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7 July 2020

Reasons For Time And Cost Overruns In Construction Projects

Construction projects are complex owing to the detail of work that these entail. These complexities give rise to delays and disputes during the construction process. When delays occur, the aggrieved party comes up with claims and asks for compensation in terms of money.

The amount you owe the party depends upon the nature and extent of the loss incurred to them. But there are ways to avoid such conditions to the maximum extent possible. These claims arise due to time overrun, and resultantly there are costs overrun as well. For reasons of cost and time overruns, read this article.

This article aims to introduce you to the key reasons for time and cost overruns that occur in construction projects. 

Factors leading to time and cost overrun in construction projects

Projects are managed by a breakdown in the activities and milestones. Since there are multiple activities being carried out simultaneously, management can be full of mess. Mismanagement can result in time overruns and cost overruns. Thus you need to be cognizant of the following factors to avoid overruns of both kinds in your construction project: 

Financial problems

A construction project has a defined budget. Some construction projects do not have a clear definition of the budget in the binding agreement signed at the beginning of the project. In this scenario, there will be an issue with payments on procurements, leasing, renting and making payments. As a result, the activities may not begin and end according to scheduled timings. 
What can you do to avoid such circumstances?

Well, you need to define the finances of the project well before time and invest a good amount of time in the planning phase of the project. Make sure the breakdown of the budget is known to the project manager since the beginning and is explained in the legally binding agreement.

Unrealistic contract durations imposed by clients,

Clients are often very hasty and want quick results. If the client forces you to keep a short time duration for the project and you end up giving in, the result will be a time overrun. What can you at such a stage? Deal with delay and quantum claims with the help of delay and quantum experts to keep the project going beyond budgetary constraints. However, the situation could be avoided if you had hired consultants beforehand and analyzed the feasibility of time before the construction process began.

Poorly defined project scope, client-initiated variations,

Every construction project has its own scope, which helps steer the direction of work. If the feasibility analysis is not sound, and the scope is not successful in demarcating the project's bounds, there will be issues in managing the monetary requirements. The project activities may become too comprehensive and elaborate and thus challenging to confine within the prescribed budget and schedule.

To avoid cost and time overruns, you need to make sure the scope of your construction project is well defined, and the variations requested by the client are only incorporate according to the constraints. 

Under-estimation of the project cost by consultants,

Sometimes consultants that project managers hire fail to foresee the requirements of the project. In such a scenario, there can be an overestimation or an underestimation of the project costs and timing. You need to be cognizant of the fact that only those consultants must be hired that is experienced and have been working for years in the construction industry.

With the help of a seasoned construction project management experts, you can save your project from underestimations. Otherwise, these underestimations may result in the overrun of costs and sometimes time as well. 

Poor inspection/supervision of projects by consultants.

Sometimes consultants are experienced in different kinds of projects than that of yours. Having hired such consultants can result in a poor inspection and misplaced judgment of the progress and labor performance. Thus, while hiring professional consultants for your construction project, make sure that they possess the relevant experience, and are capable of saving your project from time and cost overruns.

Inadequate inspection is directly related to the level of expertise of a consultant. Besides, you need to ensure that the supervisors you have designated are impartial and not capable of any malpractice. 

Want timely completion of your construction project?

Time and cost overruns are not new terms in the construction industry. But mature businesses know how to reduce such unfortunate occurrences. You can save your project too. By focusing on the most common factors leading to cost escalations and critical delays, you can make the expert witnesses focus on these key areas. 
Make sure you do not jeopardize the fate of your next construction project by hiring an inexperienced consultant. Ensure that you plan your project well in detail and formulate a well-defined budget.

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