How to Take Charge of Your Construction Budget’s Bottom Line
Before your executive or project management team discusses a new-from-the-ground-up, publicly funded project, peer out your office window at the tower cranes already dotting the landscape.
The bad news? Almost all of those projects are saddled with massive cost overruns, according to a McKinsey Global Institute report. And overbudgeting occurs long before the foundation dries and repeatedly at taxpayers’ expense.
The good news? It doesn’t have to be that way, thanks to best-practice, cost-certainty strategies, designed to make everyone a winner: you, the public and the government. Here’s how:
ISSUE
Imagine you are slated to build a higher-education project. The usual preconstruction lifecycle analysis – demand/needs assessment, feasibility study, conceptual planning, etc., – already has occurred. All the bid-required design, engineering and approval documents also are in place.
Then, two common problems emerge: The designer’s estimate exceeds the line-item amount that the construction budget earmarked before the design phase began. Additionally, the architect and/or engineer has limited, supportive data about the cost structure to identify the project’s various elements.
What happens next?
Cost-overrun culprits
One or more of the following factors can produce runaway costs:
- The initial project scope does not accurately reflect the budget.
- The budget manager is not the decision maker.
- Deficient cost structuring undermines the architect/engineer from identifying project elements.
- The budget is based on unreliable benchmarks.
- The contingency plan fails to accommodate project miscues, time allotments and economic fluctuations.
BACKGROUND
With data like this, independent eyes are critical to meet stakeholders’ expectations. That is why PCS’s world-renowned clients rely on them to responsibly determine project/program capital construction costs before they commit resources.
Sources: McKinsey Global Institute, Quality, KPMG, Independent Project Analysis
SOLUTION
Immediately upon deciding to build, hire qualified capital cost advisors, like PCS, as a standard practice. Here’s how their experienced, front-end advice on initial budgets – before work begins – best serves everyone:
| Your Risks Without a PCS Cost Advisor | Your Benefits With a PCS Cost Advisor |
|---|---|
| • Delayed or cancelled projects | • Ongoing aid throughout entire project |
| • Diminished project expectations | • External regulations/trends expert |
| • Higher escalation and/or economic impact costs | • More accurate cost controls with core skills in cost, schedule, estimating software/tools |
| • More funding for temporary accommodations | • Unbiased, budget-managing advocate |
| • Reduced project scope | • Standardization |
| • Taxpayers’ extra funding | • Better usage of taxpayers’ funds |
RECOMMENDATION
Get the real bottom line. Contact Project Cost Solutions, a capital cost advisory firm based in Decatur, Ga. With over 130 years of collective expertise, PCS helps clients to Improve Cost Certainty™, minimizing risk and increasing success on construction projects nationwide.
