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5 Things to consider when evaluating estimating software

A key element of any successful construction business is accurate estimating, allowing you to anticipate all of your costs and ensure profitability. The problem is that estimating is time consuming and often labour intensive, where errors can add up and have a.....

How to, Construction, Business - 4 min read

How to Safely Keep a Building Project on Budget

Jason Hook

Head of Sales and Marketing

May 27, 2016 9:32:00 AM

Construction projects can be complex, and keeping them on scope and budget even more challenging. Processes need to be mapped out, expectations set, and target dates adhered to, which ultimately makes the difference between a successful project and a poorly managed one. Every little detail from what materials you plan to use to where you will also be building needs to be factored in.

Taking the time to put together the right plan is essential. Otherwise, you’re much more likely to experience “scope creep” which occurs when a project is not properly defined, documented, or controlled. Therefore, to ensure that you safely keep a project on budget, here are some tips to bear in mind that are at the core of every construction project.

 

Build a preliminary budget

When creating a project budget, it’s critical to keep the bigger picture in mind. There are so many moving parts that can make it difficult to maintain track of everything, so getting it all down in a plan is helpful. Therefore, start by developing construction cost estimate to help you arrive at the right figures. Here you’ll want to use building and construction software to ensure that you’re not just calculating some random per-square-foot cost against the building’s size. For example, depending on location, land cost can vary from 10% to over 60% of total project costs. Obviously, Darling Point in New South Wales or Peppermint Grove in Western Australia will usually have a higher project cost as it’s more affluent, versus Mission Beach in Queensland, which is rural and may have lower costs associated with it.

 

Confirm all building costs

After you’ve identified your project costs, make sure that you verify that they are the precise estimates, rather than basing your project on assumed costs, which could be detrimental. Do this by ensuring that all work is clearly defined, and then get confirmed bids on everything from land to building materials. Once you have final bids and contracts in place, add them all up and make sure to add at least a 20% contingency to account for unexpected costs, so you don’t go over budget. Keep in mind that if you’re earlier on in the project, you may want to have a larger contingency until you have fully defined the project and associated costs. Later on in the project, you can reduce the contingency as all costs will have been confirmed. 

 

Assemble the right team

The most important part of ensuring that a project is kept on scope and on budget is having the right team in place. Workers need to have the right technical skill set as well as the ability to collaborate well and meet tight deadlines, so there’s no oversight. The size and complexity of the project will determine the number and type of contractors that need to be involved. In some cases, this may require hiring external subcontractors, which can pose another challenge if you’re not familiar with their work or professionalism. Therefore, be realistic in estimating the ability, experience and time needed for the project to ensure a smooth process overall.

 

Stick to your project scope

As you get deeper into the project, unexpected needs or costs may arise that could cause you to steer away from your original plan. Don’t. This is why the initial planning and preparation is essential, and where the contingency comes into play. If you calculated and confirmed your costs the right way, then your contingency should cover any extra cost. However, if it doesn’t, then it’s time to re-evaluate your plan. Did you miss a step? Were there materials you didn’t account for? Are you able to change the budget at this point after it’s been agreed upon? These are all questions that you’ll want to ask yourself, before assessing the risks of going off scope. First, understand that there are differences between needs and wants. If your construction project will suffer as a result of not getting something you need, then go back and revise your plan and budget. If it’s something you would love to have that would make your project more aesthetically pleasing, for example, scrap it. You don’t need it. So it’s not worth going off scope. 

Keep in mind that anything worth building is worth planning well. By taking the time to put together the right plan, you’ll be much more likely to build smarter, which will ultimately help keep your project on scope and on budget. 

For more practical project management advice, download your free copy of our Builder's 10 Minute Toolkit below:

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