construction

5 Reasons Construction Projects Go Over Budget

5 reasons why building projects might go over budget; poor project management, planning, extremes of weather and a skills shortage can all affect costs.

Overspending is a worryingly common fact for many building works

Premier league club Tottenham Hotspur’s move to their new 62,000 seat stadium has been significantly delayed with considerable cost overruns. Current estimates put the price tag for the new stadium at over £800 million – more than twice the original £400 million expected.

The north London club’s new home is another example of a major building project far exceeding its original budget. Ironically their temporary home, Wembley Stadium, was itself delayed and went considerably over budget before finally opening in 2007.

Budget overruns aren’t the preserve of large scale projects such as new sports stadiums: according to consultants KPMG less than 31% of all building projects even come within 10% of their original costings.

Why is this?

1. Scheduling and estimates

Once a building project gets the green light there can be a hurry to make a start. This can cause essentials such as proper scheduling and budgeting to possibly not be as thorough and detailed as they should.

Pricing – if those tendering aren’t briefed fully their costings can prove inaccurate as they may not take into account the full scope of the work. As a result prices can increase to reflect the actual work required – and delays to a project commencing or hold ups during the work can cause costings to escalate.

Scheduling – it’s vitally important to draw up a realistic plan of how the various steps to completing a project will be taken.

For instance, careful working out of when and for how long various contractors and specialist workmen will be onsite, and dovetailing deliveries of materials and so on to ensure they don’t get held up, is important to avoid wasted time and money.

2. Inadequate pre construction design and planning

Pre-construction and design may cost up to around 15% of a total building project’s budget, but it’s money well spent as it covers all bases and identifies potential problems before construction work starts.

Full surveys and architectural designs should be commissioned so as to know exactly how the structure – or structures – should be built and what materials are required will help prevent hold ups and cost overruns.

If an existing building is being converted or forms part of the overall project, then measured building surveys can detail everything from the location of load bearing walls to the layout of each power socket if needs be.

The old saying ‘failing to plan means planning to fail’ is so true when applied to building projects.

3. Changes in project specification

Inadequate planning and failure to assess a project from as many angles as possible can give rise to changes being required; this can cause budget overruns at the beginning as contractors booked and machinery hired may stand idle or at least under-used.

Even worse is when changes are required once building has started; not only are delays as above possible, but remedial work may be needed to parts of the structure already completed so racking costs up even more.

4. Poor project management

Good project management is worth its weight in gold to a successful building project while poor project management can see costs skyrocket.

A basic error such as, say, engaging contractors over a certain period but not hiring enough equipment over the same time span for them to do their jobs can cause overruns. Similarly, not scheduling contractors properly or perhaps not allowing for their commitments to projects elsewhere can cause holdups.

General efficient liaising with work colleagues and staff is an under estimated skill in ensuring everyone knows what’s happening and what’s required.

5. Unpredictable British Weather

While in the UK it’s taken as read that vagaries in the weather have to be absorbed into any time planning, extremes can knock a project off kilter and drive costs up.

In the last year in the UK there have been extremes such as the two ‘Beast from the East’ cold spells that struck as freezing temperatures came in from the east to cause a general grinding to a halt nationwide.

On the other end of the scale 2018 saw the UK sweltering in the hottest summer for years.

These extremes – particularly cold spells that can interfere with transport and thus deliveries to a site – can cause budget overruns as construction is interfered with.

Other spectacular cost overruns

The Tottenham Hotspur stadium delay is but one of various projects worldwide that have seen costs spiral to way in excess of those originally envisaged.

The Sydney Opera House in Australia, the extension to London’s Jubilee Line, the Big Dig in Boston, USA, and the Scottish Parliament Building have all ended up costing way in excess of what was expected.

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