Construction cost inflation - time to review project business cases.

Figure 1 - Approach to review a portfolio of projects

In Ireland, the past months have been characterised by much uncertainty and a number of stops and starts in the construction industry. In particular since January 2022, there has been significant construction cost inflation resulting in increases and uncertainty in forecast development costs for projects due to these escalating costs. Decision makers need to have a range of tools available to decide which projects to prioritise, particularly when delays occur and assumptions change as they have done in the past 12 months. Q4 is always a good time to review projects and reset priorates for the next year.
 
With significant changes in project assumptions on account of global market political and economic uncertainty, not least changes in timing, costs and revenues, there may be possible knock-on impact on other projects. You need to be able to consider how to prioritise projects in a portfolio. This paper (download here) illustrates an approach to prioritisation of a portfolio of projects with a case study on a residential development.

Figure 2 - Prioritising a portfolio of projects