To make a profit, construction companies must carefully plan and schedule their projects. However, even with meticulous planning, complex jobs run significant risk of going over budget.
It’s difficult to predict every potential delay or change of scope when the work that’s being completed takes several phases, is spread out over a long period of time, and involves multiple crews and subcontractors. Understanding the common reasons why helps project managers and other stakeholders prevent overspending on their own projects.
Reasons construction projects go over budget
1. Miscommunication and poor data management
Miscommunication and a lack of proper documentation frequently cause issues on construction sites. Good communication is essential throughout the entire construction process from design through implementation, and even a minor breakdown at any step of the way can lead to time-consuming, expensive rework down the line.
Many contractors still rely on pen and paper reporting and other old fashioned methods for tracking productivity and sharing progress updates. Unfortunately, with these outdated processes, stakeholders don’t always have clear visibility and may miss important opportunities to correct communication errors before they cause major delays.
2. Excessive downtime
Effectively allocating a company’s most valuable resource—its workers—is another vital aspect of keeping a project within budget. Scheduling either too many or too few workers each day are equally costly mistakes.
If there aren’t enough workers available to get scheduled tasks done, the project will obviously run into delays. Likewise, if there are too many workers onsite some of them will experience excessive downtime. At best, these surplus workers won’t have any work to do, but they’ll still need to be paid fairly for their time. At worst, having too many people in the work zone will cause a safety hazard.
3. Jobsite accidents
While some accidents are truly unavoidable, many can be prevented with proper safety and quality assurance procedures. Construction companies must enforce jobsite reporting and monitoring protocols, most importantly to protect their workers and secondarily to prevent construction errors and damage to materials or equipment.
When employees aren’t trained to catch and correct safety or quality concerns, or if they don’t have the tools they need to do so efficiently, accidents occur. Then, tasks are delayed as the company works to resolve them.
4. Incomplete designs
If design documents are missing important information or if specifications are calculated incorrectly, work may be delayed and will possibly go over budget as field crews wait for the design team to adjust. When there is little project oversight, this becomes an even larger problem, because sometimes incomplete design documentation leads to construction errors.
Designs should be completely and thoroughly reviewed before work is started, but this is not always the case on construction sites, especially when project managers are busy managing work across multiple jobsites.
5. Trade damage
Due to poor communication, extreme weather, improper handling, and other issues, materials, equipment, and existing structures may be damaged onsite. Materials will need to be replaced while equipment and structures must be repaired, adding significant unexpected costs to a project.
Construction companies may also spend valuable hours trying to determine the initial cause of the damage.
6. Supply chain issues
Contractors have little control over vendors. Unfortunately, sometimes a project’s budget is affected when vendors cannot deliver materials or supplies on time.
Supply chain issues, shipping delays, and surprise service charges add to project expenses. When creating bids, contractors should keep these possibilities in mind.
Tips for preventing cost overruns in construction
So, with all of these common issues happening on construction sites, how can contractors avoid exceeding budgets? A few simple solutions can help reduce risk across the board.
1. Track progress digitally
Construction companies can help managers and crew members gain better visibility and reduce overspending by equipping them with helpful tools like digital production tracking software. Using mobile data capture, field crews are able to easily report from the field and share data with the office in real time. Stakeholders can assess progress and make accurate predictions about project budgets and schedules.
The ease of digital reporting over pen and paper and other outdated methods helps keep projects on budget in two major ways. For one, data is much more accurate. With standardized daily reports that take the guesswork out of data collection, productivity and progress are tracked based on real facts from the jobsite rather than word of mouth.
Secondly, visibility is enhanced. And with better visibility, project management teams can be more adaptive, immediately recognizing when and how budget concerns develop, correcting them early. They can also share this data with stakeholders in the event of an inevitable change of scope to identify the cause, which helps build better, more trusting business relationships.
Construction companies can also use digital time card software to track time worked to custom categories defined by the business. Employees fill out digital time cards and log hours to tasks, which are assigned cost codes. This helps the management team granularly understand how costs are spent on labor.
2. Update your estimates with historical data
Digital productivity tracking is beneficial not just for current projects, but for future bids as well. Digital reports can be organized in a cloud-based storage system that allows for easy review. When budgeting new work, project managers can analyze previous similar jobs to make better, more accurate decisions in the initial planning process.
When a contract is created based on more realistic projections, the chances of a project going over budget are reduced from the start.
3. Manage resources efficiently
Giving project managers efficient resource scheduling tools is a good way to prevent the issues of having too many or too few workers onsite as described above.
The tools used should provide clear views of a project's schedule and allow stakeholders to easily identify what skilled, certified labor is available. They should be able to quickly schedule shifts and notify employees whenever there is a necessary change to keep work on track.
There are also many software options that help businesses better track and maintain construction equipment. As one of the industry’s most costly resources, equipment must be properly managed. Digital tools can help project managers better understand where their equipment is, how it’s being used, and whether or not it needs required maintenance.
4. Reduce safety incidents
When safety is taken seriously on the jobsite, downtime is significantly reduced. Regularly utilizing safety checklists and delivering relevant toolbox talks helps keep workers safer and prevents incidents that would result in lengthy delays to the work schedule.
Crews should also have fast, easy ways to report observations and record incidents when they happen, so that, even if there is an inevitable issue on the jobsite, it doesn’t cause unnecessary downtime.
How Raken helps
Raken’s construction budget management app is a single, streamlined solution for daily reporting, time tracking, production tracking, toolbox talks, and more. Our workflows are easy to use for both the field and office.
Using Raken, field crews can quickly capture vital info from the jobsite and give project managers valuable real-time insight, allowing for informed decision making. Current projects stay on budget, and new bids are more accurate than ever before.