vermeulens beyond estimation market outlook q1 2016
TRANSCRIPT
Beyond Estimation Market Outlook®
Since 1972
®
James Vermeulen – Co-CEOBlair Tennant, LEED AP – Associate Principal
Zach Bergeron – Senior Project ManagerKarima Maloney – Senior Project Manager
North America’s Construction EconomistVermeulens.com
Service Beyond Estimation
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
2
Vermeulens is a Registered Provider with The American Institute of Architects Continuing Education Systems. Credit earned on completion of this program will be reported to CES Records for AIA members. Certificates of Completion for non-AIA members are available on request.
This program is registered with the AIA/CES for continuing professional education. As such, it does not include content that may be deemed or construed to be an approval or endorsement by the AIA of any material of construction or any method or manner of handling, using, distributing, or dealing in any material or product. Questions related to specific materials, methods, and services will be addressed at the conclusion of this presentation.
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market OutlookAIA Continuing Education
3
Learning Objectives
Cost Reconciliation Tracker Present trends in median trade costs from January 2009 – Current
Macro Economics Understand the Macro Economic impacts on Construction Volume and Cost
Forecast Forecast for Future Construction Costs
Procurement Strategy In light of current market conditions, recommendations on project procurement
Beyond Estimation Market Outlook
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
4
Where We Are…
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
2000 - Current
5
Vermeulens Construction Cost IndexBeyond Estimation Market Outlook
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
20162017
120
VCC Construction Cost Index
CPI
Construction Cost Trendline (3.1%)
CPI Trendline (2.7%)
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
Jan-90Jan-92
Jan-94Jan-96
Jan-98Jan-00
Jan-02Jan-04
Jan-06Jan-08
Jan-10Jan-12
Jan-14Jan-16
7,500
8,500
9,500
10,500
11,500
12,500
13,500
14,500
15,500
16,500
17,5002.5% Trend Line
GDP
(Bill
ions
)
6
High/Low-4.3%
Low/Current+14.9%
Growth Rate of 2.0% for the last 6 Years
US Real GDP
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
7
Code Group VCC CM CM-VCC VCC CM CM-VCC
01 Allowances $1,156,805 $2,422,380 $1,265,575 $2,651,790 $2,672,730 $20,940
02 Site Work $2,636,810 $3,773,428 $1,136,618 $2,918,155 $2,882,279 ($35,876)
03 Concrete $5,840,270 $5,065,081 ($775,190) $5,065,361 $5,065,081 ($280)
04 Masonry $1,547,241 $1,767,385 $220,144 $1,615,526 $1,609,395 ($6,130)
05 Metals $17,945,452 $17,804,383 ($141,069) $15,675,089 $15,577,004 ($98,085)
06 Wood/Plastic $3,172,732 $3,831,671 $658,939 $3,694,276 $3,600,999 ($93,277)
07 Thermal/Moisture Protection $2,903,951 $3,046,873 $142,922 $3,099,398 $3,086,080 ($13,319)
08 Doors/Windows $17,219,666 $15,756,579 ($1,463,087) $15,214,307 $15,299,926 $85,619
09 Finishes $9,635,770 $9,399,224 ($236,546) $10,135,975 $10,137,758 $1,782
10 Specialties $1,335,983 $1,163,012 ($172,971) $1,410,825 $1,418,709 $7,884
11 Equipment $1,127,700 $1,852,358 $724,658 $1,692,000 $1,693,414 $1,414
12 Furnishings $784,846 $302,393 ($482,453) $559,342 $573,596 $14,255
13 Special Construction $300,000 $148,575 ($151,425) $150,000 $148,575 ($1,425)
14 Conveying Systems $4,858,875 $7,212,645 $2,353,770 $5,963,888 $5,993,138 $29,250
