Effective strategies for cost control in construction projects

Discover how project teams can leverage cost control strategies that can keep their project costs within budget.

Cost control in construction projects: Why is it important?

Maintaining financial control through a construction project can be an uphill battle, especially in the US. One of the major reasons why it’s important to exercise good cost control measures in construction projects is because many projects tend to suffer cost overruns, despite the project team’s best efforts during the project planning phase.

According to the Structure and Infrastructure Engineering Journal, 52% of a construction project’s overruns are attributed to design errors and changes. Rework in construction projects can often slow down its progress and account for an average of 12% of total project costs, according to the Construction Industry Institute (CII). In a Global Construction Survey by KPMG, just a quarter of respondents believed the construction industry as a whole managed to achieve an acceptable level of performance in delivering capital projects on time and within budget.

Based on these figures, it’s evident that cost overruns are not a foreign concept in the construction industry. The question then is, how can project teams exercise greater control over their project expenses and stay within budget?

For project teams, creating effective strategies in their cost control measures is a great start to future-proofing their project outcomes. By meticulously planning and diligently monitoring expenses, project teams can overcome these challenges.

Let’s explore several ways project teams can create effective strategies for cost control in construction projects.

How to create effective strategies for cost control in construction projects

Estimate costs accurately

Don’t just factor in materials and labor costs. Consider permits, waste disposal, temporary facilities, and potential price fluctuations. Analyze past projects for real-world costs. Include estimated expenses involving all stakeholders, such as architects, engineers, and subcontractors for a comprehensive overview. Include a budget reserve for unforeseen circumstances.

Ensure detailed scheduling

Break down projects into phases with milestones for proactive risk identification. Schedule realistically, factoring in buffer time for weather, material delays, or labor shortages. Optimize resource allocation by matching the right personnel and equipment to minimize inefficiencies. Utilize project management software to track progress and adjust the schedule as needed.

Improve change order management

Implement a systematic review and approval process for change orders to minimize costs and keep project scope under control. Maintain detailed records of changes, such as justifications, costs, and their impact on the timeline. Before approval, conduct a thorough cost evaluation to explore cost-effective alternatives. Keep all stakeholders informed about approved changes.

Enhance communication and collaboration

Foster open communication with regular meetings, progress reports, and a central communication platform. Share project information, budgets, and potential challenges to build trust and collaboration. Encourage all team members to raise concerns and suggest cost-saving ideas. Early collaboration allows for proactive identification and mitigation of potential cost issues.

Boost project outcomes by collaborating with Compass Consult

At Compass Consult, we are committed to helping project controllers navigate the challenges of construction project controls strategically and systematically.
With our sophisticated construction project management software, expert project controls consultancy, and your best interest at heart, we can help you achieve better project outcomes regardless of how complex your construction project is.

Contact Compass Consult today and get ongoing support to enhance your project management capabilities.

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FAQs

What are some of the benefits of using project management software?

Project management software helps track progress, identify bottlenecks, adjust schedules, and manage resources efficiently, all of which contribute to better cost control.

What are some red flags that might indicate potential cost overruns?

Early warning signs can include frequent change orders, schedule delays, material price fluctuations exceeding initial estimates, and communication breakdowns among stakeholders.

What about unforeseen circumstances beyond our control? How can we plan for those?

While you can't predict everything, incorporating a contingency reserve in your budget helps mitigate the financial impact of unexpected events. Regularly review project risks and adjust the reserve as needed.

Eager to learn more about cost control in construction projects? Contact Compass Consult today.

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Compass Consult is a globally recognized project portfolio management service provider. Our team comprises experienced civil engineers, risk management experts, and project controllers with outstanding track records for delivering exceptional project planning, earned value management, cost control, and schedule control services.

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