Projects

Escalation and Indices – Time is money … (or Rise and Fall)

Escalation allowances (also known as Rise-and-Fall) are allowances included for potential cost changes to products, materials, wages, etc. for the time that elapses during design and documentation, and also during construction (… just like inflation).

Sometimes costs are talked about as “at today’s rates”, but new projects will not be built today.  Appropriate allowances for cost changes for the design & documentation time required in getting the project to tender and construction started should be considered.

Costs change also during the time it takes to complete building a project, and so consideration in the pricing must also take this into account… After all, why should a painter give a builder a quote at today’s rates, and be expected to stick to it when they may not be painting for another 6 to 12 months?

Even when talking about budgets with your client, it is important to understand the potential project timeline and consider what the possible effect time and program will have on costs.

Escalation can also work the other way and costs can decrease. Historically though, as with housing & land prices and the consumer price index, costs are increasing.

A Cost Planner will consider this potential change in price in two parts:

  1. During the design, documentation and tendering period; and
  2. During the construction period of a project.

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