One of the most important jobs you have as a construction project manager is monitoring costs, from the pre-build estimating stage and throughout the course of a project. However, ensuring every dollar is accounted for is no small task, and puts pressure on you to ensure there are no errors in calculations and no unnecessary overruns.
What can you do to head off potential cost management mistakes to protect your budget and keep you from reaching for the extra-strength aspirin? Thankfully, you already have more control than you may realize. The key is considering your initial project plan as “Plan A,” then creating several corresponding “Plan Bs” to help mitigate some of the most common cost management missteps.
Suggestions to Reduce Cost Management Mistakes While Creating Plan Bs
- Make sure to account for changing times of the year. Consider what may be going on throughout the time period when the actual build is slated to take place. Why? Because seasonal weather patterns can create serious potential delays. Winter weather can hinder delivery of materials and equipment in certain parts of the country or create conditions that make it difficult to maintain otherwise normal productivity levels. Excessively hot summer temperatures may put employees at risk for heat-related illnesses, not to mention reduced productivity levels. And don’t forget Mother Nature’s more severe regional patterns including hurricanes and tornadoes, which can severely disrupt supply chains and nearby projects under construction. Be ahead by planning ahead.
- Be upfront about true project costs. Underestimating project costs just to win a bid sets the stage for inevitable cost overruns leading to a much smaller profit margin. Avoid the temptation to cut corners on the quality of materials and workmanship to compensate for budget shortfalls. Accurate cost projections can improve the odds of winning future bids by building up your reputation for project transparency and timely delivery and will be less likely to impact your profits. Want to make absolutely sure your bid estimate accounts for everything and is realistic? You could pay to have that one project independently reviewed to ensure all the numbers add up, the schedule makes sense and all the required details are covered. Or, you could invest in project cost management technology to help you check all of your projects.
- Be aware of price changes that may occur over the course of the project. The economy is not static. Price variations, whether sudden or gradual, can occur at any time throughout the course of a long-term project for materials, equipment and even short-notice hiring of subcontractors. Variations can also result simply from inflation, supply and demand or completely unpredictable market conditions, i.e., a pandemic and the market impact a resulting economic recession might have. So, keep potential changes in mind as you budget for your project.
- Plan for potential scope creep. It starts with a tweak here then an adjustment there. Before you know it, the running tally on your project is slipping toward a substantial cost overrun. That could leave you with a dwindling profit margin – and an unhappy client. Scope creep is very common, but the risk of overblown budgets can be minimized with proper documentation and approvals of all relatively minor changes. Make sure any changes that go beyond the predetermined scope align with the end product your client ultimately specified.
- Allow leeway for unexpected change orders. They can appear when you least expect it. An incorrect measurement taken early in the project isn’t discovered until later in the build or a last-minute material substitution has to be made due to supply issues. Whatever the reason, change orders can lead to costly rework. The solution? Double check designs, ideally using BIM modeling for increased spec accuracy. In addition, loop in vendors in the early stages of planning so they can help ensure the materials you need are available when you need them.
- Embrace dedicated project cost management software. We mentioned this a bit earlier, but it bears repeating. Today’s construction management technology can help you closely manage cost estimates during the bidding stage. And when used as part of a complete comprehensive project management solution, it can manage the documentation necessary to help keep costs under control beyond the bidding stage. More advanced software options even offer an alert notifying you when costs are trending toward limits you’ve pre-set, giving you the opportunity to analyze what’s happening early on so you can course correct before things get out of hand.
You can gain a new level of control over cost management mistakes. By taking steps to reduce their occurrence all together or to at least mitigate their degree of severity, you can create a proactive cost-management blueprint that preserves your ROI and your peace of mind.
InEight’s estimating and project cost management software introduces accuracy to your estimates, giving you not only the level of control you need to head off common cost management mistakes, but the certainty that your project can be constructed within your established budget.
