In the three years to 2015, fewer than one-in-three projects (31%) came within 10% of their original plan.
There are seven good reasons why the majority of construction projects exceed their budgets. Like a child’s wooden stacking tower, if you lose enough bricks as a result of these factors then the whole project comes tumbling down.
1. Wrong forecasts
Every construction project must have a solid foundation, with a well-written job specification and budget. With so many moving parts across the lifetime of a project, failure to nail down a properly costed plan means there’s the risk of mistakes, disputes and confusion.
2. Labour costs
Labour costs are a major headache, with 65% of UK contractors reporting that they are up on a year ago.
Finding a quality workforce is a huge challenge.
Three-quarters of firms say supervisors and bricklayers are difficult to recruit, with carpenters/ joiners and ceiling fixers not far behind. A tight labour market forces up construction costs.
And what happens after Brexit if EU labour is no longer available? An estimated 12% of the UK construction workforce in 2015 came from abroad. Faced with this challenge, UK construction businesses need sound supply chain management practice in place to keep their skilled subcontractors happy.
3. Poor communication
Inconsistencies in reporting often mean that neither subcontractors, contractors nor owners know how their project is faring at any given time. This makes it hard to react when there’s a problem, leading to delays and cost overruns.
4. Subcontractor issues
They are the cement that holds the project together, but when they fail to deliver the consequences can be far-reaching. More often, relationships break down because of poor management by the contractor.
5. British weather
Too much rain or a cold snap can halt construction for days and leave projects significantly behind schedule. Tools are downed but workers still have to be paid.
These are more common than you think. Almost one half of respondents to a survey of national
contracts reported at least one dispute in a year. Most stem from poor contract administration.
7. Inefficient payment processes
The application for payment function is a critical element of the construction process. Applying, approving and certifying effectively is the key to getting paid!
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