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San Francisco Business Times: 3 ways to keep down costs: Contractors are using an array of strategies to limit price increases
May 20, 2016
By Roland Li
Buffetted by construction costs that have soared more than 25 percent in under four years, contractors are taking matters into their own hands.
Builders are experimenting with virtually every element of the construction process in an effort to ratchet down costs. They are using virtual reality and advanced computer modeling to better organize construction projects, exploring new ways to address longstanding labor shortages and even fine-tuning traditional practices like the way they put up scaffolding, all in a bid to get more efficient.
General contractor Suffolk Construction has reduced costs by becoming involved in a project during the pre-construction phase, even before a project is submitted for approvals and as early as three years before a project breaks ground, said Andy Ball, Suffolk’s West Region CEO. That allows it to pick subcontractors — and lock in prices — early. Suffolk has rolled out these practices at its current projects, including highrises at 340 Fremont St. and One Henry Adams
The company has also cleaned up building bracing structures and even pushed for design changes to make projects less costly to build by replacing materials. Suffolk also uses computer modeling — not just on the building, but also to organize the construction site for maximum efficiency.
“Subtle changes on a 40-story building can have huge impacts,” said Ball, who estimates that technology and modifications can lead to 4 to 8 percent savings in the overall project. That’s a significant discount when costs have soared in recent years. A highrise project’s cost has risen from $300 per square foot in 2012 to $380 per square foot now, said Ball.
Technology as a tool
Ray Trebino, DPR Construction’s Bay Area business unit leader, said the general contractor uses a digital technology called Building Information Modeling to display a project’s mechanical, electrical and plumbing systems before they’re built. This allows it to collaborate with the developer and architect to reduce costs during construction and also helps the building manager operate the structure after it’s built.
“Through this visualization the company is able to more accurately predict the building process, quantity of materials and costs, as well as increase the ability to prefabricate parts of the facility,” said Trebino.
Mark Konchar, chief innovation officer for Balfour Beatty Construction, has used both cutting edge and more traditional solutions to lower costs. For a tech client in the Northwest, Balfour Beatty used virtual reality as part of the building design and modeling process, which reduced overall costs by $90,000, said Konchar. “We want to push what’s possible with technology and modeling, but do so in relentless cooperation with our design, engineering and client partners,” he said. At the Wiseburn High School project in Southern California, Balfour Beatty used buckling restrained braces, which have smaller columns and beams to support construction work, which also lowered costs compared to traditional braces.
Lowering labor costs
Contractors have also reacted to the labor shortage by working closely with local jobs training programs. Scott Anderson, senior vice president and regional manager of general contractor Pankow, said it works with local organizations such as the Cypress Mandela Training Center in Oakland to find new workers to train. Pankow has over 100 employees in the Bay Area.
The job shortage has been particularly acute for skilled trades such as glass and glazing specialists, as well as carpenters. But the sector is an attractive place for workers seeking union jobs, and there are signs young people are entering the business again.
As of May 2015, the San Francisco-Oakland-Hayward region had 83,400 employees in the construction and excavation occupations, with an hourly mean wage of $31.70, one of the highest mean salaries for construction in the country, according to the Bureau of Labor Statistics. That was an increase from 77,020 employees with a mean wage of $30.55 per hour in the same region in May 2014.
Pre-fab as the future?
As construction technology advances, there’s a chance that human labor may be at least partially replaced in pursuit of lowering costs.
Prefabrication, or building segments of a project off-site and then shipping them in to be assembled on-site, has great potential to reduce construction costs, said Denise Pinkston, a partner at developer TMG Partners. Machines can be used to build segments of the project like apartment units, reducing the need to hire labor and reducing costs.
For example, Cahill Contractors is now building a modular affordable housing project called Parkside Studios in Sunnyvale.
Still, the practice could lead to more pushback from labor unions. But there isn’t currently enough demand nationwide to support the practice.
“Right now there’s not enough pipeline to keep the factories going,” she said. “It’s too new of a thing.”
But she believes that it’s inevitable that prefabrication will change the industry in the coming decades.
“Housing’s the last thing that everyone uses that we still build like we did 300 years ago — by the piece,” said Pinkston. “So that’s got to change.”