Budgeting as Part of Construction Projects

​Budgeting construction projects accurately is an essential facet of ensuring that they proceed as planned, start to finish, and allow the manager of the project a profit. The budget includes a forecast of all expected costs, including labor, materials, and transportation. Many construction projects have subcontractors involved in elements such as installing the electrical system and plumbing, or creating a foundation, and these must be factored in as well.

Beyond direct costs, there are indirect expenses such as permits and fees, meeting on-site safety requirements, and architectural and engineering services. Given the unpredictable nature of any construction project, with cost overruns and extended deadlines a fact of life, budgeting must include a contingency reserve. This ensures that capital is at hand to cover any expenses that go beyond the expected.

The budget also incorporates profit margin, or just how much money can be realistically generated from the project at hand. Project managers calculate profit through subtracting total estimated costs from expected revenue. While this is inevitably subject to change, it provides a critical guidepost informing allocation of limited resources toward set objectives.

Omar Elrahimy

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