7 Tips for Effective Construction Budget Control
Effective construction budget control is a top priority for successful project managers.
Controlling the budget for a construction project requires significant planning and oversight throughout all phases of the project.
Here are seven tips to help ensure your project budget stays on track and under control from kick-off through completion.
- Tip #1: Define clear objectives and budget limits.
- Tip #2: Set Clear Goals and KPIs for better construction budget control
- Tip #3: Connect the budget to the project schedule
- Tip #4: Align the project team around the schedule.
- Tip #5: Run Earned Value Analysis (EVA)
- Tip #7: Let technology optimize your construction budget control
- Construction Project Management Software for the Construction Industry
Tip #1: Define clear objectives and budget limits.
As you assemble your construction team, define clear objectives and budget constraints that all the project stakeholders can agree on.
Your objectives and budget limits should encompass the cost-related goals and quality, safety, and timeline-related objectives.
Hold periodic budget reviews with your team to maintain unity and promote a budget-minded project culture. Encourage value-engineered cost-saving efforts and ensure everyone follows established protocols and procedures.
Document everything in writing and make sure all parties understand the priorities, responsibilities, and budget constraints before beginning the project.
Establishing a budget-minded culture upfront will give all stakeholders a shared understanding and help prevent unnecessary costs.
Tip #2: Set Clear Goals and KPIs for better construction budget control
Set clear project goals and establish the key performance indicators (KPIs) for every critical project management area to measure your project team’s performance.
Your KPIs should monitor and measure the following project management areas at a minimum.
Each member of the project delivery team must know their budget responsibilities and their timeline expectations at every stage of the project lifecycle.
And with your project goals and KPIs in place, you’ll have the actionable metrics you need to define the successful completion of the project. And you’ll have the critical benchmarks you need to track your progress and adjust the budget accordingly along the way.
Tip #3: Connect the budget to the project schedule
Connecting the budget to your production schedule allows you to track progress and expense against work completed as the project progresses.
And the best way to connect your budget to your production schedule is by building your schedule around the project’s Work Breakdown Structures (WBS).
With the WBS, a project’s scope of work is broken down and organized into individual tasks and work packages arranged in a hierarchical order.
Decomposing your project like this helps identify deliverables, set deadlines, and assign resources to the appropriate stakeholders. The end result is you achieve the project objectives with less manual intervention and confusion.
Linarc’s WBS tool allows you to connect those individual tasks and work packages to their corresponding budget line items and then track against completed work for accurate payment, budget tracking, and reporting.
Tip #4: Align the project team around the schedule.
Your project team needs to be focused and aligned around the schedule and budget priorities to hit your production goals and KPIs.
Regularly review the project’s schedule and budget performance with your stakeholders to ensure everyone is on the same page.
Hold regular check-ins to review budget and schedule performance, the team’s morale, and the client’s expectations. Use this time to address any budget or schedule issues that arise.
Keep everyone aligned and focused by scheduling milestone events throughout the project lifecycle. And share project status reports and projected completion dates with the team weekly.
Maintaining a schedule-oriented project culture keeps the project delivery team focused on hitting their milestones on time and under budget. And consistently analyzing project data to catch trends and discrepancies helps to improve project efficiency and budget control.
Tip #5: Run Earned Value Analysis (EVA)
Earned Value Analysis (EVA) is vital for controlling your project budget and forecasting the total project completion cost.
EVA measures project performance against its planned budget and timeline and is used to gauge the project’s progress, profitability, and rate of return.
By comparing the planned budget and the earned value of your project, you can quickly identify any cost or schedule variations and take corrective action early.
image courtesy of the Project Management Institute (PMI.org)
Earned value analysis works by comparing the planned value (PV) of an activity with its earned value (EV) and actual cost (AC).
- The PV represents the time and cost initially budgeted for each activity;
- EV values track completed work, and
- AC values represent the time, material, and management expenditures to date.
By keeping track of these three values, earned value analysis allows construction managers to determine if their projects are running over or under budget, identify potential problems early on, forecast future costs accurately, evaluate contractor performance more effectively, and provide detailed reports to stakeholders.
Tip #6: Proactively manage project change orders
Changes are part of every construction project. But monitoring and managing them is crucial because of their impact on the project schedule and your budget.
Proactive change management requires the right technology to track and manage all proposed change orders and document the associated costs.
And when change orders are approved, those changes need to be tracked like any other cost in the approved budget. A formal change order management process is critical in this regard.
Ideally, your project management system should automatically update the project budget and schedule when the scope of work changes.
Tip #7: Let technology optimize your construction budget control
Construction technology is driving innovative solutions to maximize workflow automation and data-driven insights across the industry.
These solutions help to streamline everything from communication and collaboration to scheduling, budgeting, and reporting.
We created Linarc to simplify construction project management, reduce manual data entry, and improve budget tracking and control.
Integrated construction software like Linarc helps manage your budget, track changes in real-time, and ensure your project stays on track.
Construction Project Management Software for the Construction Industry
Successful construction professionals stay on top of every aspect of their projects, from initiation through closeout.
Linarc’s cloud-based project management platform is the perfect fit for successful construction budget control.
Linarc makes it easy to store, manage, and share project information in real-time:
- Budget information,
- Plan sheets, drawings, and documents,
- Project progress reports,
- RFIs, submittals, and responses
- Change orders, and collaboration data, all in a secure digital portal.
Get a quick and easy demonstration of the Linarc construction management system today.
Linarc is an intelligent, intuitive, easy-to-use tool that simplifies the complexity of today’s projects.
