Construction cost is a focus point for every project manager, contractor, site team, and owner. Construction companies use cost control measures to ensure the project is delivered on time, according to the scope, and within budget.
Basics of construction cost control
Inaccurate cost estimations can severely affect the outcome of a project and can even reduce profit margins. Project cost estimates are done at the beginning of the planning stage and cannot always be accurate. They do not provide the actual view of project requirements, costs, and timing. Construction cost control methods help companies reduce the difference between the estimated and actual costs incurred on a project.
Construction projects usually exceed budgets, but it can be a setback for the company if the margin is huge. Using some construction cost control methods, you can bridge the gap. The process involves controlling the expenses by managing the labour, material, and overhead costs.
For contemplating a construction cost control plan, you need to make more detailed estimates of cost, labour, materials, and time. Consider the future costs, revenue, inflation, and any unforeseen technical problems that may arise on the site. Keeping the time factor is vital as delayed projects overrun the budget with labour and other unexpected costs. You can refer to the company’s past financial records to develop an accurate and detailed cost control plan.
A cost report is a document with information on the financial aspects of a construction project. The cost report provides an overview of the significant portions of the project, future cash flows, anticipated final costs, and current project costs. It offers an opportunity to the project manager, stakeholders, and other interested parties to what’s happening during a project, to make informed decisions about how to improve, and to course correct and ultimately keep the project and business on track.
Construction cost control tips
Here are some of the tips one can use to control the cost of a construction project. Project managers can avoid construction cost overruns, maintain the budget and increase project profitability with these ideas.
Involve the team in cost planning
A company can improve its cost planning and estimation by involving the teams in the process. Prepare Work Breakdown Structure (WBS) with your team, and break the project into deliverables or small tasks. The detailed breakdown can significantly improve your team’s ability to estimate project costs. After all, they are the ones at the job and the subject masters. When everyone works on creating a budget that keeps the goals, needs, and expectations in mind, they can make a feasible and profitable plan.
Update cost plan regularly
Create a detailed budget and update it as you proceed with the project. Analyze and re-evaluate the cost plans regularly to determine if amendments are required to keep the cost variance low. Construction costs can escalate anytime due to several factors, such as shortage of labour, material, or inflation. A thorough cost plan can help the project managers manage the cost by balancing out future spending on the project. Even for smaller projects like home renovations, it becomes easier to evaluate the budget if the account for spending is maintained and updated regularly.
Submit Cost reports
Share the cost report with clients and other collaborating partners to keep them informed and updated about the project’s progress. Cost reports enable you to compare the cost report against the cost control plan to determine any delays or unplanned cost overruns. With cost reports owners and managers can recognize the reason for budget escalation and take preventive measures to control it.
Use construction management software
Project managers use construction management software to estimate the cost of delivering different projects, identify actual costs, and compare them to calculate profit. The software connects everyone involved in the project, and any update or change to the scope is notified immediately. An active communication channel leaves no room for miscommunications that can lead to delays or budget overruns.
Set clear limits
Any unplanned changes in the scope could result in cost escalation that exceeds the projected budget. All team members must know the limits of spending on each job. If there is an increased cost in one work element, the project manager will have to balance it out in other work areas wherever possible. In the case of a home, renovations set clear limits for changes in the scope of work to remain within budget. If you suddenly plan for something expensive, balance it with cost-cutting in other areas where you have options.
Plan for change, errors, and delays
Project managers can set risk management procedures for the construction project. Some kinds of delays and budget overruns usually happen in a project. The team must prepare a contingency action plan on remedial measures to resolve the issues. The construction management software is beneficial in situations like these. It can signal the team about any plan change or impending project delay. The managers can then assess the possible risk and make changes in workflows or wherever necessary.
Construction cost plans and reports can help owners, managers, and collaborating teams weigh the consequences of delays and overruns. They can review and evaluate the project extensively and adjust the future expenses on the project. Cost control plans are essential for the success of the project. Stay tuned to the India Nirmaan blog for more tips on construction cost control.
