Why do projects go over budget?

In this blog post, we will look at some of the reasons that build projects go over budget. Because build projects do go over budget, pretty regularly! The vast majority of build projects will go at least 10% over the budget. For most projects that is going to be several thousand pounds of additional, unplanned spending.

Watch any home renovation TV programme and they will almost always have a little chat at the end about the budget, where the homeowner reveals rather sheepishly that they went well over budget. But there usually isn’t much digging into why that happened or what could have been done to avoid it. Budgets can be blown by a large number of factors. Plenty of which aren’t controllable. But many are controllable and this article is here to address 3 important factors.

Factor A: Incomplete scope of works

What is the scope of work? This is the description of the work being done for the price quoted. It could be the scope of work for the whole building project, or just for a smaller amount of additional work such as a kitchen fit. Understanding the scope of work is key whether it is a large or small quote. It is important to know what is included in the scope, but it is just as important to know what ISN’T included.

Scope items missing or being misunderstood can be a key reason for going over budget. Simply put, if it isn’t included in the scope then you haven’t been quoted for it. And if it needs doing then you will almost certainly have to pay for it. Meaning work you expected to cost a certain amount, could end up costing more to get it to the finish you were expecting.

Here are some examples of this causing increased budget costs…

i. No allowance is included in the core building quote for reinstating the garden after the building work is complete. The garden is then severely damaged during the build. The homeowner may then have to pay for landscaping work to restore the garden to its original state, despite not having any money set aside for landscaping in the budget.

ii. Allowance in the core building quote is only for basic materials or not included at all. Such as internal doors, skirtings and light and socket fittings. The homeowner may then face unexpected additional costs for these items during the project.

iii. A discussion is had regarding fitting a bathroom. The scope of work is very basic and there is a misunderstanding between the homeowner and builder as to what they thought they had agreed was included. They may decide it is fair to share the liability for the mistake, but even at 50% of the cost, it is still an unbudgeted expense for the homeowner.

Factor B: Unforeseen costs

Unforeseen costs are why you should have a healthy contingency. But there is more to it than just picking a contingency amount and crossing your fingers that more won’t be needed. Unforeseen costs are different to what has been discussed in the previous section. They tend to refer to additional work that could not have been reasonably foreseen by anyone whether that be a homeowner, designer or builder.

There are things you can do to try and reduce the impact of any unforeseen costs. As in the section above, it is about understanding your project. By thinking about each aspect of your project and asking questions such as… What is the ground like? How old is my house? Am I renovating areas of the existing house?... you will build a picture and an understanding of what possible costs may be incurred. Then you can look at how you may be able to allow for these costs with your contingencies or make savings by planning correctly.

Here are some examples of unforeseen costs…

i. The builder has quoted for a standard foundation depth, but the building inspector has checked the ground and has stipulated a deeper dig. The additional cost eats up a substantial chunk of the contingency budget.

ii. The structural support in existing areas of the house is not sufficient. Additional steels will now need to be purchased and fitted.

Factor C: Overrunning on time

A project taking longer to finish than initially planned can mean additional costs incurred for several reasons. Ideally, your builder will have given you a project timetable which will outline when key aspects of the project are likely to take place. This will help you plan various other aspects of the build, such as any items you need to supply or whether you will be moving out for some time. However, projects can overrun. One of the main reasons is the weather which is beyond anyone’s control other than trying to allow for some time lost due to weather.

Here are some other examples of how a project can exceed its planned timetable…

i. Missing a slot that another trade has reserved for you. Such as a busy kitchen fitter booked in for a fixed date, but the floor isn’t ready in time and the date has to be moved. This could result in a long day as the fitter has to reschedule for when they are next free.

ii. The homeowner moving out for a planned short spell which has to be extended by a substantial amount due to not supplying the required finishing items in time.

How Build Budget Expert can help

There are many ways to try and minimise the additional cost incurred by all the factors set out above. This is where thorough planning and budgeting comes in. During the initial 60-minute consultation as part of the Build Cost Tracker and Tender Process Support services, we will discuss your project in detail with the aim being to try and cover all aspects of your project budget.

Understanding the project is key to any homeowner who wishes to set a realistic project budget and more importantly, to try and stick to it! Once we have discussed all aspects of the project, it will be possible to allocate realistic budget amounts to every area.

With the Build Project Support service, as well as the initial 60-minute consultation there will be regular consultations throughout the build. Where we will discuss your project budget and progress, offering independent advice throughout.

If you have a full understanding of what work is or isn’t included in any quotes you will be able to put together a more complete and realistic project budget. If you can understand your existing land and house better, you can try to reduce potential unforeseen costs.

Paying for a surveyor could mean additional works are included at the quoting stage when you haven’t yet chosen your builder, so the quotes you receive will be more competitive than if done mid-project. If you have a comprehensive budget in place, you will know what you are going to spend on finishing items and when.

This means you can make decisions promptly and plan, reducing the chances of not being ready for other trades and causing costly delays. As stated at the start of this post, the majority of build projects go at least 10% over the original budget.

If someone is doing a building project with a total budget of £50,000. This would mean it would likely go over budget by £5,000.

Let’s be very conservative and say that using Build Budget Expert only prevents 20% of that overspend, in this example that would still save a huge £1,000. As it only cost £199 it will have paid for itself 5 times over!