Cost overruns in construction projects are not uncommon. In fact, McKinsey Global Institute suggests that large projects can go up to 80% over the budget. This can seriously impact a project’s economics and lead to delivery problems.
Lack of planning and carelessness in creating the budget, project procurement strategy, and contract documentation are common causes of budget overruns. This may be avoided by employing better construction management practices. These approaches can put you in a better position to complete projects on schedule and under budget.
Here are five ways to avoid unexpected costs in construction projects.
Construction companies need to begin with a precise estimate if they want to have a successful project. As projects become more complex, there are more things to oversee, and missing components in the estimate could cause things to fall apart.
The estimate should include a thorough breakdown of the expenses for materials, labor, locations, project time, building codes, specific equipment, and worksite circumstances to be more accurate. To secure profitability, the organization can incorporate markups, margins, and taxes.
However, there is still a possibility of error as the project develops, even if the project team produces a detailed budget before the project begins. But the risk of budget overruns and duplication of effort can be reduced by ensuring that the team operates within the designated budget. Sticking to the budget entails meticulous expense tracking.
Utilizing software that enables real-time project adjustments can help builder companies minimize cost estimation errors. Construction estimating software increases the procedure’s effectiveness and accuracy by tracking costs in real time rather than waiting until every check has been written. It also allows teams to discover where the estimate or budget went awry and enable them to make adjustments for future projects.
There are circumstances when the initial work arrangement between a contractor and asset owners is altered. A project will typically have at least four change orders, which means that the budget, estimate, or timeframe could also change four times. Failure to adjust accordingly to these modifications can result in deficits.
Make sure you record each change made as well as any additional charges that occur. It’s essential to make sure you’re tracking and recording all expenses to avoid unforeseen charges. Many construction businesses use modern management tools to keep track of all these changes and new information.
Change orders can also alter a project’s trajectory in unanticipated ways. You should streamline the change order procedure for the best cost control. Cloud-based solutions can organize the team and enhance communication and collaboration throughout the process. This way, the group can decide on change orders at any stage of the project in a way that minimizes costs.
Hiring more subcontractors for a big project translates into more contracts to oversee and more unanticipated incidents that can lead to increased spending. For example, something might transpire that can pose a threat to your budgets, such as a backhoe failing or a subcontractor quitting the project.
Consider potential risks when you plan the project, and create a plan outlining what you will do to avoid unnecessary cash outflow. For instance, you might keep a backup backhoe ready for when asset downtimes happen. Using construction software that features asset management can help with this concern. This tool allows project managers to easily plan resource allocation and utilize idle equipment when one asset fails.
Cost control relies on the proper management of these settlements throughout the project. Modern construction management solutions can help builders track and manage their contracted budget. With the help of technology, a project team can attain maximum profitability by being constantly informed of the negotiated contract price, subcontractor bills, and remaining payment amounts.
Utilizing cost management software allows teams access to current and accurate project information and provides a real-time perspective on a project’s financial health. It streamlines all cost information and gives pricing modification options.
Miscommunication could be as straightforward as overlooking an email, missing a number in a document, or failing to take note of a client’s change in choices. Missing these details can mean losing money on fixing errors that could have been easily avoided by looking up project-related information. It is essential to have a communication strategy in place and to give everyone access to the data required for each task.
By employing document management software, businesses can keep all of their essential papers in a secure location. It is simpler for leaders to adopt a productive and organized project management approach with integrated construction management software.
With it, managers can easily track the project budget, disseminate critical information promptly, and prepare all the required documents, including information requests, business letters, change requests, and more. It also provides every team member access to a centralized point of communication, regardless of the location or device they are using. This helps to ensure real-time communication and collaboration between clients, consultants, contractors, and project managers.
Avoiding unexpected costs in construction projects entail a thorough plan and strategic implementation. This might sound difficult, but it is achievable through the help of construction management software Australia.
Construction software can support a company’s efficient budget management and cost control, both essential components of successfully finishing a building project. Additionally, by integrating your accounting and construction management systems, you can provide your team with real-time cost information. With this kind of support, you and your team can monitor profit margins throughout a project and make timely modifications as needed to maintain profitability.
Construction management software also facilitates collaboration among project managers, employees, and contractors. Alerts can be configured to notify the appropriate parties as change requests are made, preventing delays and financial losses.
BizPrac is an Australian-owned and operated construction management system designed specifically to support the Australian construction industry. It is a fully integrated and constantly developing software system that offers comprehensive features like estimating, accounting, job costing, accounting, single-touch payroll, purchasing, builder retentions, etc. Bizprac is designed to ensure users make the maximum profit on each project. It is also backed by an industry-leading Australian-based support team that knows the industry inside and out.