Professional Tips for Construction Budget Planning

20 September 2020 by CostMiner

Regardless of scale or complexity, construction projects are delicate enterprises to execute on time, under budget, and up to the standards that you and your clients establish. Of these three factors, a comprehensive budget may be the most influential to your project’s success, given that it determines how quickly the appropriate materials and services can be acquired within the project timeline and which types of technology and equipment are best suited to help you achieve the quality your team is aiming for. The budget also makes room for unforeseen circumstances and on-site hiccups as well as sudden changes to the project’s design. 

This is why construction budgeting and estimation should be a major step in every construction manager’s pre construction efforts, one that allows you to prepare for the worst and take justifiable steps towards the best. Here are three fundamental but essential tips to build and hit your project’s targeted budget. 

Prepare Early by Putting Heads Together

Putting together a construction budget is no one-man job, especially when managing large-scale or particularly intricate projects. A team of professionals and stakeholders will not only help you solidify the specific needs, expectations, and limitations associated with a construction endeavor but also project true construction costs based on both experience and expertise, even when the design drawings aren’t 100 percent complete. 

In fact, many construction management firms recommend determining a planning-level budget after the architect’s schematic design drawings are only 20 to 30 percent complete. This is done to solidify fundamental design elements, such as site plans, grading, and floor plans, upon which other elements are added. The initial budget determines the direction that the later-stage designs will move in to achieve the client’s objectives and serves as a return point to see if the project has remained on-track. 

Essential starters on any budget-planning team are the client, the construction manager, the contractor, and a professional construction estimator. While construction managers can work exclusively with a contractor or an estimator to evaluate construction costs and prepare viable estimates, these three parties often work collaboratively to deliver on preconstruction services. Together, they review the schematic design drawings and the defined scope of work and extensively probe what costs must be expended to achieve a project’s criteria. Depending on the project, project managers may be responsible for estimating costs and overseeing takeoff. In this case, the workload is substantially increased and construction cost estimating software is highly recommended in order to streamline the process and cover for variances.

Close communication with equipment and material suppliers will also bolster this process and assist with speedy and cost-effective procurement, especially when acquiring expensive equipment or units with long lead times. 

Consider Both Hard and Soft Costs

One of construction management’s best budgeting practices is to divide project-related expenses into hard and soft costs:

  • Hard costs: These line-item costs are paid towards the physical construction of a project, including building materials and labor. Site preparation, excavation, equipment, groundskeeping, electrical instrumentation and control (EI&C), HVAC, and plumbing are all hard costs and generally take up about 70 percent of the total budget. Since these costs are typically fixed and negotiated upfront, they are easier to estimate and manage within the budget. 
  • Soft costs: These less tangible, indirect expenditures primarily cover fees paid towards architecture and design work, engineering (structural, electrical, mechanical, civil, acoustic, etc.), construction management, testing and inspector, permitting and filing, maintenance costs, utilities, taxes, surveying, legal, insurance, and more. These costs can fluctuate along with consultant rates and application fees. Although not always visible in the initial budgets, they can be hefty and rife, particularly when a project is significantly delayed. 

To avoid being surprised with hidden costs, it’s crucial for you to remain informed of local and state codes and restrictions as well as compliant with important legislation for your region such as the Americans with Disabilities Act of 1990 (if you’re in the United States) or the Disability Discrimination Act of 1992 (if you’re in Australia). Any project should be ready with a 5 to 10 percent contingency allowance to account for any sudden changes or obstacles and should also expect to spend it. 

The key is to remain flexible and in communication with the client to either accept additional costs for the sake of value gained or make decisions based on consultant advice to cut costs without compromising the original intent or integrity of the project. 

Rely on Appropriate Technology to Simplify the Cost-Estimation and Takeoff Process

Now that you’ve created transparency around the types of costs your construction project and team are likely to face, it’s time to get into the nitty-gritty of cost estimating. 

Most cost-estimations and budgeting processes begin with a takeoff, which is the sub-process of identifying, quantifying, and measuring the quantity of material items needed to construct a project. This can be as simple as measuring the square footage of a space to clarify the type and amount of lumber needed for flooring or as complicated as accounting for all the lighting fixtures, conduits, and wiring in a building to construct a completely new electrical system. 

In this way, what is takeoff software that allows you to measure four major parameters: 

  • Quantity of individual items.
  • Length of some items such as cabling or piping.
  • Surface area for items that occupy large amounts of space such as carpeting.
  • The volume of materials, such as concrete or asphalt, required. 

While these measurements can be taken manually, completing an analog takeoff can be time-consuming, exhaustive, and prone to human error. It’s no surprise that the probability for error, as well as the time it takes to complete the takeoff, increases exponentially with the complexity and scale of the project. Thankfully, this process can be performed using on-screen takeoff software, which not only speeds up the counting and measuring but also allows for accurate and uniform documenting of data. 

Takeoff software allows you to upload and mark objects on a project’s schematic design drawings as PDFs without any downtime spent on printing and gathering materials for takeoffs and estimations completed by hand. Furthermore, advanced software contains functions that allow you to save reusable outlines as well as algorithms that collect a variety of dimensions for the same item by analyzing multiple drawings at once. Perhaps the most important aspect is the ability to account for variances and build those into your budget (an often overlooked element of the process).

Cost-estimating software used after the takeoff is also crucial to streamlining and documenting your project’s cost and mark-up. Advanced software allows users to create standardised templates that can be customised for each job you earn as well as automatically recalculate rates as a composite rate, easing up time spent on individual tasks and calculations. 

Costminer develops cost-effective construction estimating software that allows for both takeoff and cost estimations to be completed on-screen at the same time. You can observe these panels side-by-side without the need to switch between different windows or programs, making construction budget-planning a seamless experience that integrates all calculations into one simple package. And, because our products are powerful yet easy to use, they can support the specialised work of a contractor or professional cost estimator or make estimations simple for the project manager, who is busy wearing multiple hats on the construction site.  

Final Thoughts

Construction budgeting can be a daunting and exhaustive process that continues to evolve as more detailed designs are produced. But by working collaboratively, distinguishing between various project costs, and using auxiliary technologies that streamline and simplify cost estimations, you can develop increasingly accurate budgets that keep all other success factors—schedule and quality—in check and allow your client to make informed decisions comfortably. 

Let Costminer help you manage your project and streamline your takeoff and cost estimation processes. Contact us today to start your free trial with our easy and robust cost estimation and takeoff software!

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