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What is Cost Overrun in Construction Projects?

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0 2023-09-12T22:25:29+00:00
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Just imagine that you have gone on a trip with a budget of 30 thousand and then due to some reason, the expenses shoot up to Rs. 1 lakh. How will you feel? The same situation might happen in a construction project, if a project is planned to be completed within a certain amount of money and then due to some reason, the budget overshoots, this situation is known as cost overrun in construction projects.

CAUSES OF COST OVERRUNS IN CONSTRUCTION PROJECTS

The major causes of cost overrun in construction are:

  • INCONSISTENCY

    - When the expansion in the project does not happen parallelly with the expansion in budget, the chance of cost overrun increases.

  • INACCURATE PROJECT ESTIMATION-

    This happens when the manager sends the budget report without checking it for accuracy.

  • LACK OF RISK MANAGEMENT

    - Unexpected reasons can come and the lack of planning an alternative for those reasons may cause overrun

  • INEXPERIENCE

    - The lack of experience in handling big projects causes overrun

  • COMMUNICATION GAP

    - Communication gap between the managers and the people working in the project can lead to overrun as the managers or any other worker can misuse the fund to their advantage.

I have been witness to many

cost overrun in construction project examples around me. People need to be more organised with their planning and budgeting to avoid cost overruns. There must always be a buffer to cover such costs anyway.

If you plan to spend a certain amount of money in the first year of the project and you see that the budget is going to overshoot in the next six months keeping in mind each and every expense, that is the signal that there might be cost overrun.

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