Finding ways to cut construction costs is never easy. Shortages in skilled labor causing higher labor costs and rising lumber prices are just part of the challenge. But, a process to identify areas that are less than efficient is a great place to start. We have recorded four components that should be in your process. These components will help you find cost reductions. Also, they will allow you to continue building well-constructed homes. Small savings in each area lead to lower construction costs in total.
Latest NHAB estimates put the average cost nationally at $154/square foot when building a single-family home. A 3% reduction is roughly $12,000 in savings for a 2,500 square foot home. Read about these four strategies to find the savings for your operation.
Value Engineering to Cut Construction Costs
Value engineering (VE) sets the tone for almost all construction cost reductions. It can help reduce large line items such as exploring better framing costs with engineered wood packages. Other areas include finding product alternatives for old construction techniques, or confronting hidden cost holes such as callbacks, and old take-off numbers.
Successful value engineering is based around a close analysis of the little details. When making product changes one of the determining factors to review is the lifespan of the product. Examine if the needed process change is efficient. How durable is the new brand? Will it perform well over the expected life of the home? Is the quality of the product in keeping with the value promise you deliver to new homeowners?
The key to value engineering is balancing function, design, and performance with safety, cost, and quality. Each of these aspects are incredibly important. They will impact the overall value and success of the lifetime value of the home. Therefore, each proposal must be analyzed, reviewed, and put in order of priority to deliver on your value promise.
Internet search engines offer many possible options, ideas, and products to reduce construction costs. They will offer their solution to your team that meets or exceeds needs that often lower construction costs.
Enlist the aid of product manufacturers, architects, dealers, and other sources to help. Get them to research function, performance, cost, quality, and durability of the proposed changes. Reduce the list to the most feasible value ideas, concepts, and construction cost savings.
Supply Chain Considerations
Once new value engineered changes are identified the attention must turn to the supply chain. Dealers and other vendors are in business to serve your construction needs. But multiple products covering a construction function along with space and turns dictate most product choices at stocking dealers.
Product manufacturers are also an abundant source to locate their products near you. They will offer alternative supply chain sources to deliver the product you want. Many dealers, however, use other well-entrenched brands for that application to other builders.
You may need to stay strong in your demand for a new brand with your normal supply chain sources. In any case, you hold all the power when lower costs with other brands are available to capture.
Direct Builder Rebates To Lower Construction Costs
Many manufacturers offer product use rebates to cut construction costs. Capturing these rebates are a great source of construction cost savings. Depending on your accounting system they may apply directly as reduced costs. In other systems they would be captured as totals that are recognized at different times in the accounting cycle.
Front loaded manufacturer rebates or prebates are an easy way for manufacturers to offer cost savings. Call the manufacturer about prebates when you buy from a dealer network. If so, the manufacturer might want to lock in your business and pay your rebate upfront. Manufacturers often are willing to strike a prebate deal if they know they could true-up actual to forecasted sales.
Learn more about the rebates offered by Belco Forest products!
Multiply Success Across Communities
Sweat the small stuff. Local purchasing offices are often independent decision makers. Each division is responsible for delivering on several corporate goals through local decisions. Outside the large national specifications to which everyone adheres are many small categories to achieve substantial savings.
Encourage other offices to adopt new construction products or processes if a product brand or application is having success. Most manufacturers will run free product tests and competitive analyses. The lure of additional sales can result in deeper discounts and nation-wide construction cost savings.
