Abnormal Costs | Construction Cost Reporting

Abnormal costs holds significant potential for assessment & tax reduction. Projects are to be valued as if they are the ‘perfect’ project. As such, tracking of material cost escalation, changes, productivity and performance is key to accurately identifying non assessable cost.

1. Construction Cost Reporting
Abnormal Cost
PROPERTY TAX CONSULTING
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1.403.508.7770 [email protected] www.altusgroup.com
2020 4th Street SW, Suite 310,
Calgary, AB T2S 1W3 Canada
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This area holds significant potential for assessment & tax
reduction. Projects are to be valued as if they are the
‘perfect’ project (on schedule, within budget), and built
within a 50KM radius of Edmonton (immediate and
available labour force, construction materials etc.). As
such, tracking of material cost escalation, changes,
productivity and performance is key to accurately
identifying non assessable cost.
The Alberta Cost Construction Reporting Guide states that
“If the actual costs of an industrial facility are greater than
typical construction costs the excess construction costs of
the facility are considered abnormal and are excluded.” In
practice, the determination of what constitutes ‘typical’ is
highly subjective.
Examples of events that might cause abnormal cost are as follows:
Natural disasters
(Flood, extreme wind or snow, forest fire)
Material cost escalation
Low productivity factor
Abnormally difficult site preparation and earthwork Schedule delays
(Delivery delay, scope change, difficulty finding contractor, winter start up, etc.)
Shutdowns or safety standby Interference
(For example, when building a ‘Brownfield’ expansion to an existing facility, much of the engineering cost will be related to
reviewing designs and working around the existing facility, extra cost associated with the ‘Hot Tap’ work without impacting
operations, difficult access to a live site, etc.)