Construction Budgeting 101(Ways to budget your Project)
Project cost overrun is a common dilemma in Project Management. Let’s look at few comprehensive ways as to how to invest in a quality project management, develop a sound plan which incorporates all the costs and at the same time gives flexibility to the unexpected expenses.
Accepted Cost Estimate:
First step to any construction project is a budget estimate which gives you a cost guideline for the whole project. This is a mandatory step for every project which begins with the submission of a Bill of Quantities (BOQ) – a document that provides project specific measured quantities of the items of work identified by the drawings and specifications in the tender documentation. Post the total calculation of the budget via the BOQ, increase it by 10%; this is to incorporate the unexpected costs.
A project schedule indicates what needs to be done, which resources must be utilized, and when each task begins and ends. In short, it’s a timetable that will establish milestone dates for all aspects of the project including all entitlement approvals, permitting, completion of design phases, construction start and finish dates, as well as operational handover and soft launch. The schedule should include an early purchasing strategy for long lead items which takes into account time required for manufacturing, shipping schedules, warehousing, etc.This is the second big step in regulating your budget to match the timeline of the entire project.
Record and Monitor:
Record all your costs, even the smallest expenses. For e.g. a cost of a bag of nails may seem minimal but when multiplied with several bags it may not look negligible. Use a budgeting tool to accurately determine the cost and track the expenses, this will be a huge aid in data entry as the process shall get streamlined eliminating redundant tasks. Monitoring expenses is more helpful when the clients tend to add changes or want upgrades considering these changes might look simple in the beginning but end up costing more at a later date. And a detailed and precise record of expenses will also be helpful for your future construction projects.
Project Management Software, Augmented Reality (AR), Building Information Modelling (BIM), Data Automation, Green Construction are direct tools that are helping in a huge way in improving efficiency and also reducing the costs in the long run. For e.g. A project management software helps you keep a track of an employee’s working hours and it also gives you an alert when an employee is close to getting an overtime payment; the accuracy of this helps in controlling the working hours of the labour hence regulating the costs.
Revised Cost Estimate:
This comes into consideration when there are major changes in the project mid-way, and these changes are the reasons as to why the projects tend to go over budget. The accepted cost estimate must be updated periodically to reflect the estimate cost to completion and also to ensure that there is sufficient flow of funds till the completion of the project.
Communication – Internal and External:
Set up Key Performance Indicators (KPIs) for the project as well as for your team and constantly measure the progress with it. In order for this to operate correctly, you need to hold weekly meetings to discuss the current status and the future week’s plans and also to resolves the issues in hand, if any. Aside from this, keep the communication channel open with your clients as well, share weekly or fortnightly reports with them to stay updated on the project. This shall help in smooth functioning and also better relationship for future projects.
Although it is not easy but it is possible to stay on course with the budget for the entire project, instead of thinking where to and how to cut costs, you can look into maximizing the overall productivity through certain effective tools and proper planning.