You can prevent cost management mistakes during a capital project by following some simple guidelines. You’ll see the key is preparation.
One of the most important jobs you have as a construction project manager is monitoring costs, from the pre-build estimating stage and throughout the course of a project. However, ensuring every dollar is accounted for is no small task, and puts pressure on you to ensure there are no errors in calculations and no unnecessary overruns.
What can you do to head off potential construction cost management mistakes to protect your budget? The key is considering your initial project plan as “Plan A,” then creating several corresponding “Plan Bs” to help mitigate some of the most common cost management missteps.
Let’s look at key steps to reduce cost management mistakes and create ‘Plan Bs’.
Account for changing times of the year
Winter weather can hinder delivery of materials and equipment or create conditions that make it difficult to maintain otherwise normal productivity levels. Excessively hot summers may put employees at risk for heat-related illnesses, not to mention reduced productivity levels. More severe regional patterns including hurricanes and tornadoes can also severely disrupt supply chains and nearby projects under construction.
Be upfront about true project costs
Underestimating project costs just to win a bid sets the stage for inevitable cost overruns leading to a much smaller profit margin. Avoid the temptation to cut corners on the quality of materials and workmanship to compensate for budget shortfalls. Accurate cost projections can improve the odds of winning future bids by building up your reputation for project transparency and timely delivery and will be less likely to impact your profits.
Be aware of potential price changes
The economy is not static. Price variations can occur at any time throughout the course of a long-term project for materials, equipment and even short-notice hiring of subcontractors. Variations can also result from inflation, supply and demand, or completely unpredictable market conditions, i.e., a pandemic. So, keep potential changes in mind as you budget for your project.
Plan for potential scope creep
It starts with a tweak here then an adjustment there. Before you know it, the running tally on your project is slipping toward a substantial cost overrun. Scope creep is very common, but the risk of overblown budgets can be minimised with proper documentation and approvals of all relatively minor changes. Make sure any changes that go beyond the predetermined scope align with the end product your client specified.
Allow leeway for unexpected change orders
They can appear when you least expect it. An incorrect measurement taken early in the project isn’t discovered until later in the build or a last-minute material substitution has to be made due to supply issues. Whatever the reason, change orders can lead to costly rework. The solution? Double check designs, ideally using BIM modeling for increased spec accuracy. In addition, loop in vendors in the early stages of planning so they can help ensure the materials you need are available when you need them.
Embrace dedicated project cost management software
Today’s construction management technology can help you closely manage cost estimates during the bidding stage. And when used as part of a complete comprehensive project management solution, it can manage the documentation necessary to help keep costs under control beyond the bidding stage. More advanced software options allow you to analyze what’s happening early on so you can course correct before things get out of hand.
InEight’s estimating and project cost management software introduces accuracy to your estimates, giving you not only the level of control you need to head off common cost management mistakes, but the certainty that your project can be constructed within your established budget.