Project Cost Reduction Plan

Issue: 

The cost of a 62,000 m2 public health clinic / teaching facility had to be reduced at a time when the design work was substantially complete, the major contracts had been let and construction work had been underway for more than a year.

Objective: 

Reduce the project cost from a forecasted amount of close to $550 million by more than 11%, while maintaining as much of the functionality and clinical space as possible, as well as maintaining the completion schedule.

Deliverable: 

Johan Moelich led the development and implementation of a Project Cost Mitigation Plan to reduce the project cost.

The first step was to develop a reliable current construction cost estimate.  Two independent estimates of the construction costs were developed, one by the construction manager and the other by an independent quantity surveying firm.  These two estimates were distilled into one under Johan’s leadership.  Final project cost was next estimated by assessing allowances for design contingency, escalation and market conditions for each major line item in the estimate.

The project’s soft costs were also re-estimated, using current project knowledge and input from the design consultants.

Parallel with the preparation of the updated cost estimates, the project team, which included representatives of the end users, facility maintenance and design consultants, embarked on a value engineering exercise.  This exercise identified 72 cost savings items for consideration, from which the team selected items to be implemented, taking into account issues such as the current status of the work, potential capital cost savings, impact on operational conditions and cost, etc.

Utilizing the updated project cost estimate and the value engineering exercise we were able to reduce the estimated final cost of the project by the required amount.

Once agreed to by all stakeholders, the agreed scope changes, as well as improved project monitoring and controls systems, were implemented.  The project was successful completed about three years later, on time and on budget.