Major Causes of Construction Project Cost Overruns

Major Causes of Construction Project Cost Overruns

Cost overruns in construction projects are common in the contemporary world. But, Austin of Southwest Appliance Repair explains to me that even though this is becoming normal, project budgets are being scrutinized more keenly. Industry productivity tends to remain stagnant and contractors don’t want to accept what some consider the new normal.

To ensure that cost overruns for your construction project remain as low as possible, it’s important to know what causes them. Here are the major causes of cost overruns in most construction projects.

Inaccurate Construction Project Estimates

Many project stakeholders are generally eager to have their building projects started. Unfortunately, faulty budgets and schedules can easily lead to cost overruns. The bidding process is naturally competitive. As such, estimates can have wrongful expectations in terms of the work scope of the project. In some cases, projects can be estimated on one-size-fits-all basis. This creates the possibilities of exceeding the initial estimates.

Serious Errors in the Project Design

Even with proper allocation of resources and time for accurate schedule and budget estimates during pre-construction, defective design plans can lead to cost overruns. A deficiency in design, incomplete or inaccurate plan can lead to cost overruns. Unfortunately, these deficiencies are very common. They are the pain points for building designers and owners because they usually lead to cost overruns.

Not Factoring in Changes

A change in a construction project occurs when the contractor or owner realizes that the design is not working as expected. As such, they may attempt to introduce fixes, new specs, or requirements after the initial models. This can strain the budget or cause cost overruns. Generally, additional requirements cause higher costs thereby negating the original budget. That’s because the new requirements or changes require additional manpower, time, and materials.

Systematic reduction of cost overruns ought to be the priority of the contractor. The contractor should work with the owner to evaluate causes of cost overruns and come up with the right solutions for them.