As a project owner without construction experience, it's crucial to comprehend the significance of a construction project budget. A budget acts as a financial blueprint for your project and outlines the necessary funds required to complete it. However, creating and managing a budget can be a complex and overwhelming process.
Construction project budgets have two critical components: the funds available and the cost to develop. The former represents the total amount of money allocated for the project, while the latter is largely determined by the plans and specifications developed by the design team to meet the owner's requirements. Striking a balance between these two components is vital to ensure a successful project. While you have control over the funds available, the plans and specifications lead to the cost. As the owner, it's your responsibility to ensure that costs remain within budget and the two components are balanced throughout the completion of the project.
The cost to develop a project encompasses both soft costs and hard costs. Soft costs include expenses like design and engineering fees, legal fees, permits and approvals, insurance, and other miscellaneous expenses. Hard costs refer to the expenses associated with the physical construction of the project, such as materials, labor, equipment, and other tangible expenses, which can be upwards of 80% of the total project budget.
Thorough planning and budgeting before the project begins is essential to strike a balance between the funds available and the cost to develop the project. This involves working closely with the design team to develop a detailed project plan and estimate the cost of each aspect of the project. This will give you a realistic idea of what the project will cost, allowing you to set a budget that is achievable.
To ensure a properly managed budget, it's best to hire an experienced owner's representative firm, such as Dubrow Group. An owner's representative firm has vast experience in managing budgets and can rely on historical data to proactively identify risks and make corrections. Dubrow Group uses leading software, leveraging automation, data analytics, and AI to quickly identify potential issues in real-time and make decisions on how to correct them.
Using a CMAR method of project delivery can help ensure a successful outcome. The CM is hired early in the process to work closely with the design team, developing a detailed project plan and estimating the hard cost of each aspect of the project. Throughout the construction process, open communication is essential to ensure that the project stays on track and within budget. The owner's representative and the CM work closely with the design team to identify any unexpected costs or changes to the project, making adjustments to the budget as needed.
Understanding the two components of your project budget - the funds available and the cost to develop the project - is critical to ensure a successful construction project. At Dubrow Group, we use our years of experience and knowledge delivering successful projects to help strike a balance between these two components, working closely with the design team to develop a realistic project plan and estimate costs. By maintaining open communication throughout the construction process, we can identify any unexpected costs or changes to the project and make adjustments to the budget as needed.