Why is cost control so important within construction projects? « Sum




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Why is cost control so important within construction projects?

Cost control within a construction project is essential to ensure that it does not overrun and result in the viability of the entire project becoming undermined.

A project will begin with a development budget study that will highlight all associated costs and the expected returns, then a cost plan will be prepared. Within this, all construction costs including resources will be considered along with all associated professionals fees and the allocated contingency.

Every resource cost associated with the project should be detailed in full, and also included in the development budget, alongside details of the developer’s returns and further items such as surveys, specialist advisor fees or project insurance. The whole purpose of this cost plan is to ensure that the budget is allocated across the primary elements of the project, establishing a basis for cost control.

Monitoring cost control

Cost control is primarily used to manage the delivery of the project, ensuring that it remains within the approved budget, which is also facilitated through regular cost reporting. This should include the project cost to the date of the report in order to understand how much budget has been used up until that point, the current final cost of the project and the future cash flow for continuity.

Additionally, cost reporting often considers a multitude of further elements which include any ongoing risks to costs such as wider external concerns, costs which related to the use of the completed building and any further potential savings which could be implemented by changing particular elements or working in a different way.

How can effective cost control be achieved?

Although monitoring expenditure to date is important it cannot remove the risks associated with the future of the costs. Therefore a holistic approach to cost control is needed, regularly monitoring the final cost of the project and simultaneously ensuring that the project team have a good handle on understanding the costs and developing the correct attitude towards managing these.

In order to ensure effective cost control, it must be ensured that any and all decisions made during the design and construction phases are done so based on a forecast. This should include any cost implications of alternatives to the current plan and it should be ensured that any changes to the current plans do not exceed the total budget and can be effectively justified.


Regular reviewing of risk allowances and the contingency plans can allow for changes to be made in line with any hurdles that have occurred or any external elements which could change the availability of the resources required.

It is also important to liaise with the project teams to monitor the progression of both the design phase and construction phases which will allow for a gradually more accurate final estimate of the project in line with the future cash flow. These regular reviews with the wider team also allow for the cost plan development to gradually become more detailed, which will aid in cost control and provide the most accurate forecasts.

Design teams should also ensure that they work to the cost plan at all stages, otherwise, these two processes will not aline. This will also allow for cash flow plans to be adjusted, where alterations or amends have been made.

Finally, contingency provisions are key to reducing risks. These will be established and based upon the risks and are put in place to ensure that unseen or unforeseeable events are covered. However, contingency plans should not be relied upon to correct errors in specification, any changes which arise from the client’s side in terms of requirements and variations which have arisen due to error or omissions. If the budget must be exceeded to complete the project to the agreed specification then this must be authorised through being submitted in writing to the client.

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