Budget Management: Avoiding Construction Expense Overruns

The success or failure of a construction project depends on the project manager’s ability to manage the budget. No matter how simple a project might be, if the money runs out, it has stopped being simple. Even when a project is bold and game-changing, it will not reach its potential if the budget overruns cause production to shut down before it is complete.

Unfortunately, building a structure takes time. But budget and priorities can change when it takes a project to get off the ground, much less be completed. The uncertainty and upheaval of the pandemic have placed further pressure on project managers. Now they must manage lower budgets in a shifting economy with uncertain manpower and unreliable suppliers.

It is time to start thinking differently and become more self-sufficient. Project managers who want to maintain their place in the market need to start adding value instead of succumbing to pressure. Look into the best way to manage financial resources. It may be time to hire staff where you would usually outsource to freelancers. Look into purchasing electric forklifts and other such necessary equipment at sale prices. Owning the expertise and equipment saves you money because you manage the resources. It is time to start thinking and acting strategically.

What Are the True Needs of the Project? 

The project manager must familiarize themselves with the goals and expectations of the stakeholders. There must be synergy and understanding between both groups. This will ensure that the project manager has the information they need to deliver what the stakeholders want.

Without identifying and agreeing on the requirements of the project and gaining an understanding of what the stakeholders desired result is, the project manager will not have the necessary tools to set a proper budget.

Identifying and documenting project requirements and then getting all parties to sign off is a crucial step that helps the project manager to plan several approaches to completing the project. This is how they can be sure that the budget is suitable to requirements. If the proposed stakeholder budget cannot deliver to the stakeholders’ needs, the project manager must offer them alternatives from increasing the allocation to lowering some expectations.

What Can Change? 

house renovation

The problem with budget and deadlines is that they can change. They cannot be set in stone because no one can predict the future. The best a great project manager can do is prepare themselves so that they can manage to roll with whatever changes do come.

This is when contingency planning comes in handy. The project manager needs to familiarize themselves with every step that can change and build plans to deal with any disruption, delay, or cancellation.

Service shortages and delays by banks to ensure the money is being utilized effectively can push back the deadline. But any addition to the deadline will impact the budget. Harsher spending measures by the stakeholders may tighten the budget, which will affect the deadline. The price of supplies, access to resources, labor shortages due to illness or restrictions can impact the budget and push back the deadline.

Thus, preparing a detailed plan to battle possible issues can save the project manager and the stakeholders from a great deal of grief during the project.

How to Deal with the Unexpected 

Sometimes, no matter how well you prepare, the unexpected can happen. That is why it is called the unexpected. It is understandable that as the project manager, you will feel a great deal of pressure to fix the problem. But it is not a good idea to deal with an issue that falls out of your designated purview without involving the stakeholders.

They must be informed of what the issue is and how it will affect the project. This will allow everyone to evaluate the situation and make calmer choices to enable the project to get back on track. Uncertainty leads to bad decisions, and sharing the burden can help offset a great deal of the fear that stems from it.

You may be the project manager and responsible for the outcome, but you are not alone making sure everything goes well. It is in everyone’s best interests for you to have open communication at all times.

Communication is vital at every stage of a project as this is what helps everyone stay on the same page and move efficiently toward the end goal. It also reassures stakeholders and employees that their money is spent wisely and that their labor is utilized effectively.

Effective project management and budget management rely on meeting key performance indicators. This will help track everything from the actual cost versus the cost variance to the earned value versus the planned value. The project’s return on investment will meet its expected high values with careful adherence to the key performance indicators.

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