Phasing Premiums

Recently we researched both our own files and studies carried out by various subcontractor trade associations with a view to determining the cost impact of construction phasing. Phasing in effect splits a larger economically viable project into two or more concurrent, similar, less attractive jobs, albeit at the same location and under the same contract.

As a general statement, the premium cost for phasing within an existing building that remains owner-occupied during construction varies from 10% to 40%. Our own recent experience found phasing to add 20% to 25% on average.

The reasons for these high premiums are manyfold but basically fall into two categories of increased cost: those at subcontractor and those at main contractor levels. Some of these, though by no means all, are identified below.

Subcontractor Level

i) Excessive job acceleration is often necessary in order to meet phasing deadlines, which usually contain less “float” than a longer unphased construction schedule. The cost of individual work packages can increase 40% to 110%, caused primarily by the following:

  • Stacking of trades/concurrent operations
  • Crew size inefficiencies
  • Dilution of supervision

ii) Shift work is usually necessary to accommodate occupant requirements and to minimize occupant inconvenience. These costs will add 20% to 30%. In addition, overtime costs can add 50% to 100% to premium time labor rates. However, the real cost of overtime must take into account the fatigue and inefficiency associated with premium time work. This inefficiency factor alone can be as much as 30%, resulting in total overtime premiums of 15% to 115%.

iii) Other conditions impacting cost can only be assessed on a job-by-job basis, and a percentage premium is not generally assignable. These include:

  • Working in finished areas
  • Working in small rooms
  • Temporary operation of building systems
  • Staging restrictions and closeness to the stockpile
  • Security
  • Work in and adjacent to occupied areas
  • Access restrictions for equipment and personnel
  • Shutdowns and tie-ins
  • Protection of owner’s equipment, furniture and fixtures
  • Temporary partitions, dust enclosures and other temporary construction
  • Daily dismantling and erection of scaffold, and storage of tools and materials
  • Disruption of productivity by occupants of the existing areas
  • Continuous clean-up requirements

General Contractor Level

i) The factors enumerated above apply equally to the general contractor’s own forces and costs.

ii) There is a general loss of discounts and economies of scale when servicing phased construction as opposed to unphased.

iii) Escalation of material and labor costs occurs between phases. This is difficult to predict and may be included in bids at relatively high rates in order to cover worst case eventualities.

iv) General conditions costs are generally much higher for phased construction in an occupied structure. Aside from increased risk and insurance requirements, time related charges such as job trailers, supervisory staff, equipment hire and main office overhead all come into play. General conditions costs can typically increase by up to 50% on phased work. Items such as fees and bonds, which are calculated as a percentage of construction cost, will also increase in accordance with their appropriate schedules.

Accuracy

The AIA Professional Practice Handbook states, “Any estimator who brings 60% of projects within 5% of the low bid is doing better than can be expected. One project in 5 will fall outside of 10%.” How does CostPro measure up? Over 60% of our projects are within 5% of the low bid. and fewer than one in twenty exceeds 10%. Our batting average for all projects is 2.16% below the low bid. For full details, request our track record of accuracy.