Transparency And Communication Key To Safeguard Projects During Rising Inflation.

Construction inflation is beginning to impact project viability, design teams and contractors must engage with their clients early to foster transparent relationships and find innovative solutions to cost pressures.

Two stage negotiated contracts, the procurement model of choice, allows contractors to reflect some, if not all the inflation in the tender sum. However, as inflationary pressures continue tender returns will be seriously testing the business case and budgets of many clients.

If inflationary pressures continue, for some clients this must be getting to or beyond the point of project viability. Projects going through procurement now probably had their first iteration of the cost plan in Q1 or Q2 2022, if not earlier. That means a business case will be looking sketchy at this point in the year and getting worse daily. Contractors need to be supportive and honest about the feasibility of projects with their clients, but ultimately, with inflation at the levels we are experiencing it is the client that suffers as the cost plan seems a distant memory and project viability less and less likely. Value Engineering or cost cutting is inevitable, projects aspirations on quality and scope become diluted or projects are being shelved.

Now is also the time for the industry to turn to energy efficient off-site manufacturing and low carbon products, this needs the project team to understand the options available and communicate with client at the inception of the project

To discuss or find out more about Berrys’ project management services, please contact Derek Farrow in the first instance on 01865 953191 email derek.farrow@berrys.uk.com.