Cost overruns on public construction projects are an ongoing issue. Major projects often exceed their initial budgets, sometimes by billions of pounds. This results in projects costing taxpayers much more than originally anticipated. Several strategies can help control cost overruns on public works projects:
Careful Planning and Design
Thorough planning and design from the outset is key to avoiding unnecessary additions later that drive up costs. Taking time to properly assess the project scope, do in-depth site evaluations, produce detailed designs and plans, and conduct comprehensive risk assessments can prevent unexpected issues arising mid-project that lead to delays and overruns.
Open and Competitive Tendering
Ensuring open, fair and competitive tendering for public contracts allows the government to obtain the best value bids. Setting clear requirements and evaluation criteria, undertaking robust due diligence on bidders, and requiring realistic project budgets and timelines in tenders can help minimise the risk of contractors underbidding to win contracts then relying on change orders and claims to increase fees later.
Use of Project Management Best Practices
Utilising professional project management best practices like detailed project plans, work breakdown structures, earned value management, and robust change management processes improves oversight and control. Tracking detailed progress against the schedule and budget highlights potential overruns early when corrective actions can be taken.
Proactive Risk Management
Being proactive rather than reactive with risk management avoids surprises. Conducting thorough risk assessments, implementing mitigation strategies, allocating contingencies for identified risks, and continuously monitoring risks over the project lifecycle enables prompt responses if issues arise to avoid delays and cost escalations.
Fixed-Price Contracts
Fixed-price contracts shift risk to contractors, incentivising efficient performance within budget. Contracts should include precisely defined deliverables, requirements and timeframes, with stringent change control clauses. Cost-plus contracts on projects like a school refurbishment and extension that reimburse contractors for allowed expenses plus a fee should be avoided.
Collaboration and Oversight
Close collaboration between government agencies, contractors and other stakeholders improves transparency and oversight in public sector construction projects. Governments should ensure dedicated project managers and a project management office are in place to closely track progress and performance. Independent project reviews at key milestones identify potential issues early.
The Benefits of Planned Preventative Maintenance
Planned preventative maintenance (PPM), such as planned preventative maintenance in schools, involves regularly scheduled inspection, testing, and servicing of equipment and systems to prevent breakdowns and failures. Implementing PPM improves reliability and lifespan. Though PPM requires investment in routine maintenance, it reduces overall costs compared to unplanned reactive maintenance and repairs when assets fail. The small short-term expenditures on planned upkeep prevent far larger long-term costs for emergency repairs or asset replacement. Proper PPM optimizes operational efficiency, lowers costs through prevention, and gives organisations greater control over maintenance budgets. The key is finding the right balance of cost-effective PPM to gain maximum value.
By carefully implementing such strategies, authorities can exercise greater control over construction costs. Tighter oversight, proactive risk management, competitive tendering, robust contracts and project management best practices are key to delivering public infrastructure projects on time and on budget. Controlling cost overruns leads to better value-for-money for taxpayers and more effective use of public funds.
