Cost overruns are one of the most common hiccups during a construction project. Suppose you’re building a residential home, managing a commercial renovation or overseeing a large-scale infrastructure project.
In that case, going over budget can disrupt timelines, diminish profits and strain relationships with clients. Fortunately, most cost overruns can be anticipated and avoided with timely estimations and proactive management.
1. Develop a detailed project scope and budget from the start
When you’re starting a new construction project, don’t overlook developing a detailed scope of work, including:
- Precise drawings
- Material specifications
- Labor requirements
Without a detailed project scope, it’s almost inevitable that surprises—and costs—will arise later. A well-developed project scope serves as the roadmap for your entire project.
2. Use real-time project management tools
These platforms help track budgets, manage tasks and monitor changes as they happen. You can leverage these platforms to:
- Track expenditures against the budget
- Log change orders and their financial impact immediately
- Communicate efficiently with contractors, suppliers and clients
- Forecast potential overruns based on progress reports and delays
For example, if labor costs are trending higher than expected due to scheduling delays, you can reallocate resources before costs spiral out of control.
3. Plan for change orders and monitor scope creep
Change orders are a major contributor to cost overruns—especially when they’re not properly tracked or approved. To manage this:
- Establish a formal change order process before the project begins.
- Help ensure all changes are documented, accounted for and approved in writing.
- Educate clients and stakeholders on how change orders affect budget and schedule.
Frequent communication and disciplined project control can help keep the scope—and the budget—on track.
Suppose cost overruns during a construction project result in disputes with a client; you can benefit from dedicated legal intervention. The right legal guidance can salvage the situation before the dispute escalates into serious legal trouble.