Addressing construction contingencies due to unknown conditions like incomplete drawings and volatile market conditions is a crucial aspect of project planning. This article discusses how to account for such uncertainties to ensure successful project execution.
Key Insights
- Construction projects often face uncertainties due to incomplete documents, potential weather delays, and volatile market conditions. For instance, incomplete drawings may require additional contingencies to account for potential gray areas or unclear aspects.
- Weather conditions, specifically in different locations, can significantly impact project timelines. It's crucial to factor in possible weather delays while planning the project and estimating its cost.
- Material cost inflation due to market volatility can affect the project budget. Fluctuating prices of resources like oil, steel, lumber, and other materials need to be considered while estimating costs, especially if these materials are crucial to the project.
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Contingencies are often required for unknown conditions or circumstances such as incomplete drawings, potential weather delays, lumber or oil-based product price inflation due to volatile market conditions, etc. So, let's talk about some of these scenarios. For example, incomplete documents or incomplete drawings are not uncommon.
Too often, the owner is trying to rush the project and is attempting to get 50% or 75% construction documents (CDs) out to the contractors for bidding. So, you don't have a complete set of documents before the project is estimated, and you have to take many things into account that could happen or infer what the intent is. We refer to these as contingencies, and very often, if you have incomplete documents, you may want to include contingencies for anything that’s considered a gray area or is unclear, and you have to consider the possibilities—or at least what the intent is.
Even if you have to call the architect and ask, “What are you planning to do here?” The drawings are not complete. What’s the intent? Make sure those are factored in, and if there’s too much left out, go ahead and add a percentage to your estimate or to the portion of the estimate for incomplete drawings. Potential weather delays, depending on what time of year it is and where you're located in the country, are important to factor in.
Here in Southern California, we get sunshine for about nine months straight, and then it may rain for the next three months. So factor these in. If I have a project that’s going to start in April and run through September, I probably don’t need any rain delays on my projects down here in Southern California.
In other parts of the country, the effect could be the opposite. Material cost inflation may occur due to volatile market conditions. Let’s say there’s an oil embargo in the Middle East.
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Oil prices skyrocket, and therefore oil-based materials such as asphalt, roof shingles, or anything similar will increase in cost accordingly. If the oil embargo starts today and prices go up on the market, then prices of existing inventory rise immediately. Prices don’t wait for new stock to arrive.
So keep that in mind. It doesn’t happen as much anymore, but it could happen with oil prices. It could happen with lumber coming in from Canada, for example.
It could also affect steel. Steel prices and anything made of steel could be impacted. Even something as simple as drywall.
So keep that in mind if there are any materials on your project that could be considered volatile based on national or international material prices.
