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A market survey, when properly performed, is a vital tool. Our researchers document local market conditions that will affect bidding. The market survey serves many useful purposes:
A thorough market survey provides information on factors affecting material, labor, and equipment costs. It provides information on potential general and sub-contractors, their capacity to perform the work, and level of interest in competing for the project. It also provides information on other project activity that may compete with the project for construction resources.
The information gained in market surveys assists acquisition planners to determine the most advantageous schedule for bidding and construction. It also provides information to aid in choosing the type of construction contract that is most advantageous for the client.
The market survey gives a good indication of the appropriate rate of cost escalation for the local market. Authoritative data supports the allowances made for escalation and market conditions.
Last but not least, the market survey informs the local construction community of the upcoming project and generates interest among potential bidders. It markets the project to contractors and helps ensure a healthy bid response.
Market Survey Methodology
A good "Local Market Survey" is complete and detailed. It explores every factor that affects the bid cost. Data is gathered by interviewing local firms with knowledge of construction activity in the area. Sources include, but are not limited to: general contractors and sub-contractors, builders' associations, local government officials, architectural and engineering firms, construction-reporting firms, and lenders.
The survey should address recent and expected future bidding conditions that may influence the cost of construction. It must encompass both the general construction market, and the project specific market, i.e., construction of similar size and dollar value. Particular attention should be paid to ascertaining the availability of mechanical and electrical sub-contractors and anticipated cost trends.
Data sources should be referenced. Internet research can be valuable, but over-reliance on web sites is not professional research. Data should be accumulated from reliable sources, analyzed and its meaning and financial impact communicated to the client.
Local labor supply, strike possibilities, and availability of skilled labor for major sub-contractor trades must be considered. The labor cost differential between closed shop and open shop competition should be given where applicable. For projects with a total estimated cost of $25 million or more, an analysis of the potential cost and schedule impact of Project Labor Agreements (PLA) should be made. Market analysis provides information on local labor market conditions, feedback from local PLA research, PLA bidding effect, local market stability, local strike information, PLA cost impact analysis, and other useful market information regarding PLAs. This assists the owner in determining whether the use or nonuse of a PLA is in their best interest.
Material availability, lead times, shortages, oversupply or normal market conditions must also be determined and understood.
An important consideration is the "Hunger Factor" among general contractors and sub-contractors, the anticipated number of bidders (both at general and sub-contractor levels), and their respective experience on similar projects are all key issues to be determined as well as the level of interest in working with the specific client for the project, as opposed to other owners.
It is never too early in a project to initiate market survey. As design progresses so too must the market survey. For each subsequent submission of the market survey, updated information should be shown as addenda to the preceding version, so that the original survey remains and new trends and developments are easily tracked.
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