Construction Cost Control - 4-Steps · Construction Contractors Hub

Construction Cost Control - 4-Steps

Here's a simple 4-step framework for construction cost control (for predominently sub-contract projects)

Step 1 - Create the budget

Organise your money into "cost codes" (money buckets) based on how you are spending it. (Not how you are getting paid). Each bucket shoulld be easily trackable.

Use direct costs (subcontractors and materials), indirect costs (project management and overheads) and contingency (a reserve fund for risks and unknowns)

Step 2 - Lock in Contracts (Commitments)

Hire contractors and sign agreements with clearly defined scopes, terms, and conditions to prevent future price changes Hire contractors and sign agreements with clearly defined scopes, terms, and conditions to prevent future price changes

Step 3 - Forecast the Final Cost

Things will inevitably change on site, so closely track variations (changes in scope that cost extra money). Constantly calculate your Forecast Final Cost. Do this by adding together your signed contracts, your expected variations, and your contingency funds

Comparing this forecast to your original budget tells you immediately if the project is heading for a profit or a loss, allowing you to catch problems early.

Step 4 - Manage Cash-Flow

"Cash is king." Track exactly when you need to pay subcontractor bills (progress claims) and when you are getting paid by the client Understanding the timing of money going in and out ensures you don't run out of cash and have to take on expensive bank loans

Keen to learn more, check out this video (liking and subscribing helps the algoirthm!)

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