The Australian Institute of Quantity Surveyors (AIQS) certainly thinks so, given the volatile markets, rising construction costs and disrupted supply chains.
2022 has been the year of runaway construction costs arising out of an unprecedent combination of factors including labour shortages from COVID-19 restrictions and reduced immigration, surging local demand, increased government grants/funding and significant increases in logistics. To make matters worse, the Russian-Ukraine conflict has significantly impacted global supply chains, which coupled with local material supply shortages, has resulted in a perfect storm for commercial construction.
“As an example, we’ve seen a huge increase in reinforcement supply – in June 2020 reinforcement was $1,330 a tonne, in March 2021 it was $1,560 and in April 2022 it was $2,400 a tonne,” says AIQS director and junior vice president, Simon Squire.
However, with easing prices, the focus is now shifting to ensuring certainty of supply and delivery, which necessitates preplanning. According to Squire, one may budget for higher prices, but one can’t always guarantee product availability.
“Preplanning and making early payments to lock-in shipping times to get products into the country will help in creating certainty. Facades, structural steel, and mechanical and electrical equipment are all mostly procured overseas. If there is another lockdown or delays globally, this will have flow-on effects here in Australia.”
Labour shortage, a constant pressure point in the construction industry is now adding more stress and costs thanks to the recent volatility, he added.
For 2023, Squire forecasts continued volatility and multiple fractured trajectories in the short-term, with the market expected to then ease to a new high norm. However, there are several caveats too: the conflict in Ukraine eases, rising inflation globally subdues, and China gets back to pre-pandemic production levels, all of which can be quite impactful.
Squire’s advice for the commercial construction industry is to get the budget right from day one, test it thoroughly and ensure that it’s dynamic and reflects the level of price certainty, and can be adjusted throughout the process if needed.
“AIQS recommends that clients engage with the contracting community to ensure base assumptions are correct, and if not, adjust the design or parameters early to make sure the project can work. This could mean changing a product, accelerating the project or delaying it.”
Another recommendation is to revisit construction contracts, with rise and fall clauses and two stage contracts now considered practical options for new agreements. While a rise and fall clause ensures protection for both the client and contractor, two stage contracts provide greater cost certainty, potentially leading to cost savings for the client and reduced risk of delays.
Keeping all of the above in mind, using a Certified Quantity Surveyor (CQS) throughout the process starting at project inception will really assist in bringing increased cost clarity and understanding to projects.
“It is vital to work in collaboration with the CQS and provide regular updates as the market continues to shift rapidly,” concludes Squire.
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