When it comes to planning a construction project, the budget process is a crucial first step. Whether your project is a new-build, tear down and re-build, a renovation, or an addition, taking the extra time to ensure your budget can reach its maximum potential will help set-up your project for fewer hiccups and a smoother timeline.
When planning your budget, it’s important to take it step-by-step to keep it both streamlined and manageable. There is nothing worse than incurring costly fees for running behind schedule or having to increase your budget at the end of a project in order to complete it effectively.
Below are concrete steps to assist in your budgeting and planning process.
First, consider the various phases of your budget:
- Analyze and Review – What do you know about the current situation regarding your project? What is the end goal? What were the costs of similar projects? In this initial phase, do as much research as possible to attain relevant information that will assist you in having an overall picture of your project. Create spreadsheets for referencing figures and resources and site where they came from for future reference.
- Develop and Collaborate – Flesh out the project and ensure designers, consultants, and other experts are including cost estimates with their proposals. These individuals are experts in their fields and should be able to provide thorough details regarding what they need to complete their tasks. Do not be afraid to get multiple bids, cross check budgets, and understand what fees may be incurred for late delivery of an individual contributor.
- Present and Align – After collecting all proposals and presenting the final plans, it is time for alignment with all key stakeholders. A clear understanding of both the individual subtotals and the grand total will help prevent funding issues down the road and ensure you can complete your project on time and on budget.
- Build and Track – Once your project is underway, keep a close watch on timing and cost actuals. Raise a red flag if a line item appears to be going awry. Flagging issues early can often help prevent major mishaps down the road and avoid future delays and added costs.
- Reconcile and Archive – Upon completion of your project reconcile the budget. If you have been doing this all along, the final reconciliation will not be as painful. Reconciliation will help catch any errors, as well as help you learn for your future projects. Take copious notes so you can reference them again and maximize your time with future projects and budgeting.
Second, take the following elements into consideration when creating your budget:
As part of both the “Analyze and Review” and the “Develop and Collaborate” phases, consider the following 5 areas and subsequent questions. The more you dissect your needs and outline your plan at the start of a project, the less you will potentially be forced to delay or make cost-cutting decisions once the project is underway.
- Parts and Materials – This category may feel intimidating at first. Here, you are taking a hard look at all the tangible resources needed in order to complete this project. Do not forget to leave some leeway and consideration for waste; for example, some materials that organically produce a lot of waste include concrete, grout, nails, and electrical conduit and wiring.
- Labor – These are all the people involved in your project, both directly hired by your team and subcontractors. Obtain multiple estimates regarding how long and how many people are required to complete each task. Are there efficiencies in skills and/or timing? In considering your budget here, also consider the project timeline. If an aspect is delayed, what is the impact on the proceeding events? Will there be cost implications if there is a delay?
- Equipment – Machinery rentals and/or purchases fall within this area. The important thing to keep in mind, especially when considering your proposals from subcontractors, is that you do not double count equipment fees from subcontractors as part of your labor cost.
- Fees and Permits – When it comes to fees and permits, it is crucial to do your research. Start by knowing local requirements and work your way from there. This also requires having a solid timeline in place, as delays in permitting can devour both time and budget.
- Expect the Unexpected – No matter how masterfully you have planned your project and how expertly you have budgeted, there are going to be some unexpected situations that arise. There could be excessive waste due to an innocent mistake, an overage of hours, or something mandatory added to the project at the last-minute. Budget for this inevitability so that you are prepared should something arise.
Third, ensure you are managing your budget throughout your project:
While it is important to set an accurate budget, it is equally as important to follow that budget. Ensure you have a cost control program in place, and even better, a single point of contact that can ensure the budget is being adhered to. If and when there are deviations from the budget, or more unexpected expenses than planned, they can be flagged early to help mitigate the impact on the budget.
While the research and due diligence required to create a successful budget may feel daunting, the process will ensure a successful and cost-effective project in the long run. For more information on budgeting and planning your project, visit https://jmcope.com/services/.