Michael Dell'Isola, a construction economist at Faithful & Gould and author of Architect's Essentials of Cost Management.

Managing the cost of construction is a struggle that every member of the construction team today must address. Exceeded budgets can delay schedules and harm the reputation of all involved, making it ever-more important for firms to devise a cost-management strategy.

“Cost management is everyone's responsibility,” says Michael Dell'Isola, a construction economist at Faithful & Gould and author of Architect's Essentials of Cost Management. “First and foremost, it is essential that the expectations of the owner are aligned with the budget at the outset. If not, no amount of design or construction effort can overcome an inadequate budget.”

A national expert on construction cost management, Dell'Isola contends that the process of keeping costs in check starts with the estimate and continues throughout the life of the project. “There is no substitute for accurate and responsive cost estimating,” he adds. “Good cost estimating focuses attention where needed and facilitates the balancing and trade-off process.”

But cost estimating alone might not cut it these days. “In a normal marketplace, you can apply normal estimating techniques, where you can usually compare with historical costs and get a safe bet,” he says.

However, given the volatility of the market, it's not feasible to apply normal estimating techniques. “I've been in this industry over 35 years, and I've never seen anything like this for this length of time,” he says about materials inflation.

Get A Jump Start
Early understanding and incorporation of value-engineering strategies is key to cost management, Dell'Isola explains. “People don't concentrate their energy on cost management early enough in the process,” he says. “There is a tendency to wait until the design is completed before ever [considering it].

“If you look at a project, the costs are probably 80 to 90 percent defined and committed to halfway through the design process,” he continues. “Therefore, if you're going to control the costs you have to control them early on.

“Designers then need to sensitize their approach to the funds available, using money wisely and in a balanced way, and not overspending on one aspect only to have to cut back on something else,” Dell'Isola continues, “The owner needs to be involved in decision-making and [prepared] to make trade-offs when necessary.”

A Good Value
Value-engineering, construction management at-risk and design/build are three methods Dell'Isola says industry professionals are using to control cost.

“I've conducted over a hundred value-engineering sessions and the results have almost always been worthwhile,” he says. “When done with a proper perspective on real ‘value,' it's a great process.”

Other recommendations Dell'Isola gives to keep costs in check are keeping abreast of the competition. “Be aware of other projects in your area competing for common resources,” he suggests.

Cost Drivers
A major driver of inflated construction costs, according to Dell'Isola, is basic supply and demand. “When materials are in short supply or demand is way up, the price will rise,” he explains. “The last several years have seen increases in non-residential construction well above inflation. It's something a lot of people understand; they're looking for more complicated reasons. In times of tight supply, great care needs to be taken with material selection.”

Although some believe the housing bust might quell prices in the industry, Dell'Isola says that hasn't been the case, pointing to money being spent in non-residential. “There's nothing on the horizon that says that is going to ebb,” he adds.

Aging infrastructure, bond programs for schools and the need for additional healthcare facilities are all reasons supporting stable, if not increased, spending in the market.