Common Budgeting Challenges in Project Management

“11 % of major global projects are at risk of delay or cancellation … ” An recent Andy Day MRICS, MAIQS, CQS post highlights familiar culprits: poor early planning, contractual disputes, underestimated complexity and workforce gaps. As professionals who live and breathe risk management, we recognise another underlying issue: Success in a $1 B+ programme can’t be judged by a single deterministic date or price tag. Costs WILL change. That is the only deterministic assumption we can have. Mega-projects operate in a landscape of shifting scope, evolving regulations and strategic realignments. Pretending we can “lock-in” certainty up-front creates a false binary of on time/on budget = success versus any variance = failure. A more realistic, and taxpayer-focused, approach is to govern against risk-based ranges: Rethinking “success” for mega-projects 1. Value for Money, Not Just Variance Does the project still deliver the socio-economic return promised in the business case, even if the baseline shifts within an agreed tolerance? 2. Strategic Adaptability A governance model that anticipates complexity (scenario planning, stage-gates, agile funding tranches) enables proactive pivots rather than reactive firefighting. 3. Commercial Alignment Contracts that balance incentives and risk-sharing discourage disputes and keep the supply chain focused on total lifecycle value, not baseline preservation. 4. Transparent Confidence Intervals Reporting P-values (P50, P80) for cost and schedule gives decision-makers a probability-weighted view, protecting public funds without penalising prudent risk responses. The Project Cost Estimating Manual (PCEM), (Transport and Main Roads, Australia) seems to be a good approach. Build risk-adjusted contingency inside the authorised budget, released only via evidence-based change control. Use Last Planner, AWP or similar pull-based methods to couple the master schedule with field realities. Use Project Management Institute and AACE International best pratices to define costs, riscks and schedule will enhance the propability of success. Publish a “range-based scorecard” alongside the traditional S-curve—green if we stay within the confidence band, amber/red if we breach it and can’t justify the value gained. Delay or budget growth may be symptoms, not diagnoses. A mega-project can miss “Plan A” yet still succeed if it captures opportunity, mitigates emergent risk and safeguards long-term public value within a realistic corridor. How do you define success when uncertainty is the only constant? #MegaProjects #gigaprojects #RiskManagement #ProjectControls #projectmanagement #Infrastructure #contractmanagement

Let’s talk about estimating and how to prevent profit loss.... Several years back I, along with the estimating team, estimated a $1.2 BILLION dollar project. This was in addition to many billions before hand, but this project topped them all. It consisted of several million yards of dirt that needed to be pushed several times, tens of thousands of yards of concrete, including a concrete esplanade that cantilevered over the Hudson River in Manhattan, multiple bridges, utility work, drainage, retaining walls, and dozens of subcontractors varying from electrical, steel erection, landscaping, masonry, asphalt and much more. Not to mention hundreds of vendor quotes! This was the ultimate estimating experience for me, and we all learned a TON of new tricks!!   Now working with small to medium size contractors, I’m always hearing similar complaints. Such as:   1) Why are my profits running away from me towards the back end of projects 2) I don’t fully understand my overhead or indirect costs 3) Historical data is off   While direct costs like labor and materials are more obvious, indirect costs involve expenses such as permits, insurance, overhead, additional non-productive equipment, and labor. Neglecting to fully understand and account for these indirect costs can have significant consequences, leading to financial difficulties, project delays, and even failure. It's critical to recognize the importance of the estimating department's role in thoroughly understanding all costs associated with a construction project.   Over the past 20 years, I’ve talked with many contractors who self-perform work and one of their top complaints and questions is why profits run away from them as they approach the back end of their projects. Aside from project management flaws, below are some costs contractors miss in their estimates   1) Non-productive labor wasn’t accounted for properly. Flaggers, subcontractor support, delivery support, etc.. 2) Equipment wasn’t forecasted properly. What's being rented, leased, purchased, etc.. 3) Escalations aren’t correct. You need to know your schedule and read the quote and have a full understanding of escalations and lead times. 4) Budgets for punch list, weather, labor escalations, small tools, etc weren’t accounted for. Depending on your Niche, company size, GC vs Subcontractor the above will vary.  It's a start and I suggest you look into it. #proaccel #construction #estimating #projectcontrols

Every budget disaster I’ve seen in multifamily has at least 3 of these 10 mistakes behind it: 1) Assume your rent assumptions are fine (because you made them). Projecting rent by using a flat increase across the board might get you to a total, but it won’t hold up. 2) Ignore the payroll burden. You forgot to get updated taxes and benefit rates from payroll. Now you’re 10% off on wages every month. Good luck!! 3) Not training your staff. Half your managers are new. Most of them don’t know what loss-to-lease means. But sure, you can hand them a template and expect them to fill it out with perfect accuracy. What could go wrong? 4) Skip the part where you talk to the team on the ground. You made all the right guesses. Too bad nobody else knows. If you don’t run your assumptions by the people running the property, nothing's going to work out. 5) No debrief after the budget’s done. Most onsite teams won’t intuitively know what each number represents, how it was built, or what trade-offs were made. So when actuals start rolling in, they default to habit instead of aligning to budget strategy. 6) Pick the wrong marketing mix. You budgeted for the bronze package. But the property needs gold. Now you’re under-spent, under-leased, and spending all month explaining the same $1,000 variance over and over again. 7) Not shopping your vendors. Rolling forward last year’s numbers might seem efficient until you realize the scope changed and pricing went up. 8) Assume everyone knows the numbers. They had one good meeting. And then forgot everything. Unless you’re showing up, staying visible, and helping the team connect the dots, the budget dies on paper. 9) Think details don't matter. It does. Missing line items, vague contract notes, half-baked assumptions. These don’t just slow you down. They multiply into 100+ hours of avoidable rework later. 10) Missing out on known, one-time expenses. You knew it was coming. But it didn’t make it into the file. Now, you’ve got a capital project with no capital. Did I miss anything? PSA: If you're doing any of these, just know you're already setting your budget up to blow up in your face.