How to stay on budget when the odds are not working in your favor? That is life in the construction industry. Too many aspects can impact construction costs, such as resource availability, income, government policy, labor force, risk management, etc.
In this blog post, we will briefly address the current situation in Mexico. We will also explain four great ways for General Contractors to develop solid frameworks that will help them keep costs down and deliver projects consistently on budget and on time: Value Engineering, prefabricated construction, BIM, and LEAN Construction.
Construction in Mexico during 2022
We know that 2020 was one of the most demanding years regarding stability, but 2022 brought growth and recovery in the Industrial Construction Sector. According to Bimsa Reports, there are 5,100 identified construction projects with an investment of over 1 billion Mexican pesos in the country. That is huge! Mexico is showing strength, which is greatly supported by substantial foreign investment. According to Mexico’s Economic Development Ministry, the country has established itself as one of the most attractive for foreign investment in the world due to its location and commercial ties in North America.
In a broader sense, between January and June 2022, Mexico registered 27,511.6 million US dollars in FDI, a figure 49.2% higher than the previous year. Many international companies are looking to invest and build in our country, while current business owners are expanding their plants to Mexico.
However, of course, not everything is this convenient.
What were the challenges for construction in Mexico during 2022?
Three words: Shortage Of Materials.
Due to some of the aftermath of the 2020 pandemic event, there has been a shortage of raw materials and labor instability, which have affected the availability of the workforce. These factors caused construction costs to increase. Inflation in the industry has also maintained higher levels than expected since the end of 2021. According to INEGI (Mexico’s National Institute of Statistics and Geography), the inflation of construction-related costs currently sits at 15.35%, while the global inflation in Mexico is 7.99%.
So, how do you keep costs down in 2023?
The biggest cost savers are time and quality of work. The following techniques and frameworks have helped us keep afloat and deliver compromises even during uncertain times.
- Value Engineering
Our first suggestion for keeping costs afloat is Value Engineering (VE), merely because it is the essence of this practice. You develop ideas that generate value while optimizing performance and keeping costs down. You are enhancing your project’s functionality by closely monitoring its expenses.
It is essential to do this during the earliest phases of the project. We recommend having Value Engineering sessions while discussing specifications and the project’s scope of work with your client.
- Prefabricated construction
With this suggestion, we are targeting time-related costs. The longer the execution of a project is, the more expensive it will become. Prefabricated construction has a direct impact on the overall speed of the final installation. Planning appropriately can result in a faster process than a regular construction project; we are looking at you, Tilt-Up Construction and Modular Construction.
One of the pain points of usual construction costs is faulty communication and coordination between all parties involved in a project. Poor collaboration can increase a project’s budget, especially when the expectations or requirements are unclear. It is essential to establish effective lines of communication for everyone involved. This will speed up the process.
Technology is bringing up tools for contractors to make it possible. We are now building smarter and collaboratively. By doing so, we are tackling one of the main cost elevators in the construction industry: reworks.
- LEAN Construction
Yes, we say it repeatedly, but LEAN Construction is the key. It is the backbone of everything we convey. Doing your job right the first time means incredible results.
Efficiency saves time and money. LEAN Construction helps to enhance value and reduce waste. Any increase in productivity mitigates the risk of losing profit and directly contributes to continued business success—any reduction in waste, either material or procedural waste, results in the project’s overall efficiency.
Implementing a LEAN Construction culture means that you will respect your team and other people’s time. By having everything meticulously planned and scheduled, you will be able to assign resources and tasks to the right people at the right time.
Uncertainty calls for strength; that is the only way to go through it. The best path to developing this strength is by creating solid frameworks that help you build more efficiently. The outside forces of the construction industry are ever-changing; what relies on our hands is the commitment and the culture of the people we work with. The four recommendations we mentioned before are not meant to be easy frameworks. Our purpose is to illustrate the reality: compromises require arduous and continuous work. Over the years, here in Hermosillo, we have been working to create a culture that thrives on improvement and self-reflection. We are always looking to be better for our clients and our partners.