CONSTRUCTION HEDGE
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Impact
Impact of Inflation on Construction Project
Status Quo
Development appraisals drawn up with imperfect information at design stages 2 / 3.
These are costed using cost consultants current pricing structures.
These are based on lagging indicators of previously fixed cost contracts.
Inevitably there is a cost uplift experienced between Stage 3 design and the first stage of tender with a Main Contractor.
This is attempted to be mitigated by fixing contract packages early.
Results
This is a design process which must be allowed to run its course. Overly heavy handed influence can result in savings on paper which fail to be realised over the lifecycle of the project.
Cost consultantancy practices have some of the most up to date agreed prices, however these dont do a good job capturing the current state of a fast moving market.
This lag in terms of commities pricing and labour rates do not give a perfect price for the current market. Due to the lag factor and project length of major construction projects.
The design development and associated time lag in developing a stage 3 to stage 4 design results in a confusion of inflation and scope factors.
This runs the risk of locking prices at a high rate with a large factor of margin left for a Main Contractor to reduce, in turn, increasing their margins
FEATURES
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Search
Identifying the cost risk within the development apprasial
Organise
Go to market and price a hedging strategy for the major cost risks
Share
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Encrypt
Review of the timelines of the project
Notify
Disclose the hedging requirements v with risk and reward weightings
Target
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How do we mitigate your cost risk?
We undertake an elemental review of your development cost plan
Once this is completed we then categorise each element of cost to the corresponding commodities market.
Once we have isolated and quantified the exposure to underlying commodities we will prepared a weighted metric strategy to hedge your business exposure to those costs.
This will result in the provision of a hedged commodities strategy which will be able to reflected withing the development budget that mitigates inflation risk upon a sliding scale depending on your operational risk requirements.