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Why do construction projects experience budget overrun?

On Behalf of | Aug 3, 2023 | Real Estate Law |

Construction projects are a huge undertaking – both financially and logistically. The challenges of these endeavors are so common that most established construction project managers fully understand how project costs can quickly spiral out of control.

Basically, construction cost or budget overruns occur when the actual cost of the construction project exceeds the estimated cost. There are plenty of reasons why a cost overrun might happen. These are a few of the most common.

Errors during cost estimations

Sometimes, cost overruns happen long before the onset of the construction project, starting the project off on the wrong foot. When the bidding process is competitive, it is not uncommon for contractors to try to “outbid” each other by offering low-cost estimates. The use of new or unreliable software can also lead to misleading estimations and, consequently, cost overruns.

Too much downtime

Time management and cost management go hand in hand. Assigning tasks and ensuring that targets are met on time can be extremely challenging during a construction project. For instance, once on-site, it is not uncommon to find workers hanging around for tasks to be assigned, and this often leads to unnecessary downtime.

Communication problems

Communication is key to the successful completion of any project. If construction teams (contractors, subcontractors and suppliers) are not communicating as they should, the project will likely end up hamstrung. Consequently, this can lead to cost overrun.

What can you do in the event of a construction cost overrun?

A construction cost overrun can be frustrating, to say the least. Fortunately, there are remedies. Depending on the circumstances that lead to the overrun, you may seek damages on grounds of breach of contract, malpractice, negligence, fraud or breach of fiduciary duty. Therefore, seeking legal guidance accordingly can be helpful under a variety of circumstances.