The Bonita Springs (Fla.) High School will cost $14 million more than its original $50 million to complete. Rising costs of construction materials and labor are driving this overrun.
New York City’s School Construction Authority is over budget on more than half of its current projects by an aggregate of at least $300 million, including the construction of an annex to Public School 303 in Queens whose costs have nearly doubled to $98.6 million, from its initial budget of $53.9 million.
And this problem doesn’t just plague school districts, either. Construction costs comprise between 60% and 85% for commercial developments, and through the first half of this year those costs are up nationally by 5.7%, according to JLL. A number of studies, including one by McKinsey & Company last year, confirm that cost and schedule overruns have become the norm for the construction sector, jacking up the final price tags on projects, in some cases exponentially.
McKinsey noted that construction is among the least digitized of the 22 sectors it tracks. At the very least, there’s room in the construction sector for significant improvement in how costs are forecasted and project spending is managed.
Rider Levett Bucknall (RLB), a global consultant that specializes in cost and project management and quantity surveying, has recently developed a platform called Pulse that the firm claims is among the first to focus on the financial management of a project.
“A typical project will have anywhere from three to 100 contracts, with many potential changes,” explains Paul Brussow, RLB’s Executive Vice President. “This program allows [clients] to get to the bottom line of what a project is really going to cost.” By evaluating and calculating all costs—from engineering to legal—Brussow says Pulse can helps managers spot project risks sooner, and give them more information and time to devise contingencies.
Pulse complements RLB’s Ross 5D measurement and bill production software.
RLB will launch Pulse in November as an in-house service to its clients. It has already tested it on some projects (which Brussow declined to identify), and has started training employees in North America how to use it. The company will expand that training to other countries in the coming months.
“There’s a lot of interest within the company to deploy this software,” he says.
By the end of this year, says Brussow, Pulse should be able to manage a project’s cash flow and provide participating vendors with invoice management.