5 future causes of cost variance on construction projects by Eque2

Title 5 Future Causes of Cost VarianceConstruction projects are notoriously complex – which means construction costs follow suit. Many developments take months, or even years, and are affected by fluctuating prices of everything from materials to labour. The global economy can drive the cost of supplies up or down as demand rises and falls – and currency movements don’t help, either. Eque2, a leading provider to the construction and software industry, believe that using specialist construction software will provide you with the tools to run and manage your business effectively and efficiently, helping you to increase margins, manage projects and save time and money.

Wes Simmons, Managing Director of Eque2, says: “The number of issues having an impact on construction costs is on the increase, it’s important to have construcution software in place in order to control costs more effectively.” So for construction financial controllers and project managers seeking to control their construction costs, here’s a glimpse of what might be coming your way.

1. Wages on the Up and Up

One of the first signs that the recession was easing was the beginning of a shortage of skilled construction workers. As more buildings went up, more builders were needed – but over the long economic downturn, skills had been lost as work dried up. The result is a continuing shortage of skilled trades, who can now name their price. The situation may be exacerbated by a new rule that means most skilled migrant workers who remain here for five years will only be allowed settlement – leave to remain – if they earn at least £35,000.

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Builder & Engineer magazine reports that the UK Construction Market Survey found 61% of construction professionals have reported sharp wage rises in the sector. That may ease eventually – the Government has made a commitment of 3 million new apprenticeships starts in England between now and 2020 – but rising labour costs are likely to remain an issue for some time.

2. Rising Material Costs

Materials are a global business – even if you’re a local builder – for instance, copper prices rose dramatically during the manufacturing boom in China. But this can be hard to track and predict, even by the experts. GVA’s Construction Outlook Review, published in June 2015, predicted an oil price of $65 – far higher than what happened in reality. This is where good cost-planning and estimating software can really help, providing a solid and logical platform for construction costs planning that can help you ride the global waves.

3. To Comply…

Keeping track of new regulations and legislation is a costly business – red tape adds £2 billion to construction costs (£2,275 per job), according to research by the Forum of Private Business. That’s the highest cost per employee of any UK sector.

4. Or not to Comply?

As many businesses have found, non-compliance is a no-no, and can end up costing a small fortune. Contractors, clients and designers can be penalised with unlimited fines if they fail to comply with the 2015 Construction (Design and Management) Regulations, for example.  Fortunately, good document management software can help you keep on top of compliance – improving control and helping cut costs, as well as reducing a lot of hassle.

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5. Contractors Push up their Tenders

As demand for construction services continues to rise, a seller’s market is developing. Many contractors are pushing up their prices. In 2015, Mace increased its tender price forecast for the year by 1%, to 4.5% nationally and to 5.5% for London.

The answer to this dilemma is an old one – shop around. Many construction companies track procurement costs carefully and compare contractor tenders; it’s a valuable tactic for reducing construction costs.
No-one has a Crystal Ball

With a complex industry like construction, the future is always flexible and open to influence from many elements. Be prepared, though, and the impact on your business can be controlled and even turned to your advantage. It’s not quite a crystal ball, but it can help keep the shine on your business.

At Eque2, we provide solutions that are tailored to the construction and contracting industry and we can help support your company’s growth with our highly configurable, reliable and scalable construction software solutions.


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