15 Mechanical $28,949,381 $35,232,816 $6,283,436 $29,127,187 $29,493,221 $366,034
16 Electrical $15,451,608 $16,700,277 $1,248,669 $16,476,313 $16,451,613 ($24,700)
17 Permits & Fees $19,075,543 $20,452,111 $1,376,568 $20,043,336 $20,051,467 $8,130
18 Contingencies $16,841,472 $14,102,030 ($2,739,443) $15,684,472 $15,697,176 $12,704
19 Enabling $22,704,456 $22,704,458 $2 $22,704,458 $22,704,458 $0
20 Total Construction Costs $173,488,558 $182,737,674 $9,249,116 $173,881,696 $174,156,616 $274,920
Beyond Estimation Market OutlookCost Reconciliation Tracker®
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
8
Cost Reconciliation Tracker®
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
Typical Institutional Project – Direct Trade Cost
Recession Decline -14.0%2011 +2.0%2012 +4.0%2013 +5.0%2014 +6.0% 2015 +7.0% 2016 Q1+Q2 +3.0%
Assumes trade-weighted average of individual percentage trade reduction
9
Construction Cost ImpactBeyond Estimation Market Outlook
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
10
http://www.turnerconstruction.com/cost-index
Recession Decline-13.2%
2011 + 2.1%2012 + 2.6%2013 + 4.7%2014 + 4.4%2015 + 4.6%2016 + TBD
-14%
+2.0%+4.0%+5.0%+6.0%
Turner Construction Cost Index
Turner Construction Cost Index
+7.0%
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
+ TBD
High Growth Market Adjustment Cost Recovery High Growth0
250
500
750
1000
1250
1500
1750
2000
2250
2500
2750
3000
3250
3500
3750
950675 675 750 750
1150
1075 10501150 1250
1300
1000650
9501300
MarkupLaborMaterial
3,400
2,750
2,375
2,850
3,300
11
Structural Steel PricingBeyond Estimation Market Outlook
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
12
Contingency
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
Project Contingency and Escalation Recommendations
Design Contingency
Preliminary Design 10% to 15%
Schematic Design 6% to 9%
Design Development 3% to 6%
Contract Documents 0% to 3%
Construction Contingency 3% to 5%
Escalation - based on the Market Outlook and Local index
3% to 9%
Bidding Contingency 0% to 5%
Project Contingency (Owner) 5% - 15%
13
What’s Next?
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
20162017
100
Vermeulens Turner ENR
Beyond Estimation Market Outlook
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
20162017
80
90
100
110
120
130
140Nominal US Dollar Broad Index
14
-27% +21% -18% +28%
US Dollar Risk Hedge
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
20162017
0
2,000
4,000
6,000
8,000
10,000
12,000NYSE
15
+123% -58% +144%
Beyond Estimation Market OutlookUS Dollar Risk Hedge
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
16
US Dollar and NYSE
US Dollar and NYSE
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
20162017
80
90
100
110
120
130
140
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
USD NYSE
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
20162017
0
5
10
15
20
25
30
35
40
45
50Dow Jones Commodity Index
17
+168% -57% +72%
US Dollar Impact on Commodities
-53%
Beyond Estimation Market Outlook
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
18
US Dollar Impact on Commodities
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
20162017
80
90
100
110
120
130
140
0
5
10
15
20
25
30
35
40
45
50
USD DJCI
19
GDP (Billions) and NYSEBeyond Estimation Market Outlook
10,000
10,500
11,000
11,500
12,000
12,500
13,000
13,500
14,000
14,500
15,000
15,500
16,000
16,500
17,000
0
2,000
4,000
6,000
8,000
10,000
12,000
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
128,000
129,000
130,000
131,000
132,000
133,000
