Not anticipating even the most modest cost escalation can become a major obstacle for any project. This challenge is only exasperated as rapid changes occur in the industry. These volatile periods are easily seen when looking to the past and can be reasonably anticipated. PCI has tracked escalation, including others' opinions in the industry, for over 40 years. The following is a brief summary of how what we are including in project budgets based on the planned bid date.
- Add 5.0% (or 10% per year) if the project is going to bid in the next 6 months.
- Add 6.5% if the project is going to bid in the next 6-12 months.
- Add 5.0% per year if the project will bid in the next 1-3 years.
- Add 3.0% per year if the project will bid in 3+ years.
The following chart shows the escalation percentage per year since 1960 along with PCI's forecast. Have fun playing with the table and developing your own opinion. Let us know if you agree/disagree with our assessment.
"Study the past if you would define the future." -Confucius