‘22 will be remembered as a year where you had to dump buckets of money at construction sites in order to achieve any meaningful forward motion. The revolving shortage problem has meant you must outbid someone else to compete for whatever product is in scarcity. The lack of willing workers has allowed the good guys left standing to name their price and you either agree or don’t get past go.

For a project owner who likes to stay on budget, some difficult decisions must be made. Each time you drastically overspend, a typical knee jerk is to assume you can make it up on the next category. This is now unlikely. The second reaction is to assume each overage, while hard to swallow, can be digested in the context of the overall budget. More likely is some builders will build and sell their house but end up with empty pockets at the end of it.

Each thousand of overage could need ten thousand of work being completed on budget, to allow the builder to dig out from his hole. This suggests overspending is detrimental because it harms the future business viability, a lot of free work will be done to create the funds to backpay the surprises. Experience will guide when it may just be worth it to blow the budget though. Critical paths in the schedule when winter is approaching, a key supplier fails or delays, and necessary outdoor work means hiring a different and more costly crew that can actually deliver comes to mind.

Each blown category creates a bad precedent for next time. Wages and especially material is sticky on the downside. As the total project cost ratchets up you’ve got to be able to pass it on. This is where selling the houses, at whatever the market value is, conflicts with the escalation in most of the categories of what goes in the build. The magic happens when the individual Lego pieces cost less than the completed Lego tower.