Top 5 Reasons why Construction Cost Control is Challenging

Construction cost project managers come across myriad challenges, and controlling project costs is perhaps the biggest among them. A study by KPMG shows that only 31% of projects managed to come within 10% of the budget estimates. Moreover, overruns have the potential to topple projects and cause massive losses to a business. Considering the facts, it becomes vital for managers to prioritise construction project cost management from start to end. Before knowing how to address cost control, managers need to identify the root of overruns. Most times, they indicate deeper issues in project management than only what appears on the surface. While factors beyond human control can hinder cost control, inaccurate analysis or planning are equally prevalent causes. Thankfully, modern businesses have access to cost control software solutions that can nip the issues early.

Everything boils down to a proactive approach towards project planning, as finding the causes of overruns and addressing. It makes sense to know the enemy so that one can plan a strategy to handle it.

Here are some common reasons for construction cost control going wrong.

Inaccurate estimates

Stakeholders are often more than eager to get projects and start working on them. But they go wrong with the schedules and budgets. Faulty estimates set up projects for overruns right from the outset. The bidding process is competitive, and there are good chances of estimates going wrong at this stage. Managers end up following a one-size-fits-all mindset, and it can muddle up the calculations completely.

It is vital to work on estimates carefully in the preconstruction phase and give only realistic deadlines and costs. The preconstruction stage is just as important as the building phase from the cost management perspective. So it is an opportunity that managers shouldn’t miss out on. Solid planning and effective documentation ensure clarity for stakeholders, proper scheduling, and tight cost controls.

Design errors

Another factor that can send construction costs haywire is errors in design. Defective design plans elevate the probability of cost overruns in construction projects as it often leads to inaccurate or incomplete plans. Unfortunately, inaccurate and incomplete plans can result in substandard quality. That may require rework or even cause legal battles with unhappy clients. However, it is easy to avoid such issues, and you can leverage construction software to reduce the chances of errors or incomplete designs.

The right software platform keeps every team member on the same page. and it is easier to pick the design flaws and address them at the earliest. It is best to have one that facilitates real-time changes so everyone on the project has a fair idea of what is going on. Contractors and subcontractors can stick to the design specifications, while managers and owners can keep an eye on their work at all times.

Change orders

Besides design errors, change orders are a significant cause of cost running out of control. A change order refers to a scenario when the owner isn’t happy with a design. or wants to introduce new specifications, requirements, or fixes after work is complete. Additional changes can elevate costs and impact the original project budget as they involve additional time, materials, and manpower. Further, changes are also accompanied by stress for everyone working on the project.

Ideally, managers should make sure that changes are addressed in the contract phase itself. Including a clause in the project to specify the procedures and budget if a change occurs at any stage is the best way to handle them. Using construction project cost management software to simulate different scenarios and solutions for scope changes is a good idea. It helps in setting up optimal budgets early in the preconstruction phase and prevents disputes later.

Poor site management

Site management is a lot of work because it includes multiple and critical elements such as equipment control, design integrity, labour management, cost management, quality control, and more. Even the best project managers may end up cutting corners and missing out on something at some point during the project. When things do not go as planned, severe cost overruns are likely to happen.

Improving on-site communication can reduce site management issues to a significant extent. Implementing a construction management platform can go a long way in driving collaboration and improving site management. Businesses can go the extra mile with cost control on project sites by having construction project cost management software in place. Digital calculations ensure accuracy, and cost management gets right with them.

Administrative errors

Project cost control may go wrong despite solid designs, no changes, and the best site management if the administrators fail to do their job well enough. Even small errors by the administrative team can cause massive trouble for managers. Things can get worse when there isn’t proper communication between project managers and administrators. It may be a good idea to have a bigger admin team so that nothing is missed, but it may not be the right solution for the long haul.

Empowering the team with the right tools is a better approach. A holistic construction project management software solution can be just the right thing for a business that wants to curb administrative errors that lead to cost overruns. It can minimise errors in accounting, invoicing, and delivery monitoring and reduce the chances of costs going out of control at any point.

Managers need to take a long-term approach to cost control in construction projects. It is possible only by fixing overruns once and for all, but there aren’t any shortcuts for achieving it. The best approach would be to make conscious efforts to evaluate the real reasons behind overruns and implementing the right solutions to exercise greater control over them. Proper planning and construction productivity software solutions can help make cost control a reality rather than only a distant dream. So a business that wants to achieve success with every project should implement them sooner rather than later.

Summary

Cost control is one of the biggest challenges for construction project managers. However, it is easy to address if they can find the root of the issue and address it before it becomes a bigger problem. Here are the common causes why cost controls possibly go wrong in the industry.

Author bio

The author is a senior project manager with a reputed construction firm based in the Middle East. He has a flair for writing and often shares his experience and insights through interesting write-ups.