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Construction cost overruns: Why do they happen?

On Behalf of | Dec 22, 2023 | Construction Law |

Size notwithstanding, construction projects are huge undertakings – both logistically and financially. Even a well-thought-out project can face challenges that can lead to a cost overrun.

Construction cost overruns happen when the project cost exceeds what was budgeted for. And this can be caused by a myriad of reasons. Here are the common ones:

Cost estimation errors

A construction cost overrun can happen long before breaking the ground for the project. When the bidding process is too competitive, it is not uncommon for contractors to seek to win by “outbidding” each other. And one way they do this is by providing low quotations. The use of unreliable software can also lead to inaccurate quotations and, thus, a cost overrun.

Too much downtime

Cost and time management are inseparable. Setting project milestones and ensuring that targets are met at all times can be challenging. For instance, machinery failure, on-site accidents and bad weather can slow down the project or cause downtimes leading to a cost overrun.

Problems with communication

Communication is crucial for the success of any project. If the construction teams (suppliers, contractors and subcontractors) are not communicating as they ought to, then your project will most likely be delayed. Consequently, this will result in a cost overrun.

So, what should you do if your construction project experiences a cost overrun?

There is no doubt that a construction cost overrun can be frustrating. If the cost overrun is attributable to someone else’s fault then you may want to seek legal guidance to help you recover any damages you incur as a result.


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