Seven Mistakes that Will Kill Your Project’s Budget
March 7, 2022 -
Managing a Construction Project Budget Can Be a Daunting Task
If you’ve ever been responsible for a facility construction project, you know that managing the construction project budget can be an especially daunting task. In the months between budget approval and project completion, any number of problems can rear their costly heads. Scope changes, material prices, and even inclement weather can pile expenses onto the total. That said, it is possible to guard against the common budget busters that slip into so many projects and create a plan for better construction budget management.
Most budget overruns can be prevented in the planning stage. The skill comes into play by walking the line between prudent and competitive. Bid too aggressively, and you are almost guaranteed to suffer overruns. Submit a budget that is too conservative, and your bid may be so high you do not even get the chance to work on the project. With that in mind, consider the following seven project budget killers and make sure you don’t fall prey to them.
- Incomplete Designs: Early in the design phase, designers may not have complete information about the structure’s layout. Without complete blueprints, the designer cannot know if barriers like existing plumbing or structural supports are in the walls between those two points.
- Shortcutting the Budgeting Process: Most mature companies have established processes for developing budgets and schedules. When tight deadlines or overconfidence cause budgeters to shortcut those processes, budget reliability can suffer. Experience is the key differentiator between a calculated risk and a sloppy shortcut.
- Ignoring Historical Data: There are many ways to estimate costs, but none of them beats recent historical data. Examining the costs of a recent project with a similar scope is the most reliable way to develop a construction budget.
- Applying Solutions That Don’t Scale: Even experienced project managers can be tripped up trying to scale up or scale down a solution that worked in the past. Large and small projects differ not only in the time and resources required; they also need different processes and tools.
- The Wrong Balance Between Optimism and Realism: Perhaps the most common construction project buster is a contingency set optimistically low. The key is balancing optimism with realism.
- Rework: Some level of rework may be unavoidable, as mistakes are made, or designs are changed. To keep its impact to a minimum, work whenever possible with contractors with a known reputation for quality work.
- Scope Creep: The only way to head off scope creep from unexpected quarters is for the project manager to keep open lines of communication with the client and all the project teams throughout the build.
While setting a budget happens at the beginning of a project, it is not something one can check off the list and move on from. Budget management is an active task that carries all the way through to the commissioning of the project. Take your eyes off it at any time, and it will bite you. Read more in our white paper about the seven mistakes that will kill your project’s budget.