The Rising Costs of Construction: How Clients Are Underestimating Project Expenses
A phenomenon that we are seeing with increasing frequency: clients are facing higher than expected construction costs when they go to tender. With inflation, labour shortages and supply chain disruptions continuing to affect the construction industry, many clients are underestimating the true cost of their projects. This leads to a domino effect of delays, repeat planning applications, and ultimately, spiralling expenses.
How to Avoid the Pitfalls
While the increasing cost of construction is largely due to external factors beyond anyone’s control, there are steps that both clients and professionals can take to help manage costs and avoid unnecessary delays:
1. Realistic Budgeting: From the outset, clients should be prepared for the possibility that their initial cost estimates might be outdated or inaccurate. Working with a contractor who provides a more comprehensive budget that accounts for price fluctuations can give clients a better sense of the true financial commitment required.
2. Contingency Planning: A contingency fund—typically around 10-15% of the project’s total cost can help buffer against unexpected increases in costs. This allows clients to weather the impact of price hikes or delays without completely derailing their project.
3. Transparency in Communication: Both clients and contractors need to be clear and open about costs and timelines. Constant communication about potential cost increases, delays, and project modifications will prevent clients from being blindsided by a final bill that is far above what they expected.
4. Adapting to Changes: Clients should be flexible in their approach and ready to adapt if changes arise. Whether it’s considering alternative materials or adjusting project timelines, adaptability can help prevent long-term delays and extra costs.
Conclusion
The key takeaway: good planning, realistic budgeting, and clear communication are essential to reducing the risk of cost overruns, delays, and frustrations. With these steps in mind, both clients and contractors can weather the storm of rising construction costs with greater success.
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