Keeping commercial construction costs under control is an arduous task, even for the most experienced construction companies. It can be challenging to keep all of your expenses in order, especially when surprise costs, unexpected delays, and market shifts can all affect how much your construction project will cost.
When it comes to costing up your commercial construction project, you will need to take everything from the project duration to your overhead costs into account to ensure you stay within your budget. There are also ways to stay within your budget without jeopardizing the quality of your project.
We've taken a look and have summarized some of the best ways to keep your commercial construction costs under control and what the different types of construction costs mean to your budget.
The Different Types Of Commercial Construction Costs
To begin with, let's find out what different construction costs are, what they mean for your budget, and how you can use them to ensure that you don't go over budget on your construction project.
Commercial construction costs can be split into three different types, namely fixed costs, time-related costs, and quantity-proportional costs. These costs can also be split into direct and indirect project costs.
1. Fixed Costs
The fixed costs in your construction project will include one-time or standing payments like the hire or purchase of equipment and machinery. As the name suggests, fixed costs are fixed and do not change. These costs are not in any way related to time or quantity and stand independently of any other factors.
2. Time-Related Costs
Time-related costs refer to any expenditure that increases or decreases depending upon the duration of your project. Examples of this project cost include wages, building rent for offices and conference rooms, etc., and hiring facilities, like toilets.
Time-related costs need to be factored into your overall budget with built-in contingency. It is so that you're not blind-sided by unexpected delays or anything else that extends the project duration as planned.
3. Quantity-Proportional Costs
Quantity-proportional costs vary per necessary amount. An example of this cost is the materials needed to complete your project. It could include timber, flooring, screws, nails, and anything else to be purchased to complete a task.
It is another area where contingency must be built into your budget. With anything from damage to accidental breakages affecting your quantity, it is easy to go over budget on quantity-proportional costs if you are not careful.
Direct vs Indirect Project Costs
Another way to classify commercial construction costs is direct and indirect project costs.
A direct project cost refers to costs directly incurred by the project. It could mean labor costs, materials, equipment, etc. These costs can be estimated reasonably accurately in the budgeting stage of your planning based on the construction site, the construction method, and the conditions and resources of your project.
An indirect project cost can refer to variable and fixed costs and comes in two kinds; project overhead costs and general overhead costs. Project overhead costs refer to the storage of materials and equipment, safety facilities, workshop spaces, offices, and staff parking costs. This kind of cost tends to support the crew during the project.
General overhead costs support your overall business activity. Examples of this cost include head office rent and bills, budget for conference rooms and other spaces where clients will meet, etc. These costs support the overall running of your business.
1. Effective Project Scheduling & Preparation
The first step that you can take to ensure your commercial construction project stays under budget is to plan effectively and well in advance.
Planning Ahead
Planning is key to staying within your budget. If you begin the designing and planning processes as early as possible, you can project costs and work these into a tangible budget.
There are many tasks needed before good work can start on your project, including test fits, market surveys, financial analysis, and construction choices, and the sooner these are done, the sooner work can begin. Planning also gives you time to file permits that can set you back massively if delayed.
Starting earlier allows for unexpected delays and gives you a larger time frame for setbacks. Planning is essential.
The Right Team
Choosing the right team is an integral part of the planning process; it can be the make or break between a smooth-running project and a disaster.
Your team will include a considerable variety of subcontractors, and while keeping your costs down is the main aim, the cheapest bid from a subcontractor isn't always the best one. Inexperienced and disorganized subcontractors can be detrimental to your expenses, so you need to choose the ones you work with wisely.
To find the best team, look for good reviews and referrals of subcontractors who work well with deadlines, are organized, and have enough experience in the industry to deal with setbacks effectively.
Finding the right team could be a job for a project manager, should you wish to employ one.
Understanding The Commercial Construction Industry
As with subcontractors, your understanding of the commercial construction industry will be integral to staying within your budget. The construction industry's economy has changed dramatically in recent years, and this shift has affected the way construction costs work.
You should ensure you check your build-out against the most up-to-date market information and factor in any new developments to your budget. One key area where construction almost always goes over budget is labor costs. These costs are regularly underestimated, leaving understaffed construction teams working inefficiently to tight deadlines.
Labor costs are frequently high, so a good understanding of the industry will prepare you for more effective budgeting in this area. Knowing the most up-to-date market-level information will help you understand the best places for contingency.
This is another area where a project manager would be effective.
Practice Value Engineering & Save Money
The next step is to practice value engineering.
What Is Value Engineering?
Value engineering means encouraging the use of less costly materials and technology without jeopardizing the functionality of your project. The idea is to focus on the functional abilities of components and materials over their physical qualities.
How Does Value Engineering Save Money?
Value engineering saves you money because it lowers the cost of supplies. For a better first impression, it also allows you to use a bigger budget on client-facing costs, like offices and conference rooms.
Another great advantage of value engineering is that decisions can be made on the fly to help lower your costs. A project manager would also help with this aspect of budgeting.
Finding A Project Manager You Can Trust
We've mentioned how a project manager could help you out quite a few times already, and it's because a project manager is a final step in keeping your project under budget. A project manager is probably much less costly than you imagine, and the cost of employing one is mitigated through their effectiveness in keeping you under budget anyway.
A project manager will be on hand in the field, helping to organize, schedule, and do all of the things needed to oversee a project effectively. It gives you the time to focus on your bigger business goals.
Project managers will have lots of contacts, helping you to find suitable subcontractors, good value equipment and materials, and spaces for client-facing tasks. They will also have the experience that can support solutions to unexpected delays and setbacks.
A project manager can help you to finance and budget your project effectively. They can ensure value engineering is employed correctly, manage and oversee subcontractors to keep project duration within a cost-effective time frame, and mitigate any delays that seek to increase your costs.
We highly recommend hiring an experienced and trustworthy project manager if you want to keep your commercial construction project under budget.
Final Thoughts
Keeping a commercial construction project under budget is a hefty task that encompasses many factors. It would be best to begin with adequate planning and a large time frame that allows for unexpected delays and setbacks. You will also need to have the right team under you to ensure that you remain on target for your deadline to avoid an increase in labor and other time-related costs.
Along with your project's successful and effective planning, you need to employ value engineering to keep material and equipment costs down and use the budget where it is most needed.
All aspects of your commercial construction project will run more smoothly with the help of an effective and trusted project manager. A project manager will help to keep your project on course for the deadline and keep your costs down through the use of their own experience and a good understanding of the construction industry.
With effective planning and the right people around you, there is no reason that your construction project cannot stay under budget, and working with a trusted commercial construction company is the best way to operate a cost-effective project.
Content Creator at Dancor Construction. A Toronto based Writer, blogs that relate to General and Commercial construction. When I don't work, I like to watch Soccers, movies online or play table tennis at the local Club.
