One of the most common questions our clients naturally ask when considering Off-Site Construction (OSC) is how the cost compares to traditional construction. Generally, pricing out a central utility plant (CUP) is fairly straightforward: comparing the piping, conduit, structural steel, third-party equipment, etc., to the equivalent field-built system. However, that cost comparison only captures a piece of the true net impact – since it excludes many of the cost advantages that OSC brings to a project in the form of efficiency and risk avoidance. The challenge is how to monetize the cost savings of risk avoidance.
Traditional on-site construction risks are generally accepted as an inevitable part of the process. Weather delays happen, material prices go up, labor shortages impact timelines or costs, and schedules slip. All of these factors have a real cost impact on the construction team in the form of lower margins and on the owner in the form of unexpected change orders and schedule delays, so experienced teams account for them up-front.
By contrast, OSC significantly reduces or eliminates those risks, leading to greater cost certainty and schedule adherence. Those are big wins for the construction team and project owner. But what’s the best way to monetize the avoidance of risk?
Working closely with our construction team partners, we’ve observed that that one of the most effective ways to accurately evaluate an OSC option is to monetize the cost certainly that gets applied to each line item in a budget. For example, imagine if you could eliminate contingencies in your traditional field-built schedule for:
Of course, even with the inherent cost certainty and schedule surety, OSC is not the right answer for every project. That’s why savvy construction teams and project owners get an experienced OSC company – well versed in the design, manufacturing, and installation of these complex systems – involved early in the process to help uncover opportunities. If you are planning a CUP project and want to maximize margin and minimize risk, get in touch with the Epsilon experts.