134,000
135,000
136,000
137,000
138,000
139,000
140,000
141,000
142,000
143,000
144,000
0
2,000
4,000
6,000
8,000
10,000
12,000
8.7 M Jobs
13.6M Jobs
8.7 M Jobs
14.4M Jobs
20
183,0
00 /
mth
200,
000
/ mth
3.0% G
DP G
rowth
2.0%
GDP
Gro
wth
200,000 / month
US Employment (Thousands) and NYSE
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
20162017
128,000
129,000
130,000
131,000
132,000
133,000
134,000
135,000
136,000
137,000
138,000
139,000
140,000
141,000
142,000
143,000
144,000
7.0%
9.0%
11.0%
13.0%
15.0%
17.0%
19.0%
BANK ANNOUNCEMENT
21
21.6 M Jobs 22.4 M Jobs 22.5 M Jobs 22.1M Jobs
US Employment (Thousands) Public vs PrivateBeyond Estimation Market Outlook
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
22
90,000
95,000
100,000
105,000
110,000
115,000
120,000
125,000
130,000
135,000
140,000
145,000
150,000
90,000
95,000
100,000
105,000
110,000
115,000
120,000
125,000
130,000
135,000
140,000
145,000
150,000
Popu
latio
n (in
thou
sand
s)
3.7% GDP Growth Rate
US Total Employment (Thousands)
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
01/01/01 09/28/03 06/24/06 03/20/09 12/15/11 09/10/14 06/06/17
100,000
105,000
110,000
115,000
120,000
125,000
130,000
135,000
140,000
145,000
150,000
155,000
160,000
100,000
105,000
110,000
115,000
120,000
125,000
130,000
135,000
140,000
145,000
150,000
155,000
160,000
6.2M
6.2M
200,000 / month
23
Beyond Estimation Market OutlookUS Total Employment (Thousands)
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
20112012
20132014
20152016
20170
50
100
150
200
250
300
350
400
450
24
202K AVG
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market OutlookUS Total Employment (Thousands)
200K AVG
20022003
20042005
20062007
20082009
20102011
20122013
20142015
20162017
0
1
2
3
4
5
6
7
8
9
10
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Reserve Assets (trillion) Unemployment Rate (%)
25
Federal Asset Monthly PurchaseBeyond Estimation Market Outlook
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
26
US Job Growth
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
0 2 -Jan -8 7 0 2 -Jan -8 8 0 1 -Jan -8 9 0 1 -Jan -9 0 0 1 -Jan -9 1 0 1 -Jan -9 2 3 1 -Dec-9 2 3 1 -D ec-9 3 3 1 -Dec-9 4 3 1 -Dec-9 5 3 0 -Dec-9 6 3 0 -Dec-9 7 3 0 -D ec-9 8 3 0 -D ec-9 9 2 9 -Dec-0 0 2 9 -Dec-0 1 2 9 -Dec-0 2 2 9 -D ec-0 3 2 8 -D ec-0 4 2 8 -Dec-0 5 2 8 -Dec-0 6 2 8 -D ec-0 7 2 7 -D ec-0 8 2 7 -Dec-0 9 2 7 -Dec-1 0 2 7 -Dec-1 1 2 6 -Dec-1 2 2 6 -D ec-1 3 2 6 -Dec-1 4 2 6 -Dec-1 5 2 5 -Dec-1 6
-200
-100
0
100
200
300
400
500
600
1,000
10,000
6 Month Average Job Growth NYSE Vermeulens
High/LowTotal
-8.7M (-6%)
Construction-2.3M (-30%)
Low/CurrentTotal
+14.4M (+11%)
Construction+1.2M (+23%)
27
US Construction Employment (Thousands)Beyond Estimation Market Outlook
19861988
19901992
19941996
19982000
20022004
20062008
20102012
20142016
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
0
50
100
150
200
250
300
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
28
Construction Employment and Percent of Total
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
19861987
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
20162017
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
29
Construction Employment and Unemployment RateBeyond Estimation Market Outlook
5000
5500
6000
6500
7000
7500
8000
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Employment
Unemployment Rate
5000
5500
6000
6500
7000
7500
8000
0.0
5.0
10.0
15.0
20.0
25.0
30.0EmploymentUnemployment Rate
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
