Why Construction Cost Management Can Make or Break Your Project

Why Construction Cost Management Can Make or Break Your Project

Construction cost trends can have a huge effect on contractors, subs, and owners. From material costs to equipment fees, price changes can occur quickly making construction cost management crucial. Because of this, it’s very important that construction companies stay on top of any price changes or forecasts. Overnight, your profit margins can disappear. Nothing is certain in this world which is why cost management is important to have when starting any project. Cost management is the way of saving project profitability when price changes or forecasts change.

What is Construction Cost Management

Construction cost management incorporates planning and controlling the budget for a project or business. It’s how business can predict expenses and help keep companies on budget. In construction, this is going to apply not only to the business but to the individual projects the company works on. Cost management relies on record keeping and procedures in order to keep the project on the right path. These tools can also be used to monitor progress and see where things are going wrong, and what problems to look out for in the future.

Problems Project Managers Face

As important as cost management is, project managers are often faced with difficulty in ensure that it works. When projects are passed from one department to the next or from one person to another, it can be difficult to know what is going on.

Budgeting and Forecasting

Within companies the estimator and the project manager might have different processes for budgeting and forecasting. Because of their backgrounds and approaches they can look at the same project and come up with different numbers. This is a problem when they’re accepting or finalizing a bid because the project manager might not agree with the proposed numbers which makes keeping costs under control difficult.


Change happens, as anyone in construction can tell you. Within construction there can be several types of change. The biggest types of change can be to the timeline and to the scope of a project. When there are changes to the timeline of a project that can negatively impact the costs for the project. There are lost hours and lost costs from equipment or people being scheduled ahead of time for a project that isn’t ready. Or they could have lost hours from projects that they have to delay because of a change in the timeline. The change in scope can also cause issues for construction cost management.

Trends for 2019

The last two years we have seen a steady increase in the cost of many different materials. This was only exacerbated by the trade conflicts going on. These conflicts along with regular price increases have caused an increase in building materials and could lead to material shortages and cost overruns. It’s extremely important to take this into consideration when preparing for a project.

If the trade conflict is solved this year then there could be a cost decrease for the number of products which could ease budgetary concerns. While everyone hopes for this, it’s best to be prepared for it to get worse rather than for it to get better.

So, why are there so many increases?

Besides normal inflation, there are many reasons for price increases. The biggest reason for increases is because of the current dispute between the U.S. and China. This dispute threatens prices because of higher tariffs that can be imposed by China.

Trump has also been seen as a trigger for price hikes. One of Trumps biggest platforms was to keep business in America. This means limiting imports which have caused steel mills to increase prices.

These reasons are only a few of the several factors that have led to construction cost increases. While you can’t change the market, staying up-to-date on construction news will keep you informed and prepared for whatever the industry throws at you.




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