How To Control Cost Overruns In Construction Projects
Did you know that 90% of construction projects experience cost overruns?
Even with the best of planning, you might run into project costs that you didn’t predict. This, as well as unanticipated delays with subcontractors or general contractors, can drive up costs even more.
To ensure a construction project is profitable, you have to manage cost overruns as best as possible. However, you may be thinking, “Where do I start?”
Here are some tips on how to control cost overruns so you can do proper planning for your project every time.
Do Thorough Project Planning Before Execution
The above statistic may have you worried, so a natural reaction might be to try to execute your project as soon as possible. However, sometimes getting a head start may prove to be unwise. This is especially true if you do not have a risk management plan first.
To avoid cost overruns and other setbacks, there are several things you can do.
For instance, gather up as many estimates as possible. This includes both prices and timelines.
Also, you need to carefully consider anything and everything that could happen during the project. It could help to study previously completed construction projects that are similar to yours, as they may have run into unexpected issues that you wouldn’t have thought of. This can help you plan accordingly and have a backup plan in place.
Speak with other key stakeholders and get their input for risk assessment. They may have previous experience that you don’t have, which can help immensely in arranging for contingency plans. They’ll be able to spot any design errors early on, which can save you from large cost overruns.
Lastly, you can use all this information to make better bids. By knowing approximately how much everything should cost and the bidding techniques of your competitors, you can then make bids that will net you better profit.
Be Firm About the Scope of the Project
Almost 50% of projects experience scope creep. This shouldn’t come as a surprise, considering not only does the client have their own preferences, but so do individual stakeholders. Rarely will you have a team and client who agree on a project’s vision 100%.
As a result, it’s not uncommon for delays to come up during construction projects due to change requests. While it’s true that many of these requests can be beneficial to the project, project managers must strike a balance to ensure it goes as smoothly as possible, both in quality and timeliness.
So don’t be afraid to grant a few change requests if you feel they can improve the quality of your construction project. However, it’s important not to get bogged down within the small details. You should never lose sight of the big picture, which means you have to be firm about adhering to the original planned scope as best as possible.
Continuously Monitor Your Project’s Progress
On that note, you should continuously monitor your project’s progress. Many issues start so small, they’re not noticed until much later when they might be irreversible and cost significantly more to fix. This can derail the project so much that not only do you go completely out of the budget, but also deliver the project at a much later date than promised.
When you constantly have an eye on the project, you’ll be able to spot any minor problems before they grow to be extremely detrimental. You’ll also be able to see if there are any weak spots in the project that will cause the entire project to go past its due date eventually. By doing this, you’ll be able to keep the project on schedule and within the budget.
Use Project Management Software
As a project manager in the construction industry, you might not have experience in accounting. Despite this, as long as you have the right project management software, you won’t need accounting experience.
For example, with a project management software such as RedTeam, you can get an all-in-one solution where accounting, estimating, and operations are all together in one central hub. This allows you to manage your projects efficiently.
With project management software, you’ll be able to schedule pre-bid and bid dates, document scope of work, and perform document management. Most importantly, it enables you to communicate effectively with your team and stakeholders, which can streamline the whole process.
This type of program can also let you easily keep an eye on the grand scheme of things. You’ll get an overview of the project schedule in real-time. This, combined with the ability to schedule various tasks, will keep things moving along much more efficiently.
Always Keep Stakeholders and Team Members Informed
Whether things are running smoothly or you’ve run across an issue, you should always keep stakeholders and team members informed. In the latter situation, it may be tempting to keep people in the dark while you try to resolve the problem on your own. However, this only inevitably leads to delays, which then results in cost overruns.
Whenever things change, make sure you keep up with communication between everyone involved. The more efficiently you relay information, the lower the chance of you running in to cost overruns.
Reduce Cost Overruns With Our Tips
Cost overruns may feel like an inevitable outcome for construction projects. The truth is if you can get a better project scope, avoiding budget overruns will be much simpler.
With the proper tools and organizational skills, you can prevent cost overruns as best you can and ensure projects run smoothly and on schedule. This will not only keep clients happy, but this will put more money into your pocket as well.