Tips to control cost overruns in a construction Jobsite
Controlling cost overruns are a challenging premise for every construction project -Having a risk management plan is essential
A construction project is an expensive undertaking with a high risk of cost overrun. Construction projects are notorious for rising expenditures during the build phase. Overruns can be caused by unexpected circumstances such as weather delays or the surprising discovery of issues during the construction or design phase. Some stem from the pre-construction phases, such as inaccurate cost estimation, improper planning and scheduling, and unrealistic contract duration and requirements. And others crop up during the build phase, such as frequent changes to the scope of work for design changes, fluctuation in price material, inadequate skill availability, and inflation in machinery costs and transportation.
Irrespective of the planning, financial pitfalls can arise unexpectedly during your job’s construction or finishing stages. It is almost impossible for a project management team to avoid cost rises. However, mitigating the risk magnitudes with a preemptive analysis of the causes of cost overruns is possible. In construction projects, it is best to factor in the additional costs.
What is a cost overrun?
Cost overruns are any unexpected expense for which funds were not budgeted. It is a commonplace for a project manager to experience cost expansions as a regular occurrence on a construction job site. At times, the unexpected becomes inevitable and uncontrollable.
Controlling cost overruns
Budgeting is an excellent way of controlling project costs. Having a fixed amount in mind can help eliminate the possibility of overspending on the project. Also, planning for flexibility and future-proofing is a beneficial choice to control cost overruns. There are several ways to implement the above to prevent cost enlargement, so let’s explore them.
Detail budgeting
To safeguard against cost overruns, the most important thing a project manager can do is to budget for every piece of equipment, materials and workforce used on the job. A comprehensive budget plan can drastically reduce the impact of cost overruns.
Monitor the scope
Despite being a well-planned project, change can derail budgeting. During a project, multiple Change Order requests come from stakeholders and clients. Many are appropriate and advantageous to the project, but too many changes can quickly hammer the project into cost increase. It is essential to observe the scope revisions.
Use real-time data
A successful construction project prioritizes two significant parameters- budget and time. When a project’s completion is delayed, additional costs are a given. The two aspects are closely interrelated – when the project skips the schedule, it incurs cost overruns. Here, construction management software is very helpful in managing the cost and time equation. Cloud-based software reports actual labour and material costs incurred in real-time. Managers can use this data to pre-empt and control expenses related to material, workforce productivity, and quality issues.
Observe the progress
A construction job site needs constant monitoring to track progress towards the completion target. Schedules, estimates and eventually, costs are ever-changing – here, it is essential to reflect the impact of revisions on future tasks. A real-time dashboard that monitors job site progress, team workload, timelines, and schedule slippage can empower the PM team’s decision-making towards cost controls.
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