Managing Cost Overruns in Infrastructure Construction: a how-to

You've run the numbers and see that your infrastructure project is experiencing a cost overrun.  Time to throw up your arms and accept this unwelcome yet all too common fate for infrastructure projects? Nope!

You've run the numbers and see that your infrastructure project is experiencing a cost overrun.  Time to throw up your arms and accept this unwelcome yet all too common fate for infrastructure projects? Nope!

Instead, it's time to roll up your sleeves and manage those cost overruns. Below are a few tips on how to manage cost overruns in infrastructure projects.  Call it the RE plan.

Reevaluate

It's important to look back before moving forward.  Therefore, the first step is to reevaluate what has occurred on the infrastructure project until the current time. Go over the plans, schedule, design, and budget.  

The purpose of the reevaluation is to try and pinpoint where things have gone astray. To course-correct, you need to be clear on what needs correcting.

So, dig in and consider these questions. 

  • Are the cost overruns due to mismanagement of funds? 
  • Has labor and or materials cost more than projected in the budget? 
  • Has there been scope creep?  
  • Was the design flawed? 
  • Have the weather or other outside elements been an issue?

By taking a deep dive into what has occurred to date and determining the issue(s) that have led to the cost overruns, the team can, among other things, make sure the current issues do not continue to occur.

These questions assume that the original budget was reasonable. If the original budget was flawed, more serious changes such as minimizing the scope need to be considered.

Reschedule

Order matters in math and in construction. What’s the connection to cost overruns? The order or sequencing of construction activities impacts how long a project will take and how much it will cost. After all, budgeting and scheduling go together in infrastructure construction like peanut butter and jelly. 

Each extra scheduled day on the project adds on the budget. Therefore, optimizing the sequencing of crews and equipment so that they are not out there longer than they need to be helps keep costs down. 

ALICE can help recover infrastructure projects that are off schedule and over budget. So, once you’ve identified the issue with the budget, you can use ALICE and AI to consider multiple recovery scenarios and determine which option best helps to minimize (or perhaps eliminate) the cost overruns on your construction project. 

Renegotiation

It takes a team to complete a construction project. When the infrastructure project is a success – on budget, on time, constructed as designed, etc. – it's because every member of the team did their job.  It also reflects well on everyone involved. And on an infrastructure project that goes astray, all parties involved are dinged. 

Therefore, attempting to renegotiate with partners is another element in managing cost overruns. Expecting major concessions is not reasonable. However, negotiating cost concessions with subcontractors and suppliers can help reduce costs and help a project minimize cost overruns.

Besides the incentive and prestige gain from being part of a successful project, subcontractors and suppliers can reasonably expect more work when they are flexible and show they are team players. Major infrastructure projects should be profitable for all involved.

Review

Alright, you've done what you need to do to regain budget integrity as you move forward on your infrastructure construction project. 

All good now? Not quite.

This is no time to sit back and rest on your laurels. Make sure you are regularly reviewing the current plan, so you are certain it is being followed and is working as anticipated. Issues that could impact the budget - a change order, for example, may still arise. The faster the issues are identified, the smaller the budget hole and the easier it is to adjust. 

Staying on top of a project with a regular review can be time-consuming. However, it's much simpler these days due to the proliferation of construction-related technology. It makes tracking all aspects of an infrastructure project uncomplicated. A bonus of regularly reviewing a project is the potential of finding more budget savings.

Cost overruns for major infrastructure projects do not have to be the norm. There are ways to manage cost overruns and reduce or even eliminate the cost overrun. Follow the RE plan spelled out above, and your infrastructure construction project can get back on track and on budget.

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