Procurement Risk: Strategies for Cost Mitigation

1. Street Smart. World Wise.
Cost Consulting & Project Management, Altus Group Limited
2020 - 4th Street SW, Suite 310, Calgary , Alberta, T2S 1W3 Canada T 403.508.7770 F 403.228.1020
altusgroup.com
Procurement Risk: Strategies for Cost Mitigation
There are always going to be many
moving parts when designing and
constructing a building; parts that
must be executed at just the right
point for a smooth process.
Recognizing when each part, and
therefore player, is to become
involved in the project is key, not
just for a well-­‐‑timed project, but to
help manage costs of said project as
well.
The best way to minimize risk of any sort is to proactively understand what risk there
is. Below are four areas of common areas where risk has the potential to increase your
project costs. By looking at these, you can proactively develop strategies to mitigate
costs both in the design and construction of your building.
1. Procurement Cycles
Procurement cycles look at when you should be acquiring the goods, labour, and
materials for your project. Because of Canada'ʹs climate, most companies will do their
design work in the winter to help minimize cold weather construction costs (e.g.
concrete pours in the cold can be astronomical), preparing for physical construction to
start in the spring. As Altus has seen a 4 -­‐‑ 6% increase on both labour and materials in
the past year, you should understand that the best time to start engaging contractors,
designers, and subcontractors in your construction process isn'ʹt in the spring, or even at
the end of the winter. Rather, it should be right at the beginning of the concept / design
phase. Doing this, you are able to mitigate costs through proper party engagement,
proactive purchase of goods / materials, and by developing a full project scope, limiting
last minute changes.

2. Street Smart. World Wise.
2. Contractor Relationships
Tied closely with procurement cycles, building relationships with contractors and their
subcontractors is crucial to minimizing costs.
By bringing the contractor into the process much earlier, they are better able to advise
on realistic timelines and whether things can or cannot be done. Through this, you have
a much higher chance of getting them on board and on site when they need to be. This
shows that there is a respect of their time and needs, as well as their relationships with
supply change.
This will also remove any last minute tender packages that need to be developed,
assessed, and reviewed. You are setting your project up from the start, knowing WHO
will be working on your building and WHEN. Bringing collaboration, along with
expertise, is crucial to minimizing risk.
3. Government Labour Support
Specifically in Calgary, there is a wealth of building projects currently in development,
as well as future development. What is happening is that we are finding there is often a
constraint on qualified labour to actually (safely) complete the work in a timely and
cost conscious manner.
However, there is labour coming into the country. Unfortunately, not all are qualified.
For instance, if the government allows 4,000 workers in, often, only 3,000 of these
individuals will actually be qualified to work on the projects being developed. To
mitigate these safety risks and costs, your project should be working with the
government for support in receiving QUALIFIED workers. By having qualified
individuals working with your contractors / subcontractors, your building is much
more likely to meet deadlines (not meeting scheduled timelines always has a cost
attached to it), without liability issues.
Cost Consulting & Project Management, Altus Group Limited
2020 - 4th Street SW, Suite 310, Calgary , Alberta, T2S 1W3 Canada T 403.508.7770 F 403.228.1020
altusgroup.com

3. Street Smart. World Wise.
4. Global Ideas
As our world is becoming more connected, we must stop trying to reinvent the wheel
when it has been invented elsewhere. Specifically, countries such as the U.K. and
Australia have adopted great cost minimization design and management strategies
through BIM (Building Information Modelling). How can we, in Canada, look at
implementing this same cost and time saving tool, and improve upon it to fit with our
own building and procurement cycles? Looking at international best practices can help
learn new ways of being proactive, minimizing procurement risks and costs.
As materials, software, and techniques continue to improve in the construction
industry, it is crucial to understand what is needed to make them work and be effective
for you. If you are interested in learning more about cost mitigation or how you can
build strategies into your own construction project, contact David Crane
at david.crane@altusgroup.com.
Cost Consulting & Project Management, Altus Group Limited
2020 - 4th Street SW, Suite 310, Calgary , Alberta, T2S 1W3 Canada T 403.508.7770 F 403.228.1020
altusgroup.com