Greenville, S.C.-based Gordian Co. has added Predictive Cost Data to its RSMeans Online service, citing the technology’s potential to deliver accurate, location-specific figures for more than 100 different types of construction projects up to three years out. With a few clicks, it delivers the cost of materials in a specific region during a particular quarter, helping users prioritize project timing and location.
|Predictive cost technology is detailed in a white paper posted at www.gordian.com.|
Predictive Cost factors 10 billion-plus points from 15 years of RSMeans data, coupled with advanced analytics Gordian scientists apply to more than one thousand indexes on public and private construction. Through a rigorous statistical program, a unique algorithm was produced for concrete, steel, wood and other material and labor segments. Thorough back testing from the last 10 years shows Predictive Cost attaining accuracy within 3 percent of actual cost indexes.
“Most of the tools available today make it difficult to plan and budget for future construction, especially more than one year out,” says Gordian Chief Data Officer Noam Reininger. “Going forward, you no longer have to plan tomorrow’s project with yesterday’s data because Predictive Cost has accuracy these previous methods lack.”
Predictive technology equips design and construction professionals, along with their clients, to effectively plan and estimate work. Until this point, Gordian notes, project stakeholders had few options outside of relying on current and historical costs, their own experience and studying trends to forecast building costs.
“Over time, material prices change substantially. Continually attempting to stay abreast of trends or only factoring in general inflation to try to account for these differences simply falls short,” Reininger contends. “With Predictive Cost Data, our algorithm allows for a level of accuracy never before possible.” — www.gordian.com
RISING MATERIAL PRICES, INTEREST RATES HOVER POST-2019 MARKET
In a mid-year outlook, Associated Builders & Contractors Chief Economist Anirban Basu notes that the nonresidential construction sector will remain stable for the second half of 2018, yet warns of a potential economic downturn in 2020, owing to a rapid rise in interest rates and materials prices.
“Contractors are becoming more and more concerned about surging materials prices—especially metals,” he affirms. “On a year-over-year basis, iron and steel are up 13.5 percent, which not only impacts a contractor’s margins but could potentially diminish demand for construction services overall.”
Prices for inputs to the overall U.S. construction industry expanded 2.2 percent in May, the largest monthly increase in 10 years. Prices expanded again in June by 0.8 percent and are 9.6 percent higher than at the same time one year ago, according to recently released U.S. Bureau of Labor Statistics data.
“Despite record low unemployment in the United States, an overall lack of skilled laborers in the construction sector and downstream markets contributes to the uncertainty,” Basu observes. “From electricians to painters to estimators, industry leaders are growing increasingly concerned about the dearth of skilled construction professionals and how human capital shortages have trickled down the supply chain. This will not only contribute to increased compensation costs but also increased inflation and higher interest rates, which could potentially hinder both construction and real estate sector growth.”
His full forecast is covered in “2018 Mid-year Economic Outlook: A Time of Growth and Intrigue,” posted at the ABC site, www.constructionexec.com.