An owner sought to understand the implications of a heated skilled labor market before sanctioning a petrochemical mega-project

Construction cost estimates are often based off actual performance from recent similar projects.  But when faced with a level of US Gulf Coast capital project activity that exceeded anything from recent memory, this owner wanted to understand how increased demand for skilled labor would affect craft productivity and construction costs. What appears to be a minor assumption behind a cost estimate or schedule can have a significant effect on performance versus targets, particularly when dealing with mega-projects.

We provided the owner with a market-level view of skilled labor demand along with likely productivity and construction cost rates

Westney tracks major project activity for key regions such as the US Gulf Coast.  We leverage a combination of publically-available information and insight from working with key industry players to model likely levels of project activity and resultant demand for skilled labor.  Deliverables for this engagement included:

»Forecasts for total skilled labor demand and demand by craft/trade on the US Gulf Coast and for the area immediately surrounding the project

»Projections for likely achievable craft productivity (e.g., steel, piping, electrical, etc.)

»Detailed breakdown of likely achievable all-in construction cost per direct work-hour, including insight on levels of incentive pay (e.g., per diem, premium time, craft benefits, etc.)

»Recommended contracting strategies to mitigate risks associated with increased skilled labor demand

The client was able to make an investment decision with eyes wide open as to the effects of the current and future skilled labor market

Thoroughly vetting key assumptions behind the estimate and schedule gave the client more confidence in presenting their recommendation to executives. Our work also enabled them to build a contracting strategy that considered the heated market, and eventually mitigated significant potential losses.

For more information on our work in this area, you can read about our approach to forecasting skilled labor demand or learn about a subscription to Construction Insider ®.