Top 5 Tips for Keeping Facility Construction Projects on Budget

November 21, 2022 - Author: Greg Larson, Project Manager

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“On time and on budget” is the project manager’s mantra. Facility construction projects that fit that description, though, are like four-leaf clovers – you know they exist, but spotting one is rare.

The American Productivity and Quality Center estimates one in five capital projects runs over budget. Even the most budget-conscious organizations spend more than they planned 12 percent of the time. Like weeds in a garden, take your attention off your budget for a few days and unexpected expenses can quickly get out of control.

Luckily, just like weeds, many of the things that throw a facility construction budget off track can be prevented with vigilance and careful planning.

5 Tips to Keep Facility Construction on Budget

  1. Learn from the past. The best way to estimate costs is by looking at recent projects with a similar scope. The key words are “recent” and “similar.” Over the past few years, building materials and supply chain costs have been especially volatile, so the more recent your historical data, the better. Sometimes you don’t have the benefit of having done a similar project recently, or ever. In that case, plan a more generous than usual contingency to cover the risk of unexpected costs.
  2. Balance ‘optimism’ with ‘realism.’ In a competitive bid scenario, it’s tempting to quote the lowest possible cost for every line. But a realist knows something in the budget will almost certainly cost more than planned. Some cost overruns are completely out of your control – supply chain delays, severe weather at the construction site, or a global pandemic, for example.
    Bid too low, and you’re almost certain to go over budget, making for an unhappy customer. Bid too high, you still won’t make the customer happy and might not get the job at all. “Understanding risk is crucial to mitigating cost overruns,” ACS Project Manager Greg Larson said. “Is this project identical or very similar to other projects we have completed? If so, then the risk should be low. If not, assign extra time, labor, or money to mitigate the risk as needed.” Set your budget based on the best-case scenario, then add in a realistic contingency that accounts for factors like contractor experience, clarity of specs, and market volatility.
  3. Keep everyone on the same page. Poor communication between teams and subcontractors can lead to any number of budget headaches. In one real-world facility construction project, the architect made a last-minute change to the dimensions of a room without notifying the rest of the team. The mechanical team, working off the original drawings, set out to install six-inch duct work and found it only had two inches of space.
  4. Test as you go. In the drive to keep a construction project on schedule, quality assurance tests may fall by the wayside. This is a mistake. Running water through new plumbing before the wall is closed up takes far less time than tearing the wall open later, fixing a leaky fitting, and replacing ruined insulation and drywall.
  5. Stay focused. Scope creep seeps into a project from all sides. If you’re not vigilant, it can swell your costs by 20 percent or more. Project managers are tasked with preventing scope creep because they are expected to have a big-picture view of the entire construction project. “In the design phase, it’s easy for both the client and the design team to come up with new features that would improve the overall performance,” Larson said. “This is great, but it comes at a price.” Keep open channels of communication with everyone involved in the project, from the client down to the subcontractors. If the client begins changing the scope, alert them to the added cost it will bring. Let the tradesmen know any changes to scope should come through you first, to prevent the customer from requesting changes from the contractors directly without consulting you. Make sure contractors aren’t taking their own shortcuts, either. Sometimes teams are responsible for scope creep when they tweak designs to make their portion of the project easier or more efficient. It doesn’t seem like a big deal to them at the time, but could have a dramatic increase in costs further down the line.

A budget is not something you can check off the list and never look at again. It’s a living, changing thing that has to be managed daily throughout the facility construction project. From front-end planning all the way through commissioning, you can rely on expert guidance from ACS to keep your projects moving forward.

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