Construction costs are expected to rise in 2022. According to the National Home Builders Association, building material prices are up by more than 19% compared to last year.
That means construction cost control is more important than ever.
If you’re a construction project manager, it’s crucial to be proactive about controlling construction costs, especially in these times of high prices.
In this article, we’ll outline the basics of cost control and mention the seven steps you can take to improve cost and budget management on your construction projects. Read on to learn more!
Construction cost control is the process of keeping track of actual costs incurred during a project and comparing them to the budget.
It’s important to do this throughout the project so that you can catch any overspending early on and make changes to stay within budget.
There are four main procedures of cost control in construction:
Let’s take a closer look at each of these procedures.
1. Preliminary Cost Estimation
The first step in construction cost control is to estimate the costs of the project. This includes materials, labor, equipment, and other expenses.
You’ll need to do some research to come up with accurate estimates. Once you have your estimates, you can create a budget.
2. Budget Development
The next step is to develop a budget for the project. This budget should be based on your estimates of project costs.
For example, if you estimate that the project will cost $100,000, you’ll need to create a budget that includes all of the costs that will add up to $100,000.
To create your budget, you’ll need to:
Once you have a budget, you can start tracking actual project costs.
3. Cost Tracking
To track project costs, you’ll need to keep careful records of all the money you spend on the project. This is known as your actual cost and includes material costs, labor costs, equipment costs, invoices, as well as any indirect costs such as overhead.
Estimated costs should also be considered. They include:
You should also consider future costs when tracking actual costs. These costs can include warranty costs, repair costs, and maintenance costs. You can use software like Bricks+Agent to help you predict future costs.
4.Cost Analysis and Reporting
The final step in construction cost control is to compare actual costs to the budget. This will help you identify any areas where you’re overspending.
You can then make changes to stay within budget. This may involve changing the way you’re doing things or finding cheaper suppliers for materials.
Now that we’ve gone over the basics of construction cost control, let’s take a look at seven steps you can take to improve cost management on your construction projects.
1. Use Construction Management Software
Construction management software can help you track project costs and stay within budget. This software can also help you with other aspects of construction project management, such as scheduling, task management, and document storage.
There is also mobile construction management software available that you can use to track project costs while you’re on the job site.
For example, if a certain construction worker makes a change that will increase the cost of the project, you can quickly add this information into the software and adjust the budget accordingly.
Such software can be a great way to stay organized and make sure you’re not spending more than you should be.
2. Update Your Cost Plan Regularly
It’s important to update your cost plan regularly as the project progresses. This will help you catch any changes that need to be made so that you can stay within budget.
For example, if you find that the cost of materials has gone up since you first made your cost estimates, you’ll need to update your project budget to reflect this.
3. Consistently Submit Cost Reports
If you’re working on a large construction project, it’s important to submit cost reports on a regular basis.
For example, if the project is taking too long to complete and more construction workers are in demand, you’ll need to adjust your budget accordingly. The client should also be informed about such changes.
Cost reports are essential to keep management and different stakeholders like owners, contractors, and subcontractors, up-to-date on what has been spent and what still needs to be spent.
4. Prepare and Review Contingency Plans
Contingency plans are important in construction cost management. This is because they provide a way to deal with unexpected costs that may come up during the project.
For example, if you need to make a last-minute change to the project that will increase the cost, you can use your contingency fund to cover this. Or when bad weather causes delays, you can use your contingency fund to pay any workers who are idled because of the delays.
It’s important for project managers to review their contingency plans regularly and make sure they’re up to date.
5. Avoid Change Orders
Change orders are requests to change the scope of work. They can be caused by changes in the design, changes in the materials, or other factors.
Change orders can be very costly, so it’s important to avoid them if possible. To do this, you’ll need to have a clear and concise contract that spells out the scope of work.
6. Conduct Post-Project Reviews
After a construction project is completed, it’s important to conduct a post-project review. This will help you identify any areas where you can improve cost management on future projects.
For example, you might find that you need to update your cost estimates or change the way you track project costs.
7. Encourage Cooperation with Project Team Members to Keep Costs Under Control
It’s important to encourage cooperation among all members of the project team. This includes the project manager, the construction workers, and the suppliers.
Everyone should be aware of the project budget and should be working together to stay within that budget.
Construction cost management is essential to ensure that your project stays on budget. There are a number of different ways to manage costs, and the best approach will vary depending on the project.
But in general, it’s important to have a clear budget, update your cost plan regularly, prepare contingency plans, avoid change orders, and submit cost reports on a regular basis.
It’s also important to encourage cooperation among all members of the project team and to conduct post-project reviews to identify areas for improvement.
By following these tips, you can help ensure that your construction project stays on budget and is completed on time.
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