We are seeing cost increases across all platforms, although they seem to be tapering off compared to the 5 1/2% increases we saw last year. This contrasts the pressure of revenues, which aren’t keeping up. Sometimes it all works out. Other times it doesn’t.
This week, I had a cost management conversation with a potential customer that went something like this:
We can use the subcontractors that I would rate as “C,” “D” or “F,” and both owner and contractor will start happy, with the loaned closed and construction underway. But sometime during the course of the job, we will eventually get to each other’s throats, and by the end will be sending nastygrams between us.
To me, a better approach is to price and design a budget that makes the number work, if possible, and produces a quality product. Price the right mix of “A,” “B,” “C” and maybe even “D” rated subcontractors in a well-thought out blend. With the extra effort, the numbers hopefully work and everyone is friends at the end.
Using this method, there are clear expectations, on-time delivery and everything works most of the time. No nastygrams.