Article
Mitigating Cost Overruns with Procore
In construction, a cost overrun occurs when the actual spending exceeds the budgeted amount. This is not just a minor issue—it can significantly reshape the entire project. Unfortunately, cost overruns are prevalent in the construction industry, affecting projects of all sizes. From minor improvements to complex multi-phase developments, surpassing the budget has become almost expected.
Chapter 1
The Impact of Cost Overruns
Cost overruns create a web of consequences that strain financial resources and affect project quality and execution. They can lead to legal disputes, delayed completions, and even project abandonment. The ripple effects extend beyond financial strain, influencing punctuality, quality standards, safety, and legal aspects.
Project Delays and Disruptions: Overruns often lead to significant delays, affecting timelines and escalating indirect costs like labor. Extended timelines disrupt workflows and strain relationships with clients and subcontractors. These delays can complicate supply chains and inventory management, further impacting project schedules.
Compromised Quality and Safety: Attempting to stay within a revised budget may lead to using cheaper materials or less skilled labor, compromising the project’s durability and safety. Essential safety measures might be neglected, increasing the risk of onsite accidents and future maintenance costs.
Legal and Reputational Fallout: Projects that fail to meet regulatory standards due to cost overruns may face legal challenges and fines, damaging a company's reputation. This can hinder future project bids and investor confidence, affecting the company’s market position.
Chapter 2
Common Causes of Cost Overruns
Inaccurate Cost Estimates: Initial budget miscalculations often set the stage for overruns. These inaccuracies stem from incomplete data or overly optimistic assumptions. To counteract this, detailed earned value analysis and advanced estimation software are recommended.
Unforeseen Site Conditions: Unexpected site conditions, like soil instability or hidden infrastructure, often necessitate additional work and costs. Comprehensive site investigations and utilizing technologies like ground-penetrating radar can mitigate these risks.
Project Complexity and Changes: Complex projects with intricate designs are prone to technical challenges and scope changes that inflate costs. Proactive planning and thorough testing can help manage these complexities.
Chapter 3
Procore: A Solution to Cost Overruns
Cost overruns are nearly inevitable due to changing plans and unforeseen circumstances. The key to managing these overruns lies in awareness—knowing when they occur allows you to plan and address them effectively. Without this awareness, funds might be misallocated towards non-essential enhancements, leaving critical needs unfunded. Procore provides the necessary awareness to help identify, prevent, and plan for cost overruns through its budgeting tool.
Procore's budgeting tool is a pivotal resource in the construction industry. It functions by tracking money in versus money out, similar to personal budgeting. When you create a contract or change order that exceeds your budget, Procore alerts you by flagging the line item. This immediate feedback allows you to address potential overruns before they escalate, thus maintaining financial control.
What makes Procore particularly unique is its ability to not only show that you've exceeded your budget but also to explain why. The budgeting tool is interactive, allowing you to drill down into expenses. You can identify where overspending occurred, whether it was due to change orders, design changes, or safety issues. This insight helps you prevent future overruns by understanding their root causes.
Moreover, Procore assists in preventing overruns before they happen. By planning budgets based on expected costs rather than past expenses, you can make informed decisions. For instance, if an enhancement is quoted at $50,000 but your budget is only $30,000, Procore allows you to reconsider before incurring any costs. This proactive approach is crucial in maintaining financial stability and ensuring project success.