Cost overruns are one of the biggest challenges in all construction projects. From increasing material costs to unforeseen site conditions, maintaining financial control requires careful planning, proactive cost management, and the involvement of a Quantity Surveyor (QS) from the project’s inception. At Mitchell Brandtman, we understand that a successful project requires more than good intentions; it requires a strategic approach to cost planning and management.
Proactive Planning and QS Involvement
A project’s success is largely determined by being proactive during the early planning stages. A 2021 report by Infrastructure Australia found that Australian governments overspent by A$34 billion (21%) on transport projects completed between 2001 and 2015. Larger projects exceeding A$1 billion were especially prone to cost overruns, with nearly half exceeding initial budgets by an average of 30%. Engaging a QS from the outset can ensure the development of a realistic and accurate project budget to avoid these kinds of cost overruns. This means establishing an achievable budget from the beginning, providing accurate cost estimates throughout the design phases, and identifying potential financial risks while recommending solutions to mitigate them.
Queensland Partner, Maoibh Russell, explains: “It’s about being proactive with your planning and setting clear budgets early. This means talking to your quantity surveyor early, not just going straight to the builder to obtain a price. You need to have done an in-depth review of your project to set clear budgets from the start.”
One important tool in a Design and Construct contract scenario is to develop at an early stage the Principal’s Project Requirements (PPR), which establishes clear project goals and the Principal’s design expectations. This document helps stakeholders understand expectations, reduce uncertainties and improve cost control throughout the project lifecycle. “Cost overruns always come down to early considerations, and having a clear PPR that outlines the scope, level of fit-out, and what you’re trying to achieve is crucial.” says Maoibh.
Managing Costs and Contingency Planning
Material cost increases, labour shortages, and unforeseen site conditions can significantly impact project budgets. A well-prepared budget accounts for these variables by including an adequate contingency. Maoibh highlights the importance of planning for the unexpected: “Contingency is important across the board in every single project. We recommend approximately 5% as a minimum these days, ranging up to 10% for some civil projects where there is more risk in the ground and a lot of unknowns.”
In addition to contingency planning, value engineering services are crucial in managing costs. This process helps identify cost-effective alternatives without compromising quality or design. “As quantity surveyors, we can review designs and give suggestions on where we see potential cost savings due to material selections or more efficient design. For example, using the functional areas of a project, we can advise the client that their project may cost more than expected if it is sitting above the average functional area of comparable projects.” Maoibh explains, “We can advise on average, two-bedroom apartments have this unit area, have this balcony area, and have this basement that allows for this much car space per unit. And if your project is sitting above that average area, then your construction cost is going to be higher than what everyone else is paying for that type of product.”
When looking at residential projects, almost half (44.9%) of new dwellings cost more to build than they were approved. Apartments had the largest changes in the cost of construction, rising by 6.3% between approval and commencement (ABS, 2020). A common misconception is that overloading a project’s budget will prevent cost blowouts. In reality, impractical budgets can make a project financially unviable. If sufficient funds are not available, the project may stall or require drastic changes that affect quality and delivery timelines. Maoibh warns: “You don’t want to have too much fat in your budget because potentially that might make your project not stack up, and then you won’t proceed with it. You want a realistic, considered and accurate budget, not a conservative one that includes unnecessary allowances.“
Reducing Financial Risk
Collaboration between the QS and other project stakeholders is essential to reducing financial risks.
Stakeholders also play a key role by providing documentation, including architectural, services, civil and structural engineering plans. Maoibh stresses the importance of complete documentation: “Complete documentation is key. If there’s poor coordination between consultants, like structural design clashing with the architectural design or services, it can lead to cost overruns. Building Information Modelling and clash detection can save a lot of money by resolving these issues early on.”
Maoibh reflects on a successful project: “A standout example is a Southbank [QLD] project in the early 2000s, where BIM was implemented. By using BIM and clash detection, potential issues were identified and resolved before construction began, resulting in no variations or unexpected cost blowouts.”
How a QS Prevents Cost Overruns
A well-managed construction project relies on strategic cost management throughout its lifecycle. A QS contributes by being involved early to establish a solid financial plan, providing contingency advice to account for unforeseen costs, offering continuous cost management throughout all project phases, and ensuring all necessary project considerations are included in the budget.
Maoibh sums it up: “The role of a quantity surveyor extends beyond just the early stages of a project. By staying involved throughout the design development, we can help keep costs in check and avoid major financial risks later in the project.” By using the expertise of a QS, stakeholders can reduce financial risk, improve budget accuracy, and ultimately deliver a successful project.
