Inflation has significantly impacted the design and construction industry, and PreK-12 schools feel the cost increase. Since 2020, construction costs have escalated by approximately 40 percent , an unsustainable pace that has negatively impacted every California school district’s ability to build, modernize, and improve its schools.
Beyond general cost escalation, districts throughout California are also faced with major events that will impact the market, and their projects. Southern California is faced with Los Angeles fire recovery efforts, potential tariffs on materials, and preparations for the 2026 World Cup, 2027 Super Bowl, and 2028 Los Angeles Olympics. Coupled with California’s successful 2024 bond elections, which will drive an influx of work and contractors into the marketplace, these events are creating an escalated and competitive marketplace, making it difficult for school districts to fund and complete projects on time and on budget.
Given this rapidly changing construction landscape, school districts struggle to navigate the changes and build the facilities students deserve.
Over a nearly 25 year period, year over year cost escalation in California construction. (Data provided by the CA Department of General Services, Construction Cost Index (CCI). Source: dgs.ca.gov)
Taking a proactive approach to a project can help your district navigate an evolving marketplace. Traditional cost control approaches typically fall short for several reasons, including:
Material and Labor Shortages: When traditional approaches do not account for these shortages, clients can’t account for price spikes and timeline delays and cannot adapt.
Misalignment between Budgets and Expectations: Budgets set for projects during a facility’s master planning phase can become outdated during construction due to current market inflation. Clients cannot adapt to unforeseen expenses if a budget is too rigid.
Inadequate Contingency Planning: When a budget doesn’t include a contingency fund, insufficient funds lead to overruns and elimination of essential design elements to satisfy the new budget.
Value Engineering: When value engineering is done with a crisis mentality at the end of the design phase, it compromises core design and programming elements and forces once-valued details to be cut.
Limited Stakeholder Engagement: Misaligned priorities lead to unexpected changes.
Inefficient and Reactionary Project Management: A reactive approach fails to anticipate cost issues.
To deliver projects that meet our clients’ needs and remain on a budget, HMC Architects employs various dynamic, adaptable, and innovative strategies to anticipate and control escalating costs. These solutions are vital for navigating volatile markets and can easily be incorporated into any project.
Clients must take a proactive approach and not be afraid to incorporate innovative strategies.
Initial cost modeling provides a baseline understanding of aligning needs and goals and a realistic understanding of the budget. Throughout the design and construction process, we work closely with several key cost estimation partners with decades of AEC experience to be even more precise and better understand what aspects of the projects are creating the most significant cost impacts.
Target Value Design, a continual adjustment of scope and design throughout the design process, avoids drastic value engineering near the end of the process. Identifying design and site efficiencies is key —keeping expectations aligned with the delivered project.
We consider prefabrication and other materials and process solutions. Clients must take a proactive approach and not be afraid to incorporate innovative strategies. We have found that advanced and bulk purchases for multiple sites and the creative use of prefabricated materials can yield significant cost savings on a project. Whenever possible, we strive to lock in price guarantees as early as feasible, including upfront purchases of certain materials. We look at opportunities to use California Multiple Award Schedules (CMAS) contracts to develop project cost models.
In the Twin Rivers Unified School District near Sacramento, California, we found an opportunity within the district’s procurement strategy. We executed the purchase orders for the bulk purchase of mechanical units for several district sites. By bundling equipment for several sites, we could save money and benefit multiple sites simultaneously. This strategy required the vision to understand the district’s more extensive needs and the willingness to make a more significant initial purchase.
Moving to a more flexible and innovative cost control model might be unfamiliar or intimidating to those accustomed to traditional value engineering. Project teams might have unrealistic assumptions about design and cost or do not understand the underlying challenges in cost control. Proactive strategies like upfront purchases may be new or risky to certain school districts, especially those with minimal budgets. There may be a lack of willingness to explore alternate materials or other nontraditional solutions. This can be resolved with a more flexible cost management process that begins early in a project’s planning. It involves engaging in open, honest, and realistic discussions with the design and construction teams and various campus and district stakeholders. Involving trusted cost-modeling consultants early provides real-world numbers as a basis for the design process.
Thinking outside the box and being willing to explore elements of design and purchasing methods that may yield cost savings, efficiencies, and material choices can help districts navigate these uncertain times.
