Capital projects don’t come with blank cheques. And yet, too many projects — even the most successful ones — can wind up becoming money pits. Though intentions are good at the start, why is it still such a challenge to adhere to those budgets?
If you’re looking to have more control over your capital project budgets, here are three areas to consider that can lend a way into greater accuracy and successful tracking. They can be used individually yet are more effective together.
Estimating for greater accuracy
One of the best barometers of what the ultimate price tag could be for a capital project is to revisit past projects with similar scope. Such historical data surfaces the costs for labour, equipment, materials, overhead and indirect-expense line items, as well as cost trends and budget-impacting risk factors.
This estimating exercise helps remove any unintended tendency toward optimism bias that has skewed too many budgets. And it lends a degree of data-driven cost certainty to high-stakes projects, making construction budget tracking far easier.
Managing budget accuracy with EVM
Where a purposeful, proactive estimating process establishes a reality-based budget before the project begins, that same estimate continues the quest for accuracy, serving as a basis for ongoing construction budget tracking throughout the execution phase. That’s where earned value management (EVM) comes in.
EVM is a technique that integrates project scope, cost, and schedule to provide an accurate measurement of project performance. Yet, EVM isn’t just about showing real-time status of costs and schedules; it can be used to forecast how different risk factors can affect project performance, providing valuable insights into potential future costs and schedule impacts.
Proactively controlling costs and budgets with the right tools
The technology used to manage budgets is just as important as the processes explored above. Recognising this, contractors are turning to construction cost management software designed specifically for the industry.
By digitising the above processes, contractors can create and update budgets, track expenses, forecast costs, and identify potential cost overruns. Ultimately, the software delivers the much-needed data reliability, cost analysis and cost certainty that simply aren’t possible with the generic business software that, despite its decades-long prevalence, has been unreliable in keeping construction budgets in check.
Tracking the budget provides an accurate record of where money is being allocated, allowing for better decision-making and more efficient use of resources moving forward.