Tag: Tips

Main considerations that will prevent your project from costs overruns

by Elia Gonzalez

1) Realistic initial budget:

  • Calculated using relevant bench marking but also specific project conditions, for example time/location/quality/logistic factor expected.
  • In accordance with the actual project procurement strategy.
  • A total project economy covering for all possible necessary expenses (Direct; Indirect; Client expenses; VAT; Contingencies; Risks; Inflation…).

2) Minimise scope changes:

  • From the client: defining clear requisites in the program and foreseen circumstances that may appear, covering for them with sufficient, but realistic, contingency allowances. If there are end users involved, they should be consulted prior to the design competition tender and budget calculation, what are their absolute needs, and what would be “nice to have”.
  • From the design team: allowing themselves provisional allowances to cover for design development when presenting the competition proposal, or errors in the design that will lead to major project changes. This allowances should be controlled and reduced as the project develops and uncertainties are been removed. -From the contractor: with a strong and consistent contract and a good quality project design, reducing issues discovered during the execution phase.

3) Quality commercial control during the design process:

  • Consider the impact of the overall project economy when making decisions.
  • Analyse the commercial viability of the design choices against the target budget before presenting to the client.
  • Quality estimates at each design gateway, preventing the design from developing too far from the client’s budget.
  • While developing the design also focus on specific cost drivers to reduce the risk of the project.

4) Quality of the design when tendering:

  • Reduce the contractor’s uncertainties and risk by clear and decisive design material.
  • Securing there is no missing scope on the tender offer.
  • Strong project specific contract between parties.
  • Good quality tender lists/Bills of Quantities to assess the offers and control the costs in execution

5) Preventing time delays:

  • During the design phase, have good quality time schedules with clear milestone deliveries but also with penalties for delaying the project.
  • Avoid extra expenses by considering all directly related impacts due to the new time plan (winter, interfaces with ongoing projects around, temporary relocation when not handing on time,…).
  • Assuring time allocated to certain tasks is not cut down, causing a poor quality delivery.

6) Foreseen economical market changes:

  • Proposing an attractive procurement strategy to increase interest and competitive bids.
  • Acknowledging busy production lines delivering certain materials, and preparing alternative design options. All these points may look frequent and inevitable, however, the reality is that with a structured and planned Commercial Strategy, it is possible to detect and mitigate all these risks that affect the project economy, turning them into opportunities. A commercial manager would, with this mindset, manage these issues, while coordinating with the team to highlight any issues that might impact the economy or project delivery.