16 Nov 2016
Dealing With Cost Overruns in Construction Industry
Any company who undertaken a construction project is well aware that there will be setbacks resulting from procedure and construction time delay, along with an increase in costs overrun. The setbacks occur in spite of Construction Industry remaining fully aware of the situation and concern about this serious issue and grown even more in regard to the competitive market and performance failure can lead to losses in various business aspects.
What are the reasons that cause cost overruns?
A huge capital project includes far more just scheduling and a basic maintained cost sheet. It requires proper management, planning the organization of documents and information, it also demands a collaborative relation between the owners, contractors, and sub-contractors, last but not least, control and proper flow of information. As you can see, by this what I mean is errors may occur but we have to be prepared and create an environment capable of handling these errors. The first step to bring the project back on track is understand where you could go wrong hence the question What are the reasons that cause cost overruns?
Let’s find out and understand. Many reasons out of these may be interrelated and can occur a number of times in spite of applied solutions. Late design or poor project definition can cause a delay at an early stage of a project. Delays at the beginning will set back the entire project for an unanticipated amount of time. It could have internal reasons like inaccurate estimation or insufficient planning among team members. Unanticipated site conditions can be a result of ineffective management, project governance, and oversight. Issues like this cause the project to spiral turning it into a dead end.
Even if this are taken in control an inexperienced management team can cause many setbacks like poor risk identification, ineffective and slow decision-making process. To have bad inadequate communication among the management and contractors is a high risk as well, and a sure method to meet site imposed cash constraints, delayed payment, lack of incentives to control costs, unavailability of skilled labor and weak contract terms leading to a crashing point.
The probable solution
The best solution to any obstacle faced is preventing it from happening. Now that you have a list of diabolical problems that could happen no matter what! It is now time to find out the precautionary tale. It is important to remember projects can be saved at all stages but it is always advisable to begin at the start. The most important step is to put in place an Enterprise Resource Planning system, ERP. A fully integrated ERP software should provide a complete data support, costing and budgeting, time management and notifications when the project is crossing its budget limits. An ultimate ERP system brings in transparency in accounting and a standard control over information, communication, and awareness of all errors and issues. One Such known ERP software that could help automate all functions is in the Singapore market is the Synergix E1 ERP System developed by Synergix Technologies Pte Ltd.
Some small steps can also help you redirect your strayed project like building penalties to progress, hiring experienced teams and even taking a time out to re-evaluate and regroup. Whatever mistakes made and learned should be hard-wired into the company’s Brain and DNA for a successful future for the next time.
