A construction budget features estimates from suppliers, vendors, and subcontractors, and in turn helps anticipate the total cost of a project. In addition, it looks at past projects, that are similar in nature, to estimate the cost and duration of the new project.

A construction budget, in most cases, determines several things, including the nature and grade of resources to be deployed for the project. Affecting the skill level of resources to the allowed numbers of resources, the make of capital assets such as machinery, and also the make and grade of the material being used. A well-designed budget can help manage costs effectively, ensuring that the project stays on track, and prevents the unplanned from derailing the project.

A smart budget is thoroughly pre-planned to allow you to have maximum productivity and efficiency while keeping overhead costs in check. To create a smart budget, follow the below mentioned steps:

The key step to cost budgeting is to determine all the requirements of the project. This must be obtained from the identified stakeholders (both external and internal). This includes defining the scope of work, identifying the specification of materials, estimating the number and skill of labour required. The kind of methodology expected, the quality tolerances expectations and the possible risks associated. Understanding the methodology being employed to achieve the end product also aids in understanding the operational challenges and requirements along with the allied costs. Looking back at similar projects and their budgets is a great way to get a head start on building your budget. At this stage, it is also important to take permits, approvals, environmental or safety requirements into consideration as they may be needed in future stages and can also have an impact on the cost. One must make it a point to capture the assumptions behind each of these requirements in order to allows baseline updates in case of change in scenarios.

After estimating your costs, it is important to prioritise expenses based on the project requirements and available resources. This involves determining which expenses are essential and which can be deferred or eliminated. Project costs fall under two common categories: hard and soft costs. Hard costs encompass the actual physical construction of a building, the construction site, and the landscape whereas soft costs are less evident because they are often invisible. Prioritising expenses help ensure that the project stays within the budget and that funds are allocated appropriately.

Creating a schedule involves determining the timeline for the project and identifying key milestones. Once the budget is locked, you also have an idea as to which sections of the project need more attention and are cost intensive. However, through all the processes, it’s important to factor in any dependencies or constraints, such as weather conditions or material delivery times. This exercise also helps in getting clarity of the required cashflow for the project. The schedule needs to be aligned in line with the organisation’s planned funding strategy.