and cost management? How are they carried out, and what are they used for? Should you care? Niall addresses these issues in this article.

 

   
 

Escalation Trends

The latest update of our TBD Bid Index (for the second quarter of 2007) still shows bid prices rising, but not as steeply as during the past couple of years.

Does this mean that we have reached a peak in the recent price increases? It may be rather premature to suggest that. History doesnít always repeat itself, but it doesnít hurt to consult it, so we looked back over the past 35 years at how escalation rates had changed. Unfortunately our own index only goes back to the start of 2003, so we looked elsewhere for the comparisons, specifically to the ENRís Building Cost Index and to Saylorís Subcontractor Index. The former is national in its context and looks at changes in a specific basket of materials and union labor rates. The latter index is California based and looks at particular subcontractor prices, so it is more a gauge of bid prices.

The following chart shows the movement of the ENR Building Cost Index over the past 35 years:

That chart shows some fairly high annual price increases over the first decade that we are looking at, then approximately 20 years that vary up and down around the 2% mark, then the rate jumps up again in 2004.

The Saylor Subcontractor Index shows similar trending, but since it reflects market conditions to a greater extent, the swings are wider:

Averaging the annual increases over these three time periods shows the following:

Year RangeENR BCISaylor
1972-19818.32%9.88%
1982-20022.62%3.15%
2004-20065.78%9.92%

The fact that we are starting to see similar annual escalation rates to those occurring 35 years ago doesnít mean that we will be in for a similar decade long period of high escalation. But there does seem to be a lot of construction work being planned for, and if contractors have full books, they have no incentive to lower prices.

   
 

Embassies

Embassies serve very special needs, and have their own special needs. In this article we look at this relatively rare but very necessary building type, and the special issues that have to be considered in the design, as well as what drives the cost of embassy construction.

   

Design consultant: Katie Levine of Vallance, Inc.