construction projects go over budget

Why do construction projects go over budget?

Going over budget is every construction project owner’s worst nightmare. As Construction Project Managers and Quantity Surveyors, we don’t want to inform our client that we will be going over budget, regardless of the amount. With careful planning and experienced management, you can avoid going over budget on your next construction project.

There are four common reasons why construction projects go over budget; design flaws, increased scope, inaccurate estimates and unforeseen conditions.

1. Design Flaws

Your project team, which may include architects, engineers and others, will come together to design and draw the project. The larger the project, the more people who may be involved in the drawings. With multiple people contributing, the human effort may go unnoticed for some time, or even until it’s too late.

Unnoticed errors can become significant problems during the build, which can trigger costly changes such as redesign costs and costs associated with removal and reconstruction. This can have a knock-on effect and cause  project delays.
The best way to prevent human error is by getting a fresh set of eyes to spot any mistakes and logistical issues missed by the team working on it. They may also bring fresh ideas to the project and optimise the design. 

2. Unexpected increase in scope

If the project’s scope is not clearly defined, the project will creep. Scope creep often happens when there are multiple opinions about requirements or if the building’s function isn’t clarified at the beginning of the project. Let’s take a simple example if the use of the driveway wasn’t specified during the design phase; a standard strength concrete would likely be ordered. Suppose you find out that the driveway needs high-strength C40 concrete due to the risk of exposure to slurry or hazardous chemicals, now you have a more expensive concrete that may take longer to pour, and which may have a longer wait-in time for delivery. This will have an impact on the project timeline and budget. A very simple example, but had the requirements of the build been clarified, it would have been accounted for in the budget and timeline.

Clarifying the requirements of the structure and surroundings can save time and budget later. Identify all the project deliverables, milestones and critical dates. Communicate clearly with all stakeholders, contractors and subcontractors. Keep a record of all decisions, circulate the decisions for feedback and transparency. 

3. Inaccurate estimates

The main contractor’s winning bid forms the baseline for your project’s budget. You proceed with the project on the basis that the main contractor can complete the project within the agreed price. But that doesn’t always happen; there are many reasons why the price doesn’t work in reality.

The first reason may be human error, just like in the design phase. The estimators get prices from subcontractors who may submit quotes but not include all the labour or materials required. When the main contractor uses their price in the estimate, it will automatically cause an inaccurate price. 

Another cause of inaccurate estimates arises when plans are misread and materials, labour and equipment are misquoted. A lower quantity or lower quality of materials may be ordered than what the project owner intended. 

While you can’t control the subcontractors and main contractor’s pricing, you can ensure that your bill of quantities includes all materials, labour, and equipment needed for the project. The bill of quantities will also specify the exact materials, so no mishaps can be made when ordering for the project. Working with an experienced Quantity Surveyor will make this process easier. 

4. Unforeseen Conditions

During construction projects, unexpected conditions can lead to increased costs and project delays. 

Identifying site variables such as soil conditions and environmental concerns such as risk of flooding, and planning a risk management strategy is an essential function of the Construction Project Manager. The Construction Project Manager should be able to manage these hazards before construction begins.