30
Construction Labor Utilization RateBeyond Estimation Market Outlook
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
31
Beyond Estimation Market Outlook
<70%
70% to 79%
80% to 89%
90% to 105%
>105%
Top Cities by GDP
Construction Labor Utilization Rate
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
Regional Construction Labor (Thousands)
National(-32% + 27%)
Denver(-27% + 38%)
Boston(-27% + 36%)
Houston(-18% + 28%)San Francisco(-33% + 43%)
32
Houston
BostonDenver
San Francisco
Beyond Estimation Market Outlook
<70%
70% to 79%
80% to 89%
90% to 105%
>105%
20002002
20042006
20082010
20122014
2016140
150
160
170
180
190
200
210
220
230
20002002
20042006
20082010
20122014
201660
70
80
90
100
110
120
20002002
20042006
20082010
20122014
201660
70
80
90
100
110
120
20002002
20042006
20082010
20122014
201650
60
70
80
90
100
110
120
130
140
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Regional Construction Labor (Thousands)
National(-32% + 27%)
New York(-20% + 24%)
Dallas(-20% + 25%)
San Jose(-34% + 40%)
Portland(-31% + 23%)
33
Dallas
San Jose
New York
Beyond Estimation Market Outlook
<70%
70% to 79%
80% to 89%
90% to 105%
>105%
Portland2000
20022004
20062008
20102012
20142016
200
240
280
320
360
400
20002002
20042006
20082010
20122014
2016120
140
160
180
200
220
20002002
20042006
20082010
20122014
201620
30
40
50
60
20002002
20042006
20082010
20122014
201620
30
40
50
60
70
80
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
Regional Construction Labor (Thousands)
National(-32% + 27%)
Baltimore(-21% + 12%)
Seattle(-37% + 35%) Los Angeles
(-35% + 28%) Minneapolis
(-38% + 39%)
34
Seattle
MinneapolisLos Angeles
Beyond Estimation Market Outlook
<70%
70% to 79%
80% to 89%
90% to 105%
>105%
Baltimore
20002002
20042006
20082010
20122014
201640
50
60
70
80
90
100
20002002
20042006
20082010
20122014
201660
80
100
120
140
20002002
20042006
20082010
20122014
2016150
170
190
210
230
250
270
290
20002002
20042006
20082010
20122014
201640
50
60
70
80
90
100
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Regional Construction Labor (Thousands)
National(-32% + 27%)
Philadelphia(-24% + 12%)
Washington DC(-27% + 8%)
Atlanta(-38% + 26%)
San Diego(-41% + 29%)
35
San DiegoAtlanta
Washington DCPhiladelphia
Beyond Estimation Market Outlook
<70%
70% to 79%
80% to 89%
90% to 105%
>105%
20002002
20042006
20082010
20122014
201660
80
100
120
140
20002002
20042006
20082010
20122014
2016100
120
140
160
180
200
20002002
20042006
20082010
20122014
201680
100
120
140
160
20002002
20042006
20082010
20122014
201650
60
70
80
90
100
110
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
National(-30% + 18%)
Detroit(-44% + 30%)
Chicago(-34% + 15%)
Miami(-49% + 35%)
Phoenix(-55% + 23%)
36
Miami
Regional Construction Labor (Thousands)
Detroit Chicago
Beyond Estimation Market Outlook
<70%
70% to 79%
80% to 89%
90% to 105%
>105%
Phoenix2000
20022004
20062008
20102012
20142016
40
60
80
100
120
20002002
20042006
20082010
20122014
2016100
120
140
160
180
200
220
240
20002002
20042006
20082010
20122014
201650
70
90
110
130
150
170
190
20002002
20042006
20082010
20122014
201650
70
90
110
130
150
170
190
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
High/Low
Total -37%Infra -12%Res -66%Non Res -28%
Low/Current
Total +49%Infra +24%Res +91%Non Res +32%
37
Jan-02Jan-03
Jan-04Jan-05
Jan-06Jan-07
Jan-08Jan-09
Jan-10Jan-11
Jan-12Jan-13
Jan-14Jan-15
Jan-16Jan-17
0
250
500
750
1,000
1,250
Put In Place Construction (Annualized Billions)Non Residential Residential Infrastructure
