Why Construction Projects Go Over Budget and How to Prevent It

According to research conducted by McKinsey & Company, “Cost overruns are the norm in the construction sector.” The report authors found that on average large capital projects take 20% longer to finish than planned and come in up to 80% over budget.

There are a number of reasons why construction projects go over budget: many of which could be mitigated if the industry was more proactive in embracing modern process and technology innovations, according to the study.

We have shared 10 of the most common reasons why construction projects go over budget – and how new technology can help change this.

1. Poor, or delayed, communication between field and front office

Typically, Project Managers can go weeks without receiving progress, budget, and material updates from the field. It is impossible to accurately track and monitor costs when you’re in the dark. Putting mandatory daily reporting systems in place can change this. Communicating daily reporting across the organization has always been a challenge, as it has traditionally been onerous and time consuming for busy construction managers. Fortunately, new software technologies now allow field workers to file reports that used to take hours in mere minutes.

2. Scheduling issues

You can have the most elegant schedule in the world on paper, but if it doesn’t reflect and adapt with the realities of what is happening in the field, it is of little benefit. Collaborative construction management software uses real-time project information to ensure crews arrive on site when they’re needed. This prevents double booking and reduces overtime requirements – enhancing scheduling efficiency.

3. Faulty installations

When a job isn’t done right the first time, there will be added labor and material costs to fix it. The resulting delay can have a domino effect on the entire schedule – especially if the problem isn’t immediately identified, and requires a return visit. Sure, proper up-front training and vetting of crews is an obvious answer. But choosing app-based software that allows crews to reference schematics and company-approved training videos on the jobsite can help answer questions immediately, and reduce uncertainty.

4. Lack of real-time quality control

Best project management practices say you should verify all work is properly completed and signed-off before the crew moves onto the next site. Yet the lag in reporting that is commonplace in the construction industry means a faulty installation may not be identified until the crew has started the next job – resulting in a costly call-back.

Today, mobile platforms allow construction managers to submit checklists, reports and even photo or video verification of the completed work for immediate sign-off. It’s another way technology can improve accountability and cut down on cost overruns.

5. Insights from past projects not being applied

Information is power. With each project completed, there is a wealth of data waiting to be mined. By using a construction management platform that integrates all project information in one place, decision makers can generate reports that can identify opportunities to improve efficiency and performance at the click of a mouse.

These advanced analytic and reporting tools can be used to improve management, resource allocation, forecasting and more. Project definitions can be adjusted based on factual information as opposed to gut instinct. Reports can even compare the performance of individual vendors and contractors.

6. Misjudging project scope

Cost overruns occur when project complexities are not accounted for in the design and planning stages. Today’s leading construction software solutions automatically account for all project elements to ensure there are no oversights. This includes resource and material availability, dynamic cost adjustments and integrated design-based scope definition.

7. Insufficient resource allocation

Advanced planning software can remedy this age-old problem. These “smart” systems can actually calculate the required resources for each installation/ project component: including labor and materials. They can estimate how fast a particular crew tends to work to improve scheduling. Software can even ensure equipment isn’t double-booked. The result is fewer bottlenecks through better planning.

8. Procurement/ materials issues

If your material delivery is delayed, costs quickly add up as crews sit idle. Modern construction management software automatically accounts for order lead-times, and some systems even determine deliverability based on available resources. Systems that provide real-time installation updates will show which materials have been installed and which have not.

9. Environmental factors

You can’t control the weather or predict unexpected problems on every given site, but you can control how these factors impacts your project. By raising a ticket using a collaborative software platform, field crews can quickly flag concerns to project managers, who can take quick action to reduce the impact.

10. Project leader lacks tools/ support

Project managers are continually being asked to provide updates on Earned Value. Yet, going back to our first point, this is next to impossible when they don’t have current and accurate real-time data from the field.

Collaborative construction management software provides front office staff and field crews with the planning, reporting, and accountability tools to bridge the information gap – which will help reduce cost overruns. Instead of having to assemble information from various sources, project managers have everything they need at their fingertips. Cost to actuals, progress to complete, material usage, billed, yet to be billed, completed, yet to be completed: it’s all there. The result is greater control and accountability, which will ultimately go a long way in preventing unacceptable cost overruns.

Support your team with collaborative tools to prevent cost overruns. Book a demo with Vitruvi™ today to discover the future of project management.