Cost Overrun can be prevented by an accurate Planning in construction. A large number of construction projects fail due to improper cost estimates. This means that the construction companies have to devote more time and attention to it. Inaccurate estimation of the costs, benefits, resources, and estimated time is taken for completing the projects can lead to making a greater impact on the future of the construction companies.
Lack of a proper construction project design, improper cost management, and improper utilization of the resources can lead to the construction projects going over the estimated budget.
What is a cost overrun?
Cost overrun means any changes happening in the budget of the construction project that increases the total construction cost. This happens due to some of the following primary factors. They are:
- Inaccuracies in estimating the budget of the construction project.
- Technical problems like an improper gathering of data or inaccurate budget estimates.
- Psychological problems like decreasing the commitment levels of the projects and scope creep.
How to avoid cost overrun?
Cost overrun pushes the budget level of a project. A construction manager must be aware of such problems. There are multiple ways in which one can avoid project overrun. They are as follows.
Proper planning of the project
One of the most effective ways to prevent project overrun is by planning a project thoroughly even before executing it. The more the construction manager is thorough and accurate about the estimates the project will be finished within the estimated budget. There are always risks involved with a construction project but that can be handled with a risk management plan.
When the construction manager is planning for the project, the person must take into account all the scenarios and then make a plan. It helps in avoiding many inappropriate situations and helps in better handling of the construction project. After the detailed plan has been chalked out with proper brainstorming, it needs to be signed by the stakeholders of the construction project. It helps in keeping everyone on the same page and there is no communication gap between the construction company and the stakeholders.
Complete knowledge about the vendors( supplier / subcontractors/ consultants )
There are many construction projects where the construction contractors have to contract outside vendors. It might be for doing particular tasks, or for supplying different kinds of pieces of equipment and materials. When you are hiring the services of an outside vendor, the construction project becomes open to project overruns. These are things that are beyond the control of the project manager.
Hence one must have thorough knowledge about the vendors before forging any relationships with them in the form of buyouts, making agreements, and ensuring all contract documents including addendums are added to the agreement. One must understand the capacity of the vendor proper verification of references. See whether they can fulfill your requirements including carrying cost of insurance, commitment to the project schedule, and no increase in the price due to schedule change.
Next, when the vendor provides an estimate, it is perfect. Before you sign a contract with the vendor, ensure that you have checked their background and whether they can meet the deadlines. Also, check for reviews and testimonials from older customers to understand what they have to say about their work and services.
Keeping to the planned scope
Scope creep is a big threat for sending construction projects into cost overrun problems. Changing requests about the works always is a big problem for a construction project manager. The requests for the change can come from the clients, stakeholders, and even from the other team members. Many of such changes might be helpful for the construction. It will lead to unavoidable cost overruns. One must think in detail before increasing the project scope, establish change order procedure or establish unit price on major possible change items.
Using a tool for project planning
Project planning tools help in making the work of the project manager easy. It also helps in adding productivity to the construction work and increasing the efficiency of the project. It aids in keeping the cost overrun to a minimum. The project manager can keep a track of the progress of the project and also avoid delays using this construction software.
Keeping the stakeholders updated
Communication is very important between the project managers and the stakeholders of the project. Without proper communication, there will be a delay in the completion of the project. And delays will lead to cost overrun. Starting work at the wrong time will delay the project. With proper communication, enough information can be shared and such problems can be easily avoided.
Monitoring the progress of the project
The project managers must track the real-time progress of the project. It will help in checking whether the work is going on as planned and whether the works are being completed as per the timeline planned.
Reassigning the resources
If the project expenditure is more than planned, project managers reallocate resources to deal with it. Evaluation of the resources beforehand helps the managers to prepare for such situations. This can be solved by assembling a team of efficient individuals. This will help in making an efficient and productive project.
Cost overrun can be avoided if these points are remembered by the project managers. They can efficiently complete the project on time and deliver them to their customers.
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