Beyond Estimation Market OutlookUS Construction Volume
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
19931995
19971999
20012003
20052007
20092011
20132015
20170.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%5.5%6.0%6.5%7.0%7.5%8.0%8.5%9.0%
Put In Place Construction (% of GDP)Non Residential Residential Infrastructure
PeakTotal 8.2%Infra 2.0%Res 4.7%Non Res 3.0%
CurrentTotal 6.9%Infra 1.9%Res 2.7%Non Res 2.3%
38
US Construction Volume
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
20162017
0 1 -Jan -0 0 3 1 -D ec-0 0 3 1 -D ec-0 1 3 1 -D ec-0 2 3 1 -D ec-0 3 3 0 -D ec-0 4 3 0 -D ec-0 5 3 0 -D ec-0 6 3 0 -D ec-0 7 2 9 -D ec-0 8 2 9 -D ec-0 9 2 9 -D ec-1 0 2 9 -D ec-1 1 2 8 -D ec-1 2 2 8 -D ec-1 3 2 8 -D ec-1 4 2 8 -D ec-1 5 2 7 -D ec-1 6
700,000
800,000
900,000
1,000,000
1,100,000
1,200,000
1,300,000
0
2,000
4,000
6,000
8,000
10,000
12,000
39
Construction Volume (Millions) and NYSEBeyond Estimation Market Outlook
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
40
Indicator Bottom Increase
Equities March 2009 +144%Commodities February 2009 - 20%GDP Q2 2009 2.0% Annual Employment February 2010 14.4MNon Res Volume April 2011 + 32%
Economic Summary
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
41
ForecastBeyond Estimation Market Outlook
19861987
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
20162017
2018100
200
Construction Trendline (3.1%)HighLowVermeulens Index
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
42
2008 Peak to Bottom 2010: - 14.0%Change in 2011: + 2.0%Change in 2012: + 4.0%Change in 2013: + 5.0%Change in 2014: + 6.0%Change in 2015: + 7.0%
Low Growth
MarketAverage
High Growth
Market
+ 4.0% + 6.0%2016: + 9.0%
Forecast
+ 3.5% + 5.5%2017: + 8.0%
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
43
Fast track projects no time for 100% Contract Documents prior to starting construction
Busy construction markets CM relationships required to get subcontractors to bid on your project
Financing requires a GMP in order to proceed
Complicated renovations or additions interfacing with operating facilities
Beyond Estimation Market OutlookCM @ Risk
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
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15%
10%
5%
0%
>>>>
1. GMP at DD • 10-15% premium• End costs vary depending on completeness of
documents, relationship of Owner to CM, cost control process
2. GMP at CD • 5-10% premium• Proponents provide estimate of costs and
commit to general requirements and fee
3. Modified Bid • 0-5% premium• Proponents provide GMP based on completed
construction documents
4. Lump-Sum Bid • 6-8 pre-qualified general contractors submit lump-sum bids for complete scope of work
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market OutlookCM @ Risk
45
What Are The Added Costs
CM @ Risk
Construction Contingency 2% to 5%
General Conditions & Requirements 2% to 5%Higher Service LevelHigher Insurance Levels
Fees 0% to 1%
Sub Contractor Selection/Pricing 2% to 5%High Level of Service & QualityHighly QualifiedScope Holds
Beyond Estimation Market Outlook
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
46
Procurement Strategy Texas A&M Engineering Education Center
430,000sf Project
150,000sf Addition340,000sf Fitout90,000sf Shell
565,000sf Project
230,000sf Addition415,000sf Fitout150,000sf Shell
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
47
Procurement Strategy Texas A&M Engineering Education Center
Cost Model Concept SD DD CD 100% CD80
