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Establishing a Budget for an Industrial Construction Project

Establishing a Budget for an Industrial Construction Project

There are a few major themes that you'll typically want to cover during the early stages of any industrial construction project you're involved in managing, and budget is at or near the top of any such list. Knowing the key factors that should play into your budget, plus how to organize everything and respond to possible changes, is vital for any project manager or contractor.

At Redi, we're happy to discuss pricing and budgeting in transparent ways for any of our industrial construction services, which cover the full scope of all possible client needs. Why is budgeting so vital in the construction world, what makes budgeting in this industry especially nuanced, and what are some best practices to keep in mind as you're approaching this important area? Let's dive in.

Why Budgeting Matters in Industrial Construction

Simply put, budgeting is essential for industrial construction projects because of the complexity of these kinds of jobs. Large-scale construction requires many different pieces to fit together perfectly in order for everything to come out as planned, and without proper budgeting from the start, you could end up spending far more money than necessary or dealing with issues down the line that can slow down progress and raise costs.

In addition, budgeting is important for industrial construction projects because of the potential for unexpected costs and changes in circumstances. It's impossible to completely eliminate surprises, but proper budgeting can help you plan for at least some of these issues and be prepared to respond as needed should something arise.

Finally, having an organized budget from the start also makes it much easier to keep track of how the project is progressing and makes it much simpler to make sure you remain on schedule.

The Nuances of Construction Budgeting

As we touched on above, one of the areas that makes construction budgeting so nuanced is the potential for changes down the line. While budgeting in many other areas of life typically won't include a need for flexibility, that's simply not the case when it comes to budgeting for things like industrial construction.

For instance, you may believe that you have your budget set, but then a change in the scope of work could require more materials or man power and cause costs to rise. Budgeting for these kinds of changes is important, even if it isn't possible to know exactly when they'll happen or how much money will be required.

Our next several sections will go over some of the key areas that budgeting should cover within a construction job, plus some best practices for considering each of them.

Any Property Costs

Firstly, there are some cases where property costs may be a factor in the budget. This could include leasing or renting land, buying existing buildings to renovate, or any other kind of property acquisition that's related to the project.

When considering these costs, make sure you account for any fees and taxes that are typically associated with such transactions. Additionally, do your best to estimate any potential long-term costs related to owning or leasing the property, such as taxes, maintenance, and so on.

Lastly, be sure that you're aware of any stipulations in the lease agreement that could become factors down the line if certain changes are made. This is especially important with rental agreements since these can sometimes have clauses preventing certain changes or additions to the property that could increase costs in the future.

Material and Labor Costs

The next two areas to consider when budgeting for a construction project are material and labor costs. Material costs cover any materials or supplies needed to complete the job, while labor costs refer to bringing on additional workers if necessary to get the job done.

When looking at materials costs, get as detailed as possible in order to make sure you're accurately accounting for everything that will be needed. Additionally, don't forget to factor in any transportation or shipping fees that may come with acquiring the necessary materials.

For labor costs, consider whether or not you'll need additional workers and how much they'll need to be paid. It's also important to factor in any benefits or bonuses that may apply, along with any overtime payments if workers will be putting in more hours than originally estimated.

Project Management

Another major factor to consider when budgeting for a construction project is the cost of project management. This includes not only the cost of hiring someone to manage the project, but also any additional software or tools that may be needed to help keep everything organized and on track.

For example, if you're utilizing a project management tool like Trello or Asana, then you'll need to factor in the cost of a subscription. Additionally, if you're hiring someone to manage the project for you, make sure that their salary is included in the budget and that any additional costs for benefits or bonuses are accounted for as well.

Scheduling and Financing

Finally, it's important to include both scheduling and financing costs in your budget. On the scheduling side, be sure to factor in any costs related to hiring a scheduler or using software for organizing tasks and deadlines.

On the financing side, consider any interest that may need to be paid if you're taking out a loan for the project, as well as any fees associated with the loan. Additionally, if you're working with a contractor, factor in any fees they may charge for their services.

With these key factors in mind, you should have an accurate picture of what needs to be considered when budgeting your industrial construction project. Just remember to always stay organized and adjust your budget as necessary if any changes occur during the job.

For more here, or to learn about any of our industrial construction services ranging from setup to tear-down and everything in between, contact our team at Redi today.

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