How to Stay on Budget in Commercial Construction

Commercial construction projects are immensely involved which makes it very easy to exceed budget in a number of ways. While some costs cannot be adequately assessed or budgeted such as losses due to natural disasters, with some careful planning there are a number of ways to control costs and stay on budget.

Top Ways to Control Commercial Construction Costs

  • Choose a reputable construction company
  • Predefine stakeholder needs vs wants
  • Strictly define project scope and avoid “Scope Creep”
  • Develop KPIs
  • Revisit, review, and reforecast budget
  • Set aside a Contingency Allowance of at least 5% beyond budget
  • Uphold good communication with your construction company project manager


Choose a Reputable Construction Company

One of the first and most significant steps in controlling construction costs is choosing a reputable construction company, and not one that simply comes in with the lowest bid. Reputable companies will demonstrate their expertise in many areas, such as staying on time and on budget, using estimation software, and working collaboratively.

Predefine Stakeholder Wants vs Needs

Project costs can go awry when stakeholders uncover their true and differing project objectives during rather than prior to the start of the project. It is common that projects are initiated around needs but expectations centered on wants, which immediately puts the project at risk of serious budget overrun.

Predefine Project Scope

Many times, underlying expectations and changes can drive the project into the weeds. Make sure that the project expectations are inline with the budgeted project cost by strictly defining the project scope.

Develop KPIs

KPIS allows you to see how much has been spent on a project and how that differs from the planned budget.

A few common KPIs include:

  • Actual Cost of Work Performed (ACWP) or Actual Cost (AC), shows how much money has been spent on a project to date.
  • Cost Variance (CV) Shows whether the estimated cost is above or below the predetermined baseline.
  • Earned Value (EV), or Budgeted Cost of Work Performed (BCWP), shows the approved budget for performed project activities.
  • Planned Value (PV), or Budgeted Cost of Work Scheduled (BCWS), is the estimated cost for project activities planned/scheduled in light of the reporting date.
  • Return on Investment (ROI) demonstrates a project’s profitability and whether the benefits have exceeded the actual project costs.

Review and Reforecast Budget

Revisit your budget throughout the project and make course corrections. A 5% overrun can turn into a 50% overrun without regular oversight.

Set Aside Contingency Allowance

Every project, no matter how well-planned, will encounter factors out of their control that will impact the budget. Such things include environmental factors that impact the pricing of supplies, labor, or product availability. Surprizes cost money, and the more off-guard you are, the fewer and more costly options are available to you. Plan ahead by setting aside at least a 5% of project cost as a contingency allowance. 

Uphold Good Communication With Your Project Manager

Construction projects are busy and have many facets. Staying in good communication with your Project Manager can help uncover any issues before they become costly problems, provide more options, and avoid delays. 

Sierra Group Commercial Construction 1-888-880-4949

Sierra Group’s Construction Division provides general contracting services to Commercial, Industrial, and Retail industries, along with a specialty in Bank and Credit Union Branch construction and operational remodels. From minor special projects to complex major tenant improvements, we deliver by established best practices to save you time, money, and avert distracting frustrations.

As a multi-disciplined service focused company specializing in commercial construction, we have a unique 360° perspective that gives us the ability to help you meet your specific construction needs with laser precision. 

When failure is not an option, the most demanding Companies and Financial Institutions trust Sierra Group to get the job done right.

Learn more about the Sierra Group difference here, or reach out to us at:

David Garrison
FSD Manager
818-266-7462 (cell)
1-(888)-880-4949 ext. 228

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