Construction costs can be significantly reduced without affecting the quality of the project with the help of effective budgeting. Apart from preventing cost overruns, the budget allows stakeholders to monitor performance easily and ensures the construction project is completed in time.
Research shows that about $100 billion would be saved every year globally if 1% of construction costs were reduced. This is a lot of money that can be beneficial in other sectors.
Here’s everything you need to know about proper budgeting of construction projects.
How Much Funding Goes into Construction?
There is no definite figure for the amount of funds required to facilitate a construction project, as this figure varies from project to project, depending on multiple factors. However, there are various steps contractors can undertake to establish how much funding will be required to complete a commercial construction project successfully. These include:
- Analysis of the income and expense projections throughout the project life-cycle
- Checking for how much funding was required for similar projects undertaken in the past
- Undertaking pre-design requirement analysis
- Analysis of available financial resources
- Assessment of preliminary design alternatives
Commercial construction clients typically need adequate funds to facilitate the following:
- Cost of construction
- Approval fees
- Planning and site assessment costs
- Labor costs
- Fixtures and equipment installation costs
- Cost of decanting and relocating
- Contingency
What are the Project Specifics for General Construction?
Proper budgeting will require the project manager to know all the specifics of the construction. These include:
Project Conception
This is the stage where a general construction project is brought to life by the project owner/client who decides to build a specific structure.
Project Design
In this stage, the project contractor – together with the client – develops the architectural and engineering design specifications for the structure to be built. Construction design is typically a multi-level process, including the incorporation of the schematic design and design development.
Hiring the Project Team
After the client approves of the design, the contractor will proceed to hire a project team that typically consists of a foreman, handymen, and a workplace health and safety (WHS) officer.
Resource Procurement
After assembling the project team, the next step is usually to purchase the necessary construction supplies. These may include steel, cement, sand, hardwood, floor tiles, roofing tiles, drywall material, etc.
Actual Construction
Typically, contractors will put in place operational measures to be followed by their teams while on-site- to ensure construction quality, resource efficiency, and site safety. These may include procedures for site access, quality control guidelines, resource storage guidelines, and work schedules.
Post-Construction Stage
This final part of a general construction project includes inspection of the completed structure by the relevant building commission for that area, as well as project closure, whereby both parties sign off on their contract agreements.
What Does Construction Budget Management Involve?
To efficiently manage a construction project budget, ensure the following:
Leveraging Historical Data
Contractors know the importance of examining budget documents from similar construction projects in the past and using that information to guide their current budget projections.
Consultation with Experts
Reaching out for the advice of relevant professionals can also help with proper budget management. These professionals may include architects, commercial contractors, and even electrical technicians.
Accuracy Review
The last thing you want is to make budget miscalculations based on numerical typos – which is why you should always recheck your preliminary budget for accuracy.
Budget Re-Baselining
Once the project owner approves the project changes, the contractor should re-baseline the budget as per these changes.
Real-Time Updates
It’s essential to update a construction project budget as soon as the client approves changes.
How to Create a Construction Budget Estimate
Construction cost estimates range from design estimates, to bid estimates and control estimates. Design budget estimates are usually made by contractors in charge of the project planning and design. Bid estimates, meanwhile, are drafted during the bidding stage to inform the client of the project costs in terms of direct construction costs and field supervision costs. Finally, there’s the control estimate which covers project monitoring expenses.
Some of the various components of design, bid, and control estimates include:
Design estimates
- Conceptual estimates
- Screening estimates
- Engineering estimates
- Definitive estimates
Bid estimates
- Construction processes
- Subcontractor quotations
- Quantity takeoffs
Control Estimates
- Financing cost estimate
- Post-contracting/ pre-construction budgeted cost.
- Estimated cost to completion
How Do You Create a Budget for a Construction Project?
When creating a budget for a construction project, take into account the size, type, and scope of the project. Budgetary considerations may comprise the following:
- Contingency Allowance: This is usually set at about 5% of the total budget costs to cover potential, unprecedented expenses.
- Building Exterior: This includes consideration of the cost of aspects like installation of walls, windows, doorways, sound and heat insulation, and exterior design.
- Foundation: The cost of foundation installation may vary depending on the soil type, grade stability, and excavation requirements.
