There is one thing that impacts us all…Inflation. The construction industry is no exception. Inflation paired with strict budgets means that businesses operating in this industry need to watch their cash carefully.
According to statistics, between August 2022 and August 2021, the cost of material inputs for nonresidential construction rose by more than 20%. Not only that but supply chain delays and labour/skills shortages add the strain of project delays, which can quickly lead to budget overruns.
Simply put, it is challenging to stay within your budget when there are so many external factors at play. So, throughout this article, I will be listing 5 ways you can control your project’s budget when costs are rising.
Estimates
Before any work commences, ask yourself this: are your estimates accurate? When you are in the planning stages of your project, accuracy is crucial. Any mistakes made at this point in time will come back to haunt you at a later stage in your project and could result in unexpected and substantial costs. So, if your estimations in the planning stage are anything but accurate, you will struggle to control your project’s budget.
Communication
A lack of communication can cause challenges for any industry, but in construction, it can be costly. In order to control your budget, it is crucial that you communicate at every stage of your project. For example, when you are in the planning phase, it is crucial that each party involved has access to the up-to-date drawings. If you fail to communicate, you could find yourself in a situation where multiple versions of the drawings are being used, which can lead to disastrous consequences for your project and budget. So, if you want to control your budget, make sure that you communicate effectively and to the appropriate parties at every stage of your project.
Risks
If you have followed me for a while, you will have seen my advice on being prepared for the risks that can arise on a construction project. It is crucial that you spend time identifying the risks that could impact your project, whether they are legal implications or factors outside of your control. This way, you can assign cost and time implications to each identified risk; that way, nothing will come as a nasty surprise. So, recognise and plan for potential risks, no matter how far down the line they may be and you will have a much greater chance of controlling your budget.
Skills
We are all aware of the labour shortages that have severely impacted the construction industry. Nowadays, filling every position on your construction project can feel like an impossible (and costly) task. So, what can you do? Make it your mission to hire staff that have the ability and qualifications to fit several of your roles. This way, your workforce will get more done, but with less manpower required. Yes, you may spend a bit more time hiring, but in the long run, it will save you costs and help you to control your budget.
Timekeeping
Timing is everything when it comes to a construction project. Deadlines are set and agreed upon with clients and it is imperative that they are met. If your project extends, guess what? So does your budget. To ensure that this does not happen, you must check in with your timeline frequently throughout the entire project. This way, you can foresee any delays and where possible, minimise them. If you continuously miss deadlines, it’s going to cost you financially and could damage your reputation. So, to conclude, timekeeping is essential when it comes to controlling your budget and you should always keep tabs on your project’s timeline.
There are many factors that can cause your budget to quickly spiral out of control. However, there are clear steps you can take to minimise the risk and the costs. However, my core piece of advice to you would be, if your budget does for any reason go over and you believe that this could lead to a legal dispute…Make sure that you act before you have a crisis and severe cost implications on your hands.
At Mercantile Barristers, our key members hold industry professional qualifications and have practised for several years with leading construction consultancies. So, if you are faced with a legal issue at any stage of your project’s life cycle whether this is due to budget overruns or other factors, please get in touch.
Remember, if you are faced with a construction dispute, Mercantile Barristers will be happy to assist. Do use the enquiry form below to contact us to discuss your matter further.