Reasons why construction projects fail to stick to the budgeted cost.
The construction budget is the amount of money allocated for a specific building or remodeling project. Budgets are used to anticipate all costs and expenses of the building process from start to completion.
Quantity surveyors manage all costs associated with building projects, their primary goal is to minimize expenses and keep them within the limits of a budget. They get to be part of the project from the start preparing comprehensive project estimates, gather tender and contract documentation, conduct feasibility studies, and undertake risk control.
With the use of well-integrated budgeting software, the quantity surveyors will be more efficient, consistent, accurate, integrated, and more professionalized.
Construction managers rely on estimates in budgets to establish the amount of money they will spend on a project, these estimates specify the deliverables of a project including labor and raw materials allowing them to accurately implement the set budget. With the right software, the construction managers are able to track their entire project from start to finish with daily updates of expenditure preventing the accumulation of losses which leads to over budgeting.
If a construction project fails to stick to the assigned budget, chances are high that the client will end up running out of money before the project is completed and abandoning it without completion. Below are the main reasons why construction projects fail to stick to the assigned budget.
Inadequate planning
Poor planning leads to poor budgeting and execution of tasks in a construction project. This usually happens due to the use of old school mode of planning and failure to adapt to more proficient technology that aids in the planning of the construction project. The more technology and effort put into planning, allocation of cost on every stage of construction, the more reliable the budget will be.
By fully reviewing, understanding the plans, specifications, the scope of work, and deciding the right software to utilize during planning, one will be able to have a reliable budget in which if it's well adhered to, the project will be completed without incurring impulsive budgets in the course of the construction.
Inaccuracy in budgeting
A budget is usually based on a set of assumptions that are generally not too far from the actual field situation and operating conditions. With these assumptions, the allocated cost can randomly change and this will equally affect the allocated budget. This usually happens when there is a sudden economic downturn and the prices fluctuate altering the initial costs. Unless the management acts quickly to count for these budget excesses, managers will continue to spend under their original budgetary estimates hence resulting in project excesses. These excesses can be monitored using software technology ensuring monitoring of project budget from start to completion and also having automated cost change updates.
Budgetary slack
This is the intensional under-estimation of budgeted revenue or over-estimation of budgeted expenses. This allows the construction manager to make `their numbers`. The practice usually interferes with the performance of the budget since money gets diverted to personal accounts altering the allocated budget. The practice usually results in extra expenses incurred by the client. This can be prevented by having proficient construction managers and also utilizing technology to plan out the budget and take off estimates.
Failure to communicate
Good communication is crucial to delivering a successful construction project. When communication among stakeholders breaks down or is mishandled, it can lead to delays, costly rework, and incomplete projects. Poor flow of communication automatically affects the flow of the project making them not to be completed on time and within budget. To prevent this all communications should be documented and shared with appropriate stakeholders. This goes along with settling any disputes or disagreements that might arise throughout the course of the project.
This can be solved by having an integrated platform in which all communication happens in one place, all the stakeholders in a project are also informed in real-time and the actions needed will be taken in time.
Project issues and delays
Delays caused by events, such as natural disasters, can’t be controlled by parties involved in a construction project. Each task or job requires a certain number of man-hours to complete and this is used to determine how many workers you will need to complete each one within a given amount of time. When workers don’t show up, get injured at work, the productivity levels are lowered causing delays and altering the budget. Assigning specific roles and responsibilities so that everyone knows what they should be doing each day will help reduce delays and impulsive budgeting.
To prevent this, workers should have a check-in system in which the construction manager will know in time the number of workers that failed to report to work and redistribute the tasks accordingly without delays.
Failure to account for daily offsite costs that are incurred
In many projects, managers fail to account for the little costs that are incurred in the duration of a construction project e.g. payments made to the delivery personnel, costs done to replace/ repair damaged construction resources etc. In the long run, these costs end up being extra costs on the budget that were not accounted for. This will make the project outrun the set budget and can be avoided by simply accounting for each little money and monitoring the costs in a system that monitors the use of the budget, hence fluctuations in the cost plan will be noted and fixed.
Contributor: John Thuku
