Why do Over 69% of Construction Projects go Over Budget?

Over 69% of construction projects go over budget by 10%. Find out why as we go over the reasons and how to prevent this from happening

It is an astonishing fact that more than 69% of construction projects go over their budgets by at least 10%. This phenomenon is not just a glitch but a significant challenge in the industry.

So what causes this frequent occurrence of running over budget? Here are a few reasons…

Inadequate Initial Planning

Poor initial planning is one of the main reasons. When a project doesn’t have a robust plan from the beginning, problems that weren’t anticipated are bound to emerge. They range from misjudging the scope of work to cost underestimation, overlooking necessary permits, and many others.

If companies want to avoid this, meticulous planning has to be done. It involves developing a comprehensive project blueprint, carrying out thorough site assessments, and accurately estimating costs.

Project management software can be used to ensure no aspect of the project goes unnoticed, causing unnecessary delays if everything isn’t properly organised. Updating this plan regularly during the production process helps anticipate possible problems before they become serious issues.

construction projects

Use of Unreliable Resources

Unreliable resources constitute one of the leading causes of budget overruns in construction. This consists of materials and labour, which don’t meet anticipated standards – UK companies are famous for it. In essence, going for cheaper materials may be viewed as saving, but ultimately, it leads to larger expenditures because they lack strength or capacity.

Consider, for example, a precast dock leveller system versus cheaper, less reliable options. A high-quality precast dock leveller system offers efficiency and durability, reducing maintenance costs while improving overall quality in terms of project execution. Conversely, poor standard levelling systems involve frequent repairs or even replacements, with a resultant cost increase.

Similarly, unreliable labour can derail a project. Recurring errors and the need to correct them are likely when workers lacking proper training or experience have been hired, resulting in delays and extra costs. All resources must be screened adequately for their qualifications and history of being dependable.

construction projects

Scope and Design Changes

Another common reason why construction projects exceed budgets is scope creep, where the project’s scope goes beyond its original plan, often because of more client demands or unexpected obstacles. Client demands really do add up. The project budget increases with each small change made.

There should always be a clearly defined scope at the inception of such projects, with strict adherence to it thereafter. Any proposed alterations should be reviewed for their financial implications before any agreement. To deal with these things as expectations management and undue changes of scope, effective communication between the service provider (project manager) and the client.

What do you think about the statistics and the causes behind it? Something has to change – and it seems the more complex construction becomes, the more the number of projects going over budget increases. Is there a permanent solution? Probably not, but there are proactive measures to take.