Special Cost Reduction Edition

Today is a very special show which is fully dedicated to the topic of cost reduction in your project.

When a project runs into headwinds there are only 3 main variables that you have to play with, capital cost, construction cost and rents. You might conclude that you have zero control over any of them. That perspective can be true if you are too late in the product life cycle. You have already arranged permanent financing, your project is completed and your building is leased in the market. At that point you have very few levers you can pull.

We tend to think of Construction cost as if it was a fixed quantity. If the bid goes up by 10% from the GC, well then your cost just went up by 10%. That’s just too bad for you.

But there is a process called value engineering. Value engineering is the process of pulling cost out of a project without damaging the value of the finished product.

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