We are in the most volatile and inflationary construction environment ever. This makes it exceedingly difficult for estimators and other cost professionals to accurately and reliably predict or help budget projects.Thanks to Construction Analytics1 we can track construction escalation against national inflation and also building material and wage rate increases since 1967. Figure 1 shows cost surges in 2004, 2018, and in the COVID19 era. Through an extensive data research initiative we at Building CATALYST are able to provide the only credible multi-factor, multi-level reckoning of both time (escalation) and place (location) to more accurately and reliably predict project outcomes.
Figure 1- Construction Escalation History
Here is the four-tiered approach needed to produce the most accurate valuation of project outcomes, based on the best combination of national, historical, current and local market value.
Nationally Published Cost Data:
Escalation - Construction Analytics (edzarenski.com) aggregates over 20 other publicly available data resources to provide the best credible escalation standard as a starting point.
Location - RS Means uses bottom-up building material and wage cost data approach. While this approach fails to accurately predict owner costs (as shown in Figure 1), it provides the best credible location (City Cost Index) available.
CATALYST internal real-world project-specific data research and application. CATALYST has recorded and/or been applied to over 700 building projects across 41 states.
Escalation - Up until COVID, CATALYST research results followed Construction Analytics (CA) very closely. Since COVID, CATALYST baseline 5-year rolling basis is running about 10% higher than CA.
Location - CATALYST accounts for other location-related cost drivers than the RS Means City Cost Index (CCI). A dense urban site poses significantly higher effort and cost than a suburban site. Likewise, other site demands and bearing conditions need to be considered. CATALYST applied these and several other owner requirements to make the most accurate valuation of a project cost.
Multi-level User Adjustment. CATALYST provides several manual override options to adjust cost models based on user experience and insights on current market conditions. These include whole-building escalation percentage or location (CCI) adjustment. CATALYST also allows factor adjustments at the whole-building, Uniformat Levels 2 (e.g., Electrical), or Level 2.5 (e.g., Exterior Wall). Finally, CATALYST enables users to manually revise or adjust any line item based on the understanding of special requirements associated with the line item.
Immediate Local Market Calibration - CATALYST enables users to capture up-to-date real-world market data as projects are being bid out at the trade level for immediate feedback in predicting projects in the preconstruction stages. CATALYST brings life to the otherwise dead trade data through historical data recording and dynamic benchmarking process.
This four-fold application of data science plus local expertise, removes most of the uncertainty and risk associated with budgeting and steering projects to successful results - even in a highly volatile market.
