How hard is it to keep track of cost on construction projects?

Construction projects are complex, and as they grow, they become even more challenging to manage. Despite this, there is often the hope that the tender price will be the final cost, which is rarely the case. So why does it still come as a surprise when costs increase, and why is tracking the project’s progress so difficult?

Most contracts allow for changes in scope, but the details can be vague. Often, the client has the final say on the cost of these changes. On-site, changes are sometimes made without officially acknowledging them, which can lead to confusion over costs. For example, a minor change in a design detail might be reasonable, but if it is not formally recognized as a change, it will not be reflected in the final price.

In the design process, changes can lead to significant additional work, like re-drawing plans or adjusting the supply chain. But these changes often happen without proper discussions as to fees or timelines. This lack of clarity can lead to disagreements, with clients rejecting fee proposals as being too high leaving contractors or consultants feeling underpaid and frustrated.

The solution? Start with a well-defined, detailed scope of work. Vague descriptions lead to disputes about what was originally agreed. Whilst time constraints often make it difficult to discuss costs for every change, it is crucial to document everything carefully to avoid misunderstandings and ultimately disputes. Having a clear, well-costed proposal that follows the contract’s valuation mechanisms is the best way to protect your position if disagreements do arise.

Finally, clear communication is also key—both within the project team and with external parties. Internally, there should be a clear process for handling and documenting changes. Externally, it is important to follow the contract’s requirements for notices to ensure they are effective. Without adhering to the formal process, any discussions will not count as real progress.

Conclusion

Clear specifications, thorough documentation presented in line with the contract process and effective communication are crucial to managing the complexities of change in construction projects; thereby helping parties to avoid costly disputes.

The Birketts View

A clear contract is crucial for effective project management. Once completed and put into use, it provides the basis for a unified approach to the progress of the project and all the changes that occur along the way. However, it is very much a live document. Agreed terms must be used with confidence by all parties involved.