A typical dream home construction of one's choice would require certain budget to carry out and finish the construction works.

One would require to properly estimate and workout a budget, which not only helps him/her in arranging the requisite funds at respective time schedules, but also assist the home owner to check if he/she is exceeding his/her pocket.

To plan and foresee the estimated costs, one would require to have certain amount of knowledge so as to have a basic understanding of things as well as tools to monitor the expenses involved.

Indicative Cost Components of a typical Home Construction

India's premier cement manufacturing company, ACC 's website, furnishes a very nice graphical representation of the typical breakup and contributing percentage of each of the major cost-head that is involved in incurring expenses during the construction of a home.

The graphical representation provides a broad estimate of the cost of materials, labour and other items as a percentage of the total expenditure.

Typical cost components of a home construction

The illustration lists the cost heads and respective cost components as following:

1. Design fees  -  3 to 5%
2. Contractors' payments, etc.  -  up to 12%
   
3. Earthworks (excavation, back filling, disposal of surplus soil, etc.)  - 2 to 6%
4. Cement  -  10 to 14%
5. Sand  -  3 to 5%
6. Stone aggregates (stone metal chips)  -  2 to 4%
   
7. Water  -  up to 2%
8. Rebar / Reinforcement steel  -  up to 6%
9. Masonry  -  8 to 10%
10. Flooring  -  3 to 7%
11. Shuttering (Form work)  -  2 to 4%
12. Electrical works  -  4 to 6%
13. Doors, Windows, Gates, Shutters, etc.  -  up to 10%
14. External works (boundary, drainage, landscaping, etc.)  -  8 to 10%
15. Plumbing and Sanitary works  -  up to 12%
16. Painting and finishing  -  up to 12%
    
17. Other (miscellaneous) expenses  -  up to 15%

Disclaimer: The above information is indicative based on a typical home construction primarily in reinforced cement concrete. The percentages and items will vary from case to case.

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Related earlier post:

• Importance Of Budgeting in Construction Practices
• A basic guide about what it all requires to be an entrepreneur in Construction field

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Since ages, we all have been practicing making and implementing budgets at our homes and for related occasions, ceremonies, etc. So, what essentially is a budget? In simpler terms, a budget may be defined as a financial working, which may or may not include quantitative statements to support it; and which is prepared prior to a defined period of time, and which is essentially pursued during that period so as to attain a desired objective of achieving a set target of financial figures, or even preferably to complete the activity well within the planned final figure. In a nutshell, it includes certain planned income and the foreseen expenditure interwoven with the planning of employment of the capital for a desired work to be completed.

Budgeting Techniques in Construction Practices

A well-prepared budget can become an effective management control technique in more ways than one in any construction front, whether it be a pre-bid working, or a cost plan for an upcoming site, or even a small home renovation job.

The practice of budgeting control is basically the establishment of financial budgets relating to the responsibilities of the personnel who are required to execute the responsibilities up to the requirements of the pre-formulated policy, while maintaining the continuous comparison of the actual figures with those of the previously estimated and budgeted ones. Any major deviation of the former with respect to the latter should prompt for establishing a revision of the previous version of the budget.

Requirements of a Good Budgeting Control System

The following outlines the predominant requirements that a budget must incorporate to be effective and helpful enough for any enterprise, company or an individual:

·               The foremost of all requirements is to formulate a policy for a certain pre-defined period with the targets clearly chalked out in terms of the desired financial figures and/or the output over a clear period of time. This is important since unless a specific and target-oriented aim is there, a management or person in-charge will not be in a position to adopt the required preventive and/or corrective measures in case the desired programme is going out of track. This also helps if a programme is going well ahead the desired schedule and/or the cost pattern. The manager, in this case, may re-distribute the surplus of resources to fronts where they may be critically required.

·               The other predominant requirement is that of defining and allocating the responsibilities and accountabilities of executives at each important level of hierarchy. This helps in better coordination and the results are more likely to be in resonance with the drafted target policy.

·               Continual evaluation of the policy as well as the measured results from time-to-time and at regular intervals is another important requisite of an ideal budget.

·               Last, but definitely not the least, analyzing and rectifying the adverse factors, which tend to derail the planned targets is another positive requirement of good budgeting. Such negative factors must be pinpointed, analyzed and solved in no time when they do occur. As such, the divergences between the planