3 Ways Construction Companies Are Wasting Money

Why is it that in your personal life you take great care in protecting the money you earn? It's simple, IT'S YOURS! So why is it that when a building is being built there is so much waste?

There are many ways that money is wasted but I'm going to highlight 3 areas where money is wasted and if you are in a Construction Management type of contract with pass-through costs, then this is going to infuriate everyone.

1. Electricity

When you are at home you will sternly tell your kids to turn off the light, the t.v., the stereo, or whatever they leave on when they are not using it.

On a construction site, you will see equipment left like scissor-lifts, or radios left on even if nobody is around. The temporary lighting is the worst culprit by far, they are a long string of lights (potentially incandescent bulbs, yes, contractors still use them) and they never turn off. There is no smart technology being integrated. There isn't even tracking of which sub-trade is using the electricity and how much. I've personally seen the lighting on for a 30-storey tower on 24-hours (day & night) even if there aren't any workers on site. There are so many ways that this is bad in addition to the waste of money.

Now for the dirty truth, the cost of electricity when you are on generators, which is typically for the first 6-10 months on a large project, will cost you potentially $3.50 per kWh, to put that in perspective even on peak demand you will only pay $0.18 per kWh at your house and a commercial property will only pay around $0.08 per kWh. That makes the electricity at the start of your project 1944% more expensive than your house, it would be typical to see an electric bill of $20,000-40,000 each month when if the contractor implemented smart technology and tracking could be as low as $3,000-6,000 per month. Imagine that over 10 months, you could have saved up to $200,000, let alone the potential savings over the rest of the job. Another huge source of savings to get on municipal electricity as quickly as possible, this will cut the cost per kWh back to a normal price and save you money.

2. Materials

Your new $200 Million tower will use about 55% of the money for labour and 45% for materials. That means that all the stuff that makes your building a building will cost you around $90 Million. The sub-trades are responsible for the procurement of materials, but due to the procurement process being quick and the likelihood for them missing something they will increase the amount of materials they need in the estimate to be sure that they won't lose money. This can range from 5%-20%, and it would also be affected by the types of materials, like flooring and drywall would have a lot of offcuts which they need to plan for legitimately and trades like structural steel, glazing, mechanical and electrical equipment will have almost no extra materials. On a project of this scale I would expect that around $700,000 worth of materials are added to the estimates as a buffer and is then either wasted on-site or never supplied.

As the owner is paying for everything, all the sub-trades are doing is paying for the uncertainty of the project, and padding their potential profitability. I'm a person who would rather work with you and be honest than try to trick you and hide things.

The other challenge of oversupply materials to a construction site is that workers will be less diligent with using offcuts when they have more new material to use. The irony of this is that now the owner has to pay for the waste management services to haul and dispose of this material.

Lastly, something which happens often in North America is that the extra materials grows legs and find their way off the project, this can be extremely costly depending on the type of product stolen, especially if they have a long delivery time.

3. Waste Management

How many times has an owner actually reviewed the on-site waste management practices of a constructor?

There are many ways that Waste Management can cost or save you money. First, the procurement process if done incorrectly could lead to higher fees, no rebates, and poor waste diversion rates. If it is procured properly you will have an exact waste material forecast (developed with the assistance of the sub-trades), this can then be used to properly compare the various material rates from the waste haulers, which will then immediately cut your cost by as much as 30%. On a large project that could be around $200,000. Then you will have the ability to properly track your waste diversion weights and compare them against the forecast, this will then help you find any problems and resolve them, which will reduce your risk to going over budget.

Second, sorting your waste on-site is the most valuable task of proper waste management. Your costs are based on weight and if your waste bins are properly sorted then you will take advantage of the cheaper costs for recyclables like concrete being at $40/tonne vs. garbage at $75/tonne. In this scenario every time anyone puts any concrete in the garbage you are losing $35/tonne. On a large tower like the one above you should expect around 3,000-4,000 tonnes of material to be removed from the site, which could result in an extra cost of $105,000-$140,000, this doesn't even account for materials like steel which should give you a $200/tonne REBATE.

Lastly, off-site sorting of your waste is a good choice for urban projects without a lot of space, but the drawbacks are that they don't give rebates and the cost per tonne can be as high as $100. This means that for a large tower project your budget would be around $400,000 for the materials plus the hauling fees of $75,000 (assuming 1,000 trips at $75 each) for a total of $475,000 when it should have been around $220,000 plus the $75,000 for hauling.

Summary

What can you do about this? Is it just the process that the construction industry accepts and it's how construction is done?

I can't accept it; there are simple things which can be done in each of these areas:

Electricity: Make the constructor more responsible, make them do a proper energy consumption forecast and hold them accountable to achieve it. On the execution side, there are sensors you can install to cut the lighting energy demand, and better site management to make sure that energy isn't wasted.

Materials: Is there a better way of procuring the materials and services from sub-trades? The large constructors has already taken back the control of concrete and rebar supply, is it possible to procure other materials like steel studs, masonry blocks, drywall, paint, etc.?

Waste Management: Set up the accountability with the General Contractor. They are the gatekeeper and manage all the aspects of the project from material supply and disposal. They can provide the proper resources to the sub-trades like garbage/recycling bins among other contractual tools. Most importantly create an accurate forecast of the types of materials and when they will need to be removed from the project.

Have any thoughts? Share them below, and as always please share this article to help others learn. And don't forget to check out my other articles.

Blog post by: Jorden Lefler, Senior Sustainability Manager