December 1, 2004—In a new study by PinnacleOne, a leading construction consulting firm, an overwhelming majority (89%) of industry professionals have witnessed price increase in project bidding. The average price increase was estimated to be 10 percent or greater by more than two-thirds (69%) of respondents and at more than 15 percent by greater than one-third (34%) of the participants. Cost of materials (68%) was identified as the clear driver of this alarming trend. The survey also identified a growing concern with the issue of false claims and a lack of understanding on energy and environmental issues among the construction executives.
Among findings in the PinnacleOne Pulse of US Construction2004 survey:
- Steel Shortage. During the past year, almost three-quarters (74%) of industry executives had projects adversely affected by the steel shortage and the associated price increase, and a majority (57%) of these professionals believe this obstacle will be come greater in the coming year.
- Energy/Environmental Standards. Although more than three-quarters (77%) of respondents have initiated energy efficient plans in new projects and 93% anticipate rising demand for energy solutions, a significant number (39%) fail to use LEED (Leadership in Energy and Environmental design) green building standards when designing projects. Moreover, almost half (44%) of respondents were unaware of promotions/incentives offered by the Dept. of Energy or local utilities to assist in the procurement of energy efficient solutions.
- False Claims. More than three-quarters (77%) are concerned with the issue of false claims. Of the respondents that have been involved in the review and analysis of false claims, inflated pricing (45%) and subcontractor claims (25%) are issues identified as accounting for the greatest number of claims.
- Dispute Reviews. Respondents were far more likely to use mediation (34%) as a means to resolve disputes, compared to arbitration (14%) or litigation (12%). Least popular resolution vehicle were Dispute Review Boards (DRB) (5%). Of the 31 percent of respondents that have ever used a DRB to resolve a construction dispute, a majority (55%) described them as satisfactory and just under a third (31%) called them ineffective. Only a small minority (14%) described DRBs as very effective.
- Partners. Of the majority (55%) of respondents who typically use partnering on projects, fewer than half (45%) feel the practice has resulted in a reduction disputes/claims.
- Time. While respondents estimate that a majority (62%) of their construction projects are completed on time, a significant amount (29%) are completed late. Similarly, the construction professionals polled estimated that 61% of their projects come in on budget, with approximately one-quarter (26%) over budget.
Other areas included in the poll of construction industry executives were alternative procurement methods; change order growth; energy & environment; air quality; contracts.
PinnacleOne is a national construction consulting firm focused on providing program and project management and dispute avoidance and resolution services.
