Updated: Aug 24, 2021
If you’re planning a construction project, large or small, the thought of spiralling costs can give you nightmares. We all know somebody whose project ended up costing twice the budget or even more. With proper preparation and a cost control system, it really doesn’t have to be that way.
This article will help you keep your construction costs under control, step by step.
Step 1. Establish a really good brief.
We can’t stress enough how important it is to know exactly what you’re trying to achieve when planning your project. A really good brief will avoid the need (or temptation) to make changes once construction is underway. That’s critical because changes will nearly always incur a cost. For more information on how to establish your brief, please see this post .
Step 2. Set a budget.
It’s generally accepted that 80% of a construction project cost is determined by the design, so you need to decide what you want to spend early in the process. Your project team need to understand the budget and plan within it. It’s no good them designing something along the lines of Buckingham Palace if your budget only extends to a Portakabin!
Take care to gather realistic estimates for everything. This will allow you to accurately forecast how much each element of your project will cost and thus draw up a cost plan. Your cost plan will be your benchmark against which to measure the progress of your project, so it needs to be as accurate as possible. We advise against optimism when drawing up your cost plan because it’s better to find an unexpected saving at project completion than to have extra costs.
Step 3. Assess your risks.
Sometimes, no matter how carefully you’ve planned, things go wrong. Assessing your risks will allow you to plan how to manage them. For example, if you’re doing a build in the middle of winter, chances are you’ll be affected by bad weather. You might have equipment failures or shortage of materials. You never know, you may be affected by a global pandemic or a zombie apocalypse.
Obviously, some eventualities are extremely unlikely. Other, more plausible incidents, should be considered and built into your plan. You may have heard that you should add x% to your budget to cover contingencies but we believe it’s much safer to consider each specific risk and allow for it in your cost plan.
Step 4. Have trusted subcontractors.
Having a ready supply chain of trusted subcontractors can go a long way towards keeping your costs under control. You should choose your subcontractors with care to make sure that they will be available at the moment your project needs them and that their work will be to the standard you require.
Having to find contractors when you’re already in the middle of a project can cause delays and, if their work isn’t up to scratch, you may end up with an unacceptable level of defects to be corrected.
If you don’t already have subcontractors that you know and trust, you could consider procuring a management contracting service, like Iconic Project Management’s, to minimise your risk.
Step 5. Communicate.
Regular communication helps to ensure that everybody knows what they should be doing and when, preventing costly mistakes and delays. Be certain to send the correct information to your contractors at the correct time and regularly update everyone on progress.
Step 6. Update your cost plan.
You should compare your project’s actual costs with forecast costs very regularly. Constant monitoring will give plenty of warning that costs are going awry.
If you do find that costs are beginning to exceed what was forecast, you will need to take action to stay within the budget. This action is known as value engineering and merits an article of its own to properly explain. Alternatively, if you feel that your original budget was unrealistic, you may choose to reset it.
Step 7. Limit changes.
Hopefully, your brief was so thorough that you won’t need to make any changes once work is under way. However, it’s your project so you are perfectly entitled to make changes if you so wish.
Please understand, though, that changes to the programme once work is underway will nearly always incur cost. If you do decide to make changes, we would strongly encourage you to thoroughly assess the impact of your changes before committing yourself. On the other hand, changes made at the beginning of the programme will probably be easier to implement and, therefore, less expensive so you’ll need to make those decisions as quickly as you can.
Step 8. Learn lessons.
After your project is completed, you should have a process of reflection. No matter how well you think it went, every project gives the opportunity to learn so that you can make the next project even better. Analysis of your actual costs, to see how closely your project adhered to the forecast costs, will help to inform the cost plan for your next project.
As long as you can count, you will be able to track your project costs. If your project is very simple, such as a refresh of a small office, you may well be able to manage the costs by yourself. However, if your project is larger, or more complex, you may benefit from additional commercial support. The advantage of bringing in professionals is that they will have delivered your type of project many times before and learned a lot of lessons along the way.
If your project would benefit from help to keep your costs under control, please give us a call.
Director of Marketing at Iconic Project Management Limited. We specialise in retail, leisure and commercial construction.