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What to Do When Your Project Goes Over Budget

Projecting with pencil on the big urban drawings. Town planning

The job of an architect, engineer or project manager is to give clients what they want. It’s quite common for budgets and expectations to be well out of line. When a project is underway changes, unexpected delays, and changing material pricing can impact the budget. As a professional you know it’s not your fault the budget is overrunning its limit, but the client is looking to you for a solution.

Keep Budget Details Clear for Clients

From the initial bid to the completed project, it’s essential that everyone remains on the same page when it comes to finances. The initial bid will include a full breakdown of costs. If and when these costs differ throughout the project, the client should be provided with specific information. Tracking is essential throughout the project. Costs will change, but showing specific details about these changes in real time is an effective way to keep all parties involved in decisions about the budget.

Managing Estimating Errors

Cost overruns occur for many reasons. It is a common part of the construction process. Project management software can help to minimize these risks, but it’s also important to avoid them when possible. Key causes of overruns include:

  • Omissions: Ensure full cost detailing is provided to clients before and during the project
  • Assumptions: Ensure clients fully understand the required materials for the project and the price. Don't base any cost on assumptions
  • Inadequate allowances: Careful consideration of materials, labor, and other costs needs to be taken
  • Price changes: Planning a buffer for this constant concern, securing better relationships with suppliers for long-term pricing, and ensuring the project moves along quickly to avoid delays can help

Other common concerns often revolve around inaccurate or incomplete pricing details. Organization, time management, and tracking of detailed product and material pricing can minimize these risks.

Managing the Overage

Budget overruns can be dealt with in only a handful of ways. It may be possible to negotiate price reductions for materials, but in most cases, it comes down to the client getting what he or she wants and paying for it or making changes. Steps architects and engineers can take include:

  • Exploring secondary options with clients and considering the consequences of altering the design
  • Showcase the value and worth of the expenses; perhaps it benefits or improves the project
  • Discuss circumstances openly; work with clients to find a solution
  • Pad bids with a percentage of potential overage from the start, clearly indicating the risks involved
  • Pull up specific data that shows line by line detailing of the overruns, where they occurred, and why they occurred

In some cases, overages cannot be compensated for and the project has to stop moving forward. However, if an architecture or engineering firm invests time in accurately capturing costs from the start, indicating the very real possibility to clients of potential overruns, and tracks budgetary changes step by step, it is possible to maintain a positive relationship with clients.

The right software can make this possible. Project management software that breaks down material costs and tracks time clearly answers the question of “why” that many project owners have. Architecture and engineering firms fully understand and work hard to minimize the risks of projects running over budget, but in many cases it happens anyway. Handling the problem effectively means remaining organized and communicating with clients.