How to manage construction costs in times of inflation?

Rising material prices, rising labor costs: inflation is having a major impact on the construction industry. Many professionals are struggling to cope with the effects on their construction projects. Independent contractors are particularly vulnerable. In this complicated context, how can you control and better manage your construction costs?

A number of strategies and techniques can be implemented to reduce the effects of inflation on construction projects, while maintaining an impeccable level of quality. Here are a few best practices to adopt.

First and foremost, you need to estimate the initial construction costs, taking into account expected inflation, and then regularly re-evaluate them if necessary. This can be done by monitoring construction cost indices or by calling in experts. Any necessary adjustments will be incorporated into the budget. All expenses must be carefully controlled. Any discrepancies must be identified so that action can be taken.

Inflation can make long-term contracts less profitable. Indeed, if they are based on prices fixed at a given point in time, and the costs of fulfilling the contract become higher, profitability is no longer there. It should be noted, however, that it is possible toinclude a price adjustment clause. For example, prices can be adjusted in line with inflation, based on pre-defined cost indices.

In order to control construction costs, supply chain management must be rigorous and constantly adaptable. This means negotiating advantageous contracts with suppliers, and diversifying sources of supplyto consider the types of materials usedetc.

Certain materials essential to construction are scarce, even in short supply, and becoming ever more expensive. In this context, and since global supply chains came to a standstill during the pandemic, companies have relied on a stockpiling strategy. In this way, they try to take advantage of prices before they rise and toto avoid forced shutdowns..

In conjunction with architects and engineers, it is possible to move towards less costly construction and fitting-out solutions. The contractor can consider the use of a different construction systembut also choose alternative materialsto reduce non-essential surface areas, etc.

New digital tools are helping to better manage and reduce construction costs, even in times of inflation. Here is a selection.

BIM is a technology and a collaborative tool for creating 3D models of buildings. By centralizing all the information needed to manage a construction project, it helps to manage costs more effectively throughout a building's lifecycle, in a number of ways:

First of all, the precise modeling it provides ensures that exact quantities of materials andestimate your budget very precisely.

It also offers the possibility of exploring different building design options and simulating their future performance. This enables the most economical solution to be adopted in terms of both materials and construction systems, without compromising quality. 

BIM also promotes better coordination between the various teams and areas involved in modeling. It thus avoids or limits potential conflicts and problems during construction and the additional costs involved in resolving them.

BIM also ensures supply chain optimization, logistics and reduced delivery times.

IoT enables physical objects to be connected and exchange data in real time. This is achieved by integrating sensors. In the construction sector, sensors can be integrated into equipment, materials and building structures. 

This technology makes it possible to monitor the use of resources on a worksite in real time and thus optimize their use, avoiding waste or losses. But that's not all.

The systems in place alert the operator to any equipment malfunctions and thus make it possible toanticipate breakdowns. They also improve inventory managementThey also improve inventory management, providing real-time visibility of stock levels, and thus ensuring that the right purchasing decisions are made. These will be able to take inflation-related price fluctuations into account as far as possible.
To help prevent absences and boost team productivity, sensors can be incorporated into gloves, helmets or vests to provide information on work habits and team health.

While it's impossible to control inflation, it is possible to use artificial intelligence to control spending, particularly via management software that incorporates it. Thanks to predictive analysis, it will be able to suggest trends, predict fluctuations in construction costs and thus support better financial planning as well asideal allocation of resources. It can also help optimize project design and construction processes, improve supplier contracts and risk management.

Inflation can't be controlled, but the use of good practices and new technologies makes it possible to be proactive, to better manage and reduce construction costs, and therefore to offset it. 

Techtime can help you on a daily basis to plan and organize all your construction projects. The application has been specifically designed to meet the needs of professionals in the construction industry.