It happens to every contractor at some time or another. Your project unexpectedly balloons well over budget. The cost overrun then suddenly jeopardizes the entire project. Whether the discrepancy is caused by a design error, unexpected conditions or a scope change, there are strategies you can employ to save a project from spiraling out of control.
Why Cost Overruns Happen
Construction projects have many moving parts. If one thing goes wrong, it can easily throw off an entire budget.
The most common causes of cost overruns are:
- Estimating errors
- Design errors
- Unexpected site conditions
- Increases in project scope
- Weather conditions
The Impact of Cost Overruns
Cost overruns can have many adverse effects on construction projects, including:
- Increased cost
- Delayed project completion date
- Loss of income to the owner and contractor
- Increase in contractors’ overhead
6 Simple Solutions
1) Hire Reputable Contractors and Subcontractors
In any project, your team is your greatest asset. If you hire dependable contractors and subcontractors, you will have less reasons to worry.
2) Project Planning
One of the best strategies to preventing cost overruns is to craft a detailed plan. If you can anticipate potential snags along the way, you will have a better chance of finishing your project on time and on budget.
3) Set a Schedule and Stick to It
In order to please clients, contractors need to be able to produce results in a timely manner. At the start of the project, set a schedule that you can realistically meet. Try breaking the project into segments to help your team stay on track. Then, as the project progresses, make sure to keep your eye on the timeline.
4) Stay in Scope
With multiple stakeholders involved in a construction project, it’s not always easy to fight scope creep. Whether features are added or plans are expanded, a change in scope can contribute to rising costs or even jeopardize a project.
You can more easily stay in scope if you can limit these three factors:
- Errors and omissions in the original project design
- Changes to the original plan
- Substitutions or changes in materials
5) Keep Everyone on Same Page
Construction projects are never completed by one single individual. Teamwork is an essential part of the equation. But, in order for your job site to work like a well-oiled machine, first everyone must be on the same page.
For example, if your project manager doesn’t properly instruct your construction laborers, you could miss a deadline that throws your project out of scope.
6) Track Progress
If you are serious about preventing cost overruns, you will also have to track your progress throughout the duration of the project. This strategy can help you find early signs of project delays. By addressing these issues early, you can prevent major problems.
While some situations may be out of your control, it pays to work hard to prevent costs from spiraling out of control, rather than dealing with the consequences later.