One of two things is invariably true about each project that I have been called to evaluate. They’re either 50% over budget … or they’re 100% over budget.
The primary reason that projects are chronically over budget is that while there is an estimate of a core project, there are a myriad other unglamorous unavoidable scope items and tasks that are being completely neglected.
For example, there are infrastructure, utility connections and fees, site work, geotechnical and foundation issues, hazardous materials abatement and for projects in existing buildings, required code, structural, and mechanical systems upgrades. None of these are part of the plan but are nevertheless often unavoidable.
Added to these construction costs there are professional fees, permits management entitlements, finance, furniture, equipment, security….and on and on. These are collectively known as soft costs and are always at least 25% of the construction budget and can be as high as 50%.
And, finally, the budget has an inadequate or completely absent estimating contingency.
So how do you get your arms around all of this very early in a project?
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