How to Create a Construction Project Budget
Any project or activity needs funding and budget allocation to keep the workflow alive and functional. In this case, construction projects need complete documentation of cost control in building design and construction. Before we get into the specifics, we must learn first what a project budget is.
The Code of Practice for Project Management (CIOB) 4th edition defines budget as the quantification of resources consisting of a prepared financial statement to attain a given objective at a certain period. Construction projects need careful planning and management so that all factors may be carried out successfully. According to a study from Carnegie Mellon University, the project budget is used as a guide for management control and monitoring purposes. To compare the original cost from the expenses during the construction project course, every detail must be recorded.
1. Assessment of Projected Expenses
General contractors must be aware of what various expenses they should encounter, there are costs associated with financing, permitting, and regulatory fees. Plumbing, walls, lumber, hardware, concrete, wiring, and HVAC are costs associated with the building itself. The expense sheet list of possible expenses may not stop there because you'll also have to consider manpower and emergency expenses. Knowing how to budget takes time, so you should research and read from various budget planner references.
2. Check the Available Funds
After enumerating all the projected business budget, you must check in with the owner or key persons regarding the source of funding. Setting a project budget will help you identify where to purchase the materials and possibly scout for willing investors. The source of funds must be concrete so that after the groundbreaking ceremony, the project will be carried out according to plan.
3. Compare with Similar Projects
The construction industry is competitive, that's why you'll have to apply cost-effective and tested methods to create a successful build. A project as simple as a home remodeling needs a project budget to simplify every task. If you are creating a construction budget, it's highly recommended that you compare your data with similar projects you've done in the past or compare it with others' works.
4. Conduct Consultations and Meetings
Construction funding involves thousands or even millions of cash flow. Every aspect must be approved by all the concerned stakeholders. Frequent consultation and meeting with the engineers, architects, contractors, building owners, and among other key people is a requirement. This way, everyone meets in between and agrees with the overall budget plan.
5. Set Projected Dates
Aside from creating a budget planner for your construction project, important dates must also be set. These dates must specify when to have the planning stage, groundbreaking ceremony, the start of the actual project, the duration of building work, and the projected end of the whole project. Scheduling out every activity will help you keep up with the change of seasons and meet the expectations of the investors. Consult with your project calendar as you go along with the planning of your budget checklist and bills.
What is a Construction Project Budget?
It is a financial plan that allocates a certain amount of capital to each task of construction. This document records the costs and expenses defined for the building process and anticipating it helps in not exceeding a limit amount. Spreadsheets or Excel sheets best represent budget data.
What Does Construction Costs Mean?
Construction costs refer to all sorts of costs and expenses that go into a construction process. It is related to or incidental to the development of capital improvement.
What Part of the Construction Process Takes the Highest Capital in the Budget?
- The foundation and establishment process.
- Windows and doors.
- Electrical settings.
- Cabinet and countertops.
- Ceiling, flooring, and roofing.
How to Manage a Construction Budget?
To make sure that the construction project is on track of its decided budget plan by following a simple process:
- Give a written budget plan to the contractor.
- Make no decisions without following the budget.
- Try to get raw materials at a cheaper price.
- Record every cost and expense.
What are the Types of Capital Cost of a Construction Project?
- Planning and feasibility studies.
- Land acquisition.
- Architectural and engineering design.
- Raw materials, tools, equipment, and labor.
- Site investigation and field supervision.
- Construction financing.
- During construction insurance and taxes.
- Owner's general office overhead.
- Soil testing and inspection.