85
90
95
100
105
110
115
120
125
130
135
140
145
150
155
160
V DraftV ReconciledCM DraftCM ReconciledBudgetAnticpated Buyout
$ M
illio
ns
Jan 2014 Jul 2014 Sep 2014 Feb 2015 Aug 2015 Oct 2015
$50M MEP
$48M MEP
$40M MEP
Beyond Estimation Market Outlook
48
Procurement Strategy Texas A&M Engineering Education Center
180
190
200
210
220
230
240
250
260
270
Vermeulens Index Estimates
Revised GMP
BP3 Remainder Structural
Initital GMP (DD)
BP1 Demo & Utilities
BP2 Structural
BP3 Remainder Structural
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
49
Procurement Strategy Texas A&M Engineering Education Center Beyond Estimation Market Outlook
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
50
Procurement Strategy Texas A&M Engineering Education Center
Procurement Outcome
CM @ Risk with DD GMP cost premium of 8% - 10%
CM Fee & Markup 1.5% - 2.0%CM Holds & Changes 1.5% - 2.0%Change Order Pricing: BP-3: 2.5% - 3.0% CM Contingency: 2.5% - 3.0%
8.0% - 10% GMP held no significance
Cross Pollination of Trades (Steel & Electrical) cost $3M-$4M
Early Steel Package saved the Schedule 6 months – 8 months
Owner should be able to buy +$5M of alternates
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
51
Procurement Strategy Texas A&M Engineering Education Center
Mitigate market risk and scope creep with Design AlternatesTarget 10% from Program: ‘90% - 105%’
Carefully Plan and Co-ordinate Bid Packages Requires Timely input from Users
Ensure the CM has MEP preconstruction estimating talentPotential to eliminate with Bidding Contingency
Recommendations
Beyond Estimation Market Outlook
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
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Jan-03Jan-04
Jan-05Jan-06
Jan-07Jan-08
Jan-09Jan-10
150.0
160.0
170.0
180.0
190.0
200.0
210.0
220.0
230.0
240.0
250.0
Enabling Package (Slurry Wall & Excavation)
100% CD GMP
Early Steel, Elevators and Design Assist Enclosure
+0.6% +8.5% per year -14.0%
Procurement Strategy Dana Farber
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
53
Recommendations
Distinct early packages (no cross pollination)
Detailed concept design options to marry program and budget
Timely decision making at conceptual design – avoid escalation
Use of bidding contingency to mitigate market risk
GMP 100% Documentation = lowest cost
Beyond Estimation Market OutlookProcurement Strategy Dana Farber
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
20142015
20162017
20182019
220
440
Construction Trendline (3.1%)CPI Trendline (2.7%)HighLowVermeulens Index
54
SD DD CD
EnablingStructure & Envelope Interiors & MEP
Concept Design
Procurement Strategy
N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
Strategic Early Procurement Packages
Escalation is extremely variable across the country
Plan and Program ‘90 to 105’
Watch Job Creation for Continued Growth
55
RecommendationsBeyond Estimation Market Outlook
B o s t o n T o r o n t o S a n A n t o n i o D e n v e r L o s A n g e l e s
Track Record
Project Volume & Benchmarking
Consensus Approach in Reconciliation
Market Outlook
Conceptual Estimating
Trusted Advisor
Why Vermeulens
56N o r t h A m e r i c a ’ s C o n s t r u c ti o n E c o n o m i s t
Beyond Estimation Market Outlook
Beyond Estimation Market Outlook
Service Beyond Estimation
James Vermeulen – Co-CEOBlair Tennant, LEED AP – Associate Principal
Zach Bergeron – Senior Project Manager
North America’s Construction EconomistsVermeulens.com
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