Fluctuating construction costs have always presented a challenge to the industry - but in recent years, the steady rise has begun to jeopardize the financial stability of construction companies.
The key to overcoming this challenge is understanding the cause. By breaking down each factor that contributes to spiralling costs, construction companies can develop innovative strategies to address each issue and manage them effectively.
Understanding the Causes of Construction Cost Inflation
One of the main drivers of rising construction costs is the steep increase in the costs of raw materials, with the price of steel mill products, plastic construction products, and aluminum, copper and brass mill shapes more than doubling in recent years. These price hikes are largely responsible for creating a challenging environment for construction projects.
The other main challenge the construction sector has faced is the affects of the COVID-19 pandemic, which cause many job sites to be halted. Although the industry is recovering, labor shortages and supply chain issues still persist, impacting project delivery.
Factors Contributing to Construction Cost Inflation: Explained
Rising energy costs: The prices of energy across the western world have risen at an unprecedented rate, affecting the cost of producing raw materials. Given that construction is an energy-intensive industry, the impact of rising energy costs is particularly significant.
Supply chain disruptions: The global supply chain disruptions caused by the pandemic and increased e-commerce demand have had a significant impact on the construction industry. With demand and limited supply, shipping rates and transportation costs have skyrocketed, making the entire construction supply chain more expensive.
Labor shortages: The construction sector continues to face a particular shortage of skilled workers, making it challenging to stick to project timelines and budgets. Attracting young talent to the industry has become more difficult, partly due to misconceptions about the nature of modern construction work.
Geopolitical instability: Geopolitical events, such as trade disruptions and conflicts, have had far-reaching consequences for the construction industry. Transportation routes have been affected, trading relationships disrupted, and protectionism has increased, all contributing to rising costs.
Practical Strategies to Reduce and Stabilize Costs
Prioritize De-Risking
To mitigate risks related to cost inconsistencies, it's crucial to invest in continuous improvement and adopt good governance practices. By implementing consistent and measurable processes, supported by digital technologies, you can optimize your programs and schedules, resulting in significant cost savings.
Optimize Procurement Strategy
By embracing the principles of target value delivery, construction teams can effectively manage costs by collaborating and finding appropriate offsets. Negotiating supply contracts with trusted partners can also help in optimizing procurement processes and achieving optimal value for your construction projects.
Embrace Technology
Introducing digital tools and technologies on-site, such as HP SitePrint, can significantly improve efficiency, reliability, and productivity. Overcoming resistance to new technology and leveraging the benefits of automation and data-driven decision-making is essential for reducing construction costs.
Foster a Strong Culture
Clear and frequent communication, being a good partner to suppliers and stakeholders, and equipping the team with the right training and technology are vital for reducing costs. Automation technology like HP SitePrint can help teams work fast and safe while generating valuable data to mitigate cost inconsistencies.
Manage Construction Costs with HP SitePrint
Construction cost inflation poses significant challenges to the industry, but they also present opportunities for proactive field ops leaders. By implementing strategies to reduce and stabilize costs, leveraging technology, and fostering a strong company culture, construction companies can gain a competitive advantage, win more bids, and drive growth.
HP SitePrint, an innovative robotic solution for autonomous layouts, offers breakthrough efficiency, reliability, and precision. By embracing HP SitePrint and other proactive measures, construction companies can tackle volatile construction costs and confidently navigate the future.
Discover how HP SitePrint can help optimize your construction projects and control costs with confidence.
Selected for you
5 ways HP SitePrint can help transform your building operations
Bringing the power of HP’s ink innovation to construction sites
Digital Transformation in construction: why general contractors must adapt
Contact us
Talk with an expert
Contact us to get pricing information and to take par in the HP SitePrint Early Access Program.
Stay informed
Sign up to stay informed on the evolution of HP SitePrint and an entire industry.