Most development and infrastructure projects are costly, with many moving parts – which makes cost management crucial!
Estimating, budgeting and controlling costs is essential for ensuring a development or infrastructure project is delivered on time, on budget and on programme.
Here at Greyfriars Project Management, we are a team of expert project managers with extensive cost management experience. We provide cost management support for a wide range of projects – from large-scale public sector construction to one-off developments in the private sector.
So, we’ve taken a look at everything you need to know about cost management in the construction industry – including what cost management involves and just how important it is…
What can affect costs in a construction project?
Development and infrastructure projects in the construction industry can be highly complex, with many stakeholders.
This means there are a number of factors which can affect the cost of a construction project, including:
- Changes to the size and scope
- Materials and equipment used
- Labour costs
- Unexpected delays
- Unplanned risks
- Services employed
These must all be taken into consideration – and managed – throughout the project, with any changes identified and accounted for.
What is cost management?
Cost management is the process of estimating, budgeting and controlling costs to ensure works stay on budget.
It should begin as soon as possible in the planning stage and continue throughout its lifecycle.
Cost management should be carefully managed by an experienced project manager and effectively communicated to all stakeholders.
Estimating costs enables you to creating a budget.
This involves identifying the costs associated with a project and researching how much each is likely to be – including all resources which will generate costs throughout, like labour, materials and services.
Budgeting is essential for determining funding and providing a target for the project to work to.
Estimated costs are used to create an approved ‘cost baseline’ which forms the basis of the budget. This will need approval from all stakeholders.
The budget can be altered if there are changes in the project’s scope, with the project manager adjusting and justifying the changes where necessary.
Controlling costs ensures the project is delivered within budget.
Cost controls should be implemented throughout the entire lifecycle of the project, particularly during the execution phase.
All expenditure should be tracked and actual costs compared to those budgeted. This ensures any changes which will have cost implications will be identified and corrective action can be taken to keep costs on track.
Why is cost management so important?
There are a number of reasons why cost management is so vital to development and infrastructure projects in the construction industry.
Keeping to budget
One of the main reasons development and infrastructure projects fail is because of uncontrolled costs!
All types of construction projects must be kept within budget, regardless of size or complexity. Even small projects can quickly go over budget if cost management is poor.
So, cost management is vital for making sure a project remains within the budget. Pragmatic budgeting and prudent cost control means any variances to budget are identified and dealt with as early as possible.
This is especially important in the public or charity sectors, in which funds can be limited and budgets can be strict.
Managing and meeting stakeholder expectations
Good cost management ensures all stakeholders have an understanding of costs, so expectations are both managed and met.
The project budget lays out how much money is needed and when. Once correctly communicated to stakeholders, everyone has a clear understanding of costs. Funding can be agreed and all stakeholders can ensure they don’t overspend.
A clear budget and robust tracking provide comfort to the project sponsor, reassuring them that their project will be delivered successfully – on time and on budget.
Cost management can improve the efficiency of the project.
It gives project managers better sight of project performance so they can identify areas which are running within budget and take action on those which are exceeding it.
By identifying and eliminating unnecessary costs, it’s possible to save money and make the project more efficient.
How can Greyfriars Project Management help?
Without prudent and pragmatic cost management and control, projects can fail. Cost management and cost control are essential for ensuring that construction projects are successfully completed within budget.
Here at Greyfriars Project Management, we have extensive cost management experience. Using our skills and expertise, we help clients across the public, private and charity sectors deliver their projects on time, on budget and on programme.
We provide a range of cost management services for our clients, including cost planning, cost control, valuations and change management.
Whether you require help with cost control on your development or infrastructure project – or require full project management support – we can help.
Get in touch today to find out more.