Impossible, no! But it's obviously difficult.
According to a 2019 study by KPMG, 66% of construction sites exceed their budget by more than 10%. In other words, barely a third of construction sites manage to stay more or less on budget! These cost overruns, running into millions of dollars($500 million between 2009 and 2013 alone), seem to affect all sectors of the construction industry, whatever the scale of the project. From simple residential renovations to major civil engineering projects(9 out of 10 mega-projects are reported to have significant cost overruns), cost overruns appear to be widespread.
Yet it seems that most of these budget overruns could be avoided. But how? What are the most effective ways for companies and project managers to control costs and stay on budget? Our article takes a look!
It's difficult (and insulting!) to justify all these cost overruns by a lack of know-how or goodwill. Especially since, as we've seen, this is an extremely common problem, and one that applies to all companies. So what's causing these extra costs? Why is the construction industry so financially vulnerable?
While the exact causes may vary from one project to another, certain factors are common.
If you never manage to meet your estimates, it's certainly in the first hours of life of your construction projects that your problems arise. And they can take many forms:
The unexpected is an unavoidable fact of life in construction. Unfortunately, failure to anticipate these contingencies can lead to significant budget overruns. These contingencies can take the form of :
Poor communication can lead to misunderstandings, mistakes and unplanned extra work, which can ultimately lead to budget overruns. Communication problems can occur with :
Fortunately, cost overruns are not inevitable. By adopting a proactive approach and establishing rigorous work processes from the outset, you can significantly reduce budget overruns and bring your construction projects in on time and on budget.
Here are a few ways to make this easier:
As mentioned above, budget overruns are often the result of poor planning and/or inaccurate estimates. To avoid this, it's important to establish a precise, detailed budget right from the start of the project. This means :
To keep your construction projects on track and avoid cost overruns, careful project management is essential. There are various project management methods you could use, for example:
Keeping a close eye on the progress of your projects and expenses is essential to identify problems early and take corrective action before they lead to additional costs. We recommend that you :
Establish regular checkpoints: Checkpoints are times when project progress is assessed against budget and schedule. They enable potential deviations to be identified and corrective action to be taken.
Use a site tracking software In addition to automating a number of your processes, thus limiting errors and the time spent on repetitive, time-consuming tasks, tracking software will provide you with real-time data, reports and analysis to help you make informed decisions.
Clear, open communication is essential to avoid misunderstandings and mistakes that lead to extra work and cost overruns. You can :
Establish clear, effective communication channels: Communication must be quick and easy. It must keep everyone involved informed of project progress, changes and potential problems. Avoid multiplying communication channels and centralize information as much as possible.
Use appropriate communication tools: project management software often offers very complete and effective communication platforms.
Define clear roles and responsibilities: Everyone needs to know to whom they can refer and to whom they can communicate a problem.
Foster a culture of open and honest communication: It's important that all team members feel comfortable communicating their ideas and concerns.
As we've seen, risks are part of the job! It's important to identify risks that could lead to cost overruns, and put in place mitigation plans to manage them. To do this, you can :
Although construction budget overruns are a common problem, they can be avoided with the help of a few effective strategies. By implementing rigorous, methodical work processes, companies in this sector can increase their chances of completing projects on time and on budget.
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