Construction cost overruns can build up before the bills arrive. Check orders, work still to buy, changes and risk to see whether the whole job will stay within budget.
Do orders and the work still to buy already exceed the budget?
Construction Cost Overruns: Set The Starting Budget
State the scope, price date and risk allowance in the agreed budget. Keep exclusions clear so extra scope can be seen apart from higher rates.
Look for gaps in tender packs, quotes that leave out work and orders placed before changes are priced. Check site time and labour output too.
Check The Work Left
As an example, a £500,000 budget has £350,000 ordered, £120,000 still to buy and £25,000 of extra change. The forecast is £495,000 before risk.
Adding £15,000 risk takes it to £510,000. These figures show the method. Do not add a change again if it is already in an order.
Spend to date can look comfortable. What does the whole forecast show?
- Orders and work left
£350,000 + £120,000 = £470,000.
- Extra change
Add £25,000: £495,000 before risk.
- Risk and total
Add £15,000: £510,000 forecast.
In this worked example, the risk allowance takes the forecast £10,000 above the £500,000 budget.
Act On The Warning
Log new changes and show their likely value and status. Do not wait for a final quote if the work may add cost.
Name who will act and when. Keep scope changes apart from price rises and use the risk fund for the risks it was set up to cover.
General guidance. Check your signed contract and the job facts. Get legal advice where needed.