- Heating, Ventilation, and Air Condition (HVAC): HVAC costs vary depending on the type of building, as this includes things like the building dimensions.
- Soft Costs: this includes things like general liability insurance costs to cover builder’s risk for builders and handymen.
- Fees: These typically include project management fees and legal fees.
- Licensing Costs: Those building new commercial developments usually need to take into account a host of permit expenses, including environmental and electrical permitting.
What are the Factors to Consider When Calculating Construction Costs?
When estimating the construction costs, find the right cost estimator tool. The cost estimator tool can be found online and consists of several factors that help determine the cost of the project. These factors include:
- Similar construction projects: These can act as cost references for the new construction projects.
- Design and architecture: The floor area and the number of stories of the commercial building.
- Construction site conditions: It includes soil conditions, the weather, and the location of the construction site.
- Labor wage rates: Depend on conditions construction workers have to work under during the project.
- Construction materials: These include bulk materials, standard off the shelf materials, etc.
- Delivery requirements: The transportation of construction materials to the project site.
- Project schedule: The period of construction will determine the money spent on the project.
- Regulatory requirements: The approvals and permits given by various regulatory agencies.
- Insurance requirements: The insurance covers construction workers, tools, equipment, etc.
What is Cost Control Construction?
Cost control construction is a process in which the costs of the project are managed efficiently to ensure that the commercial facility is built within a budget. Project managers should execute the construction, with due consideration to the quality of work and materials while sticking to the estimated cost and limits.
How Do You Calculate Your Budget?
For a construction project to run smoothly without any hitches, it should have a budget. Here’s what to consider when calculating your construction budget.
- Analyze the project plan and research on previous similar construction projects.
- Determine the scope of the project in relation to the income and projected expenses.
- Develop the budget by estimating the cost of materials and services needed during construction.
- Set up a contingency fund for emergencies.
- Approval of the budget by the construction team and stakeholders.
How Do You Estimate Electrical Construction Projects?
When undertaking budget estimations for electrical construction projects, clients and contractors typically consider the following:
- Budget overheads: Overhead costs that need to be factored into an electrical construction project may include legal fees, utility costs, accounting fees, and insurance fees.
- Takeoffs: These are the estimates of the number of resources required by the electrical contractor to complete the project efficiently.
- Labor costs: Electrical contractors charge mostly either by the hour or by labor units, which is a measure of the duration it takes the laborers to install all the necessary electrical components completely.
How Do You Control a Project Budget?
Building a commercial enterprise and keeping within the budget is a great construction success for a project manager. Before this happens, you need to come up with a budget control plan to avoid overspending.
- Continuously forecast the project development to predict its future in terms of costs.
- Regularly update the cost plan when there are any discrepancies, for example, reducing costs where there are high allocations to balance the budget.
- Consistently submit cost reports to the construction team to analyze the money spend against the budget plan.
- Prepare and review contingency plans as a risk management procedure.
- Encourage project team to design the commercial facility within the budget.
What is the Best Estimating Software for Construction?
Construction estimation software refers to digital software tools that are designed to streamline the cost estimation process for construction projects. Currently, one of the best estimating software’s on the market – arguably – is ProEst.
How Do You Calculate Construction Area?
Architects need to know the construction’s area. These calculations help to acquire permits and estimate construction costs. Calculate the project’s construction area in these simple steps:
- Step 1: Measure the length and width of each room in the construction building by measuring adjacent walls.
- Step 2: Multiply the length to the width for the area of each room to find the square footage.
- Step 3: Add the square footages to find the total area of the building.
How Do You Estimate Materials for Framing?
When calculating a construction budget, one needs to estimate the amount of materials – framing equipment – needed so that they can come up with the cost plan. Estimating framing materials includes:
- Checking out the construction plans to know the size of the walls, doors, and windows of the project.
- Estimating the type and number of plates needed for the walls.
- Calculating the number of studs required for the project.
- Determining the header material for the doors and windows.
- Estimating sheathing by calculating the number of sheets needed for the wall frame.
Budget Your Commercial Construction with the Right Construction Company
To ensure your projects go smoothly, get a full-service construction company. Besides offering quality services, they’ll ensure all the right resources are used and that the project is completed in time.
Contact Stovall Construction today.