Fighting Rising Prices
It appears that prices, especially for purchases with a high material content, seem to be rising, in some cases quite dramatically. These can blow your capital budget, even if it is only six months old.
What to do?
Substitution
Make sure you need the quality you specified. I always like to buy higher quality than needed, but in times like this it may be prudent to buy materials of a quality that satisfy, not gold plate, your project.
If you have structures in your design, check out substituting reinforced concrete for steel. In some cases this makes sense and can give you a better result.
There are many places PVC pipe can replace carbon steel or even stainless steel piping. I have argued for a long time that PVC will work fine for dryer bearing lube systems drain and be more economical to install, too. Certainly low pressure process water lines can be fabricated from PVC and last just as long, even if buried.
Used steel, but never used equipment. If a major industrial or power site is being demolished within an economical distance, there should be lots of steel available at reasonable prices.
Payment Terms
Negotiate construction labor with your normal terms. Once the negotiations are complete, ask if there is a discount for paying every two weeks.
On equipment, keep your retainage intact, but see if advancing other progress payments will result in a savings.
Descope
Look hard at all the items in your scope. Do not sacrifice maintenance or operability, but are there items you can take out of your scope, at least temporarily.
Offload
Spare parts and some pieces of equipment can be procured on a long term lease. Comes out of your budget and barely affects the P & L. A million dollars amortized over 10 years will cost as little as $125,000 per year on lease. In a 1,000 tpd mill, that works out to $0.35 per ton. The mill will never see it.
The point is get creative. There are many ways to deliver a quality, competitive project to your mill.
