The Benefits of Budgeting and Cost Planning for Construction Projects

• 30 October 2017
• Uncategorized
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Over the years in many South East Asian cities, it has become commonplace to see incomplete or failed construction projects, some of which stand in the most prominent of locations. It is the case however that many of these empty shells could have been completed had proper budgeting of the development process at the initial planning stage been carried out.

This function has traditionally sat with the quantity surveyor to perform the role of assisting the developer by providing a complete cost and procurement strategy from the outset. This is delivered through the provision of a consulting service that can give the developer cost certainty in the form of sound contractual advice, guidance on the correct procurement strategy and the provision of realistic cash flow expectations.

Critical factors which contribute to the successful completion of a construction project are, budgeting, cost planning and the type of procurement route chosen. These tools are often overlooked by developers, who frequently rush directly to a designer, or just as frequently, directly to a contractor before considering these key factors.

Accurate budgeting should be the first priority in planning a construction project. The process should commence even before land has been purchased or concept designs engaged.

The correct stages are outlined below:

1. Assembling a project team – hire a reputable quantity surveyor and project manager to drive the budgeting process. These roles should be filled before the rest of the design team is in place.

2. Prepare a detailed budget – this is the first and most critical task. This involves communication between the developers’ finance team and the quantity surveyor to gain an accurate picture of the project’s requirements. The total project cost will be planned for at this stage, not just the construction cost. This includes land cost, licenses, professional fees as well as the direct construction costs. The developers’ own staff costs may also be factored into this equation at this stage. Many ventures fail due to a developer only taking into consideration direct construction costs and ignoring other factors which can have a significant impact on the overall cost of the project.

3. Cost Planning – design a project that matches the budget! Once an appropriate designer has been appointed, the quantity surveyor can assist the developer in monitoring the original budget. This process includes the formation of a cost plan which will fit around the designer’s scheme. The quantity surveyor can also advise on changes and re-design in order to retain the original budget. Redesigning or increasing the scope can significantly affect the overall budget, so all changes should be strictly monitored during every stage of the project’s development.

4. Cash flow forecast – once the budgeting and cost planning are complete the quantity surveyor should provide a cash flow forecast to show when finances are required, and at what stage of the building process.

5. Once these stages are complete the quantity surveyor will advise the developer on the procurement strategy and tendering options. These choices will determine how the project is delivered and the extent of input required from the various professionals as the project moves forward.

ACH Management (Cambodia) Co,. Ltd. is able to deliver all of the above services to our clients, and can offer further value added benefits which include:

• Value engineering, risk analysis, and risk management.

• Extensive knowledge of projects throughout South East Asia that can benefit any project in strategic advice and project planning.

• Provide project personnel on a flexible basis to meet workload peaks.

• Systems and procedures developed and proven through use over a number of years on many projects.