QLD Quarterly Construction Cost Update May 2025

Author: Monisha Craig

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.

IS YOUR PROPERTY PROTECTED?

Understanding the Importance of Replacement Cost Estimates & Insurance

Staying informed about your property’s true replacement cost is a proactive step in protecting your asset. With the ever-changing landscape of construction costs and inflation, regular reviews of your property’s value are essential. Mitchell Brandtman can assist you in navigating this crucial aspect of property ownership, ensuring you’re adequately prepared for whatever the future holds.

Imagine the unimaginable: a fire, flood, or unforeseen disaster damages or completely destroys your property. In such challenging times, knowing that your insurance coverage accurately reflects the current cost to rebuild offers significant peace of mind. This assurance comes from having an up-to-date Replacement Cost Estimate, a service provided by our team at Mitchell Brandtman.

What is a Replacement Cost Estimate?

A Replacement Cost Estimate is a detailed assessment that determines the current expense required to replace an existing asset under today’s market conditions. For property owners, this means calculating the costs necessary to rebuild a home, commercial or industrial building in the event of damage or loss. Our team at MB will assess various factors, such as demolition costs, professional fees, and estimated construction cost, while accounting for potential price surges, to provide an accurate replacement cost value for insurance purposes.

Why is This Service Essential?

Over recent years, construction costs have experienced significant fluctuations. For instance, prices charged by building companies in Australia have increased by 32% over the last 5 years. Additionally, the country’s inflation has increased by an average of 3.7% annually over the past five years, peaking at 7.8% in 2022—the highest in four decades.

These economic shifts directly impact the cost of rebuilding your property, which is likely to be far higher than when you first insured it. Without an updated Replacement Cost Estimate, your insurance may no longer provide full coverage, leaving you financially vulnerable at a time when you need protection the most.

Who Benefits from a Replacement Cost Estimate?

Homeowners and Investors: Ensure insurance policies reflect the true replacement value of properties, safeguarding personal finances and investments.

Developers and Building Owners: Accurate insurance coverage is crucial to mitigating financial risks during and after construction.

Bodies Corporates and Strata Managers: Understanding replacement costs allows for the proper allocation of strata fees.

Why is this Important?

Mitchell Brandtman recognises the importance of timely and accurate Replacement Cost Estimates. Our team offers quick turnarounds and cost-effective services, providing you with a detailed breakdown of current rebuilding costs. This transparency benefits both you and your insurance provider, giving you the confidence that your coverage matches today’s construction market.

Contact us at 1800 808 289 or email us at bne@mitbrand.com

Discover how Mitchell Brandtman managed cost controls and claims validation for the complex Blues Point Tower remediation project. Our strategic approach ensured transparency, kept the project on track, all while meeting budget outcomes.

We are thrilled to officially welcome back Gary Thompson to MB as a consultant reintegrating into our Expert Opinion team, bringing with him 38 years of industry experience along with a wealth of specialist knowledge.

Gary, a former MB Partner, founded his own independent Expert Advisory Service in 2018 and has now returned to further strengthen our team. As a licensed contractor with extensive expertise across the industry, Gary’s insights and strategic approach will enhance our ability to deliver high-quality expert opinion services.

Alongside Caitlin Shields, Queensland Partner and Expert Quantity Surveyor, our team is set to continue delivering outstanding results. With over 19 years at MB, Caitlin’s deep understanding of all built form sectors, civil, and infrastructure projects—combined with her passion and attention to detail—has made her an invaluable leader in the industry.

Together, Caitlin and Gary lead our dedicated Expert Opinion team, reinforcing MB’s commitment to providing trusted, high-quality expert advisory services.