3 Dynamic Strategies For Managing The Cost Of A Construction Project

18
Nov

A typical construction project requires considerable resources, such as time, money, energy, to become a success. The amount of financial resources needed to implement a construction project depends on several factors including the nature, size, and purpose of the undertaking. Naturally, the initial cost estimates change as the project progresses; mainly due to unprecedented project development hitches. In order to mitigate or to reduce the effect of these unexpected snags on the project success, the contractor should implement an effective cost management policy. You can combine one or several of the following dynamic strategies to ensure a cost-effective project development process.

 

Cost Planning For Project Development

 

Start by creating a comprehensive plan for your construction enterprise featuring all the key elements of the project development process. You will then use this project development plan to create an informed and realistic budget to help you estimate your construction costs. When planning for your project development costs, you should identify and note the project scope and then budget accordingly. The project scope is determined by the project specifications, its feasibility, outline & detailed design, and all other functional details in line with the project needs and objectives as specified by the owner or sponsor.

 

Another crucial consideration when planning for the project costs is all the key stakeholders, such as the project owner, consents managers, architect, engineer, quantity surveyor etc. In the construction or renovation of Greenwood parking lots, consents managers will include government agencies and local authority officials responsible for licensing, safety aspects, environmental management, and the administration of town and/or regional planning mechanisms. You should also consider the sources of finance, cost and availability of contractors and materials, the desired construction contract, consents and site acquisition etc.

 

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Identifying Key Cost Factors

 

In order to identify all the key cost influencers in a construction project, the project stakeholders should adopt two main approaches. The first approach focuses on all the main project price determinants while the second strategy acknowledges all possible causes of cost variations. The cost of a project is mainly dependent on its physical characteristics and descriptions. These include the project specification/scope, the location of the worksite, tax liabilities, site characteristics, and whether it’s a new build or a renovation. Other crucial factors include the method of procurement/contract, construction schedule, and financial impacts of inflation.

 

Potential causes of cost variations/changes are split into: internal and external factors. The internal factors are influenced by project stakeholders while the external factors are independent of the project players. Some potential internal causes of price changes include poor project management, design alterations, incompetent contractors, and resource constraints (materials, equipment, plants, workforce, and financial shortages). External influencers include land acquisition costs, inflation, unexpected site problems, exchange rate fluctuations, and various natural factors.

 

Implementing Effective Cost Control Measures

 

There are several methods of implementing cost control measures. You can start with a protective approach whereby you implement a systematic cost appraisal and monitoring strategy throughout the project development process. This involves rigorous risk identification and mitigation from the project planning phase up to the project handover stage. Risk and contingency planning is another method of mitigating cost changes or variations during the project development process. The project construction team should plan for uncertainties and for unexpected changes during the construction process. The project budget should include adequate contingencies to cover special risks, such as the aforementioned external cost variants and design changes and adjustments. Implementing an effective project management approach is one of the most effective ways of controlling and managing the cost of a project. A dynamic project management methodology should be implemented to account for changes in cost, time, quality, and design process, thereby ensuring optimal control of the project development process.