That could literally turn out to a million dollar question.

Traditional outsourcing occurs for many reasons. These include lower costs, better availability of skills, freeing time for other tasks, or sometimes simply because it is highly recommended. Therefore, what is the scope for outsourcing construction related work?

It is quite extensive actually. Taking Construction Cost Estimation as an example. This is a basic yet critical component of any construction activity. This can be outsourced to companies who will analyze the bid, as well as formulate construction cost estimates and present your business with the most cost and labour effective building plan. The advantages that accrue from this kind of outsourcing include

• being empowered with the right cost information, thereby helping you bid competitively for contracts;
• getting to understand the profitability quotient of a project, so that you know which endeavours make you money;
• effective tracking of actual costs as the project develops.

WHICH ASPECTS OF PROJECTS CAN BE OUTSOURCED?

Traditionally the main thrust of construction outsourcing has been on deciding what to outsource. But with the increased availability of all kinds of data, greater refinement and sophistication, our skill at analyzing and collating data, the focus has now shifted on how to outsource.

Using a separate example, Corporate Real Estate departments have increasingly moved away from large in-house service delivery models to smaller strategically focused departments in conjunction with several outsourced components. Most outsourcing companies appreciate that it is best to work out a combination of in-house and contracted services.

Design and Feasibility Stage

By outsourcing the initial design to qualified and professional companies you can benefit from relevant expertise at a substantially lower cost.

Typically, the process of outsourcing is as follows; The outsourcing firm’s engineers carry out an in-depth analysis, based on your hand sketches, 2D drawings and blueprints and develop construction cost estimations and building cost estimations by way of cost values.

These are then represented in 2D drawings consisting of elevations, plans or sections. Furthermore these can then be converted into 3D models after factoring in your inputs so that you obtain a truly realistic dimension to the construction cost of a project.

The firm’s panel of experts will confer with you to arrive at engineering based cost control methods that ensure you obtain top-class quality for the least cost.

Once a design for a new project has been approved and detailed drawings produced, there are a number of opportunities to outsource part or all of the work to dedicated Quantity Surveyors and Estimators.

Initial Construction Cost Estimation and Budget Preparation

This is a crucial phase in the project, where any errors and omissions will most likely result in increased overall costs. In the long run, it will be a large benefit to you and your budget to spend a little more time and money in selecting a reputable firm to represent your project.

Help and Advice in Selection of Main Contractor

The expertise of the main contractor is therefore crucial to the success of the project. It is therefore very important to select the right person/company to construct your project. An experienced Quantity Surveyor will be able to assist in this process to ensure you get the best possible product with the minimum fuss.

The above focuses on the pre-contract / pre-construction phase of your project. There are a number of facets of the construction & management phase which can be outsourced as well. These will be discussed in a later article.

HOW THE INTERNET CAN HELP

As the internet is developing, so too is the potential to use it as a tool within construction and construction cost estimation.

This is changing the way constructions projects are being managed and outsourced. It brings together project building, material and equipment procurement and project management in a way that is easy to use, easy to operate, and customised to the needs of construction professionals.

This merges real time project and supply bidding, holistic project management capabilities, a host of qualitative information, making a centralised communication framework for the construction industry.

THE WAY FORWARD IN THE CONSTRUCTION INDUSTRY.

Outsourcing is fast evolving into a highly professional, sophisticated and dynamic way of bringing a project to fruition. The coming years shall see outsourcing within the construction industry expand in a big way, leveraging the economies of scale achieved by intelligent outsourcing.

Outsourcing works because it lets you focus on core competencies, improves accountability, lowers stand-by costs, reduces project costs, imparts flexibility, hastens project delivery and improves risk management.

In an era of cutting edge expertise and evolving technology, construction is becoming increasingly complex. Outsourcing allows you to stay abreast of these changes by giving you access to the best experts in the field at a reasonable price.

How we factor in the costs taking into account the entire life cycle of the facility to be built is critical. We must remember that construction cost forms only one part of the life cycle cost, and it will be the owner of the facility who will have to bear the costs after the construction phase. Therefore it is important to remember that any savings in construction costs at one stage should not be at the expense of quality, which may come back to haunt the owner at a later stage.

While it is always a good idea to compartmentalize a project, it is essential that the level of communication between the divisions is clear and effective, in order that tasks are carried out with synergy. Productivity enhancement measures such as use of new technologies and automated construction processes are also to be investigated and implemented, provided they bring down the cost and are in tandem with the project objectives. Since it is the owner or the user will live with the outcome, all efforts should be to keep the quality levels high, which include optimization and rationalization of the costing.

There are certain fundamental methods which can reduce construction costs by a substantial amount. Opting for prebuilt units is one such way. For many low and moderate income American families, buying a home has become something of a dream given the current state of the real estate market. Under the prebuilt mechanism, house are constructed off site and subsequently assembled on site, rather than being built from the ground up in the traditional style.

For example, in California, non-profit housing developers are allowed to buy tax defaulted properties. These empty lots can then be successfully utilized to construct prebuilt units at a fraction of the cost of those of conventional homes. Moreover, time taken in the build process can be shortened considerably.

An often ignored reason for the high cost of construction, particularly within house building, is the lack of government encouragement in the development of moderately priced housing. Instead of support, most governments bow to the demands of neighbourhood groups who are bent on preserving the exclusivity of their area. These groups are not keen on the development of mid rise apartment projects in their vicinity – nor would they like to have retired folks and young people in their midst. This creates exclusivity, which pushes up the price of real estate.

A very direct and emotional component of the construction cost equation is that of labour costs. One good method of reducing construction costs is to reduce the cost of labour. This being the emotive issue that it is, it has to be handled with extreme care as public backlash from laying off workers is something every company would wish to avoid. There are a number of innovative methods to reduce labour costs which are beyond the scope of this article, however these can be innovative, and negate the need for workers to take substantial pay cuts. They could for instance be made to work staggered hours so that their skills are optimally utilised. As labour costs can amount to very high percentages of the total cost of construction, any savings achieved can have major impact on overall project costs.

Cost of construction is a complex issue and it varies with the type of industry and the geographical location.  However, the scope for cost rationalisation is often overlooked to the detriment of the project in question and its ultimate beneficiaries.  Money saved by exercising caution and discretion is money released towards greater growth and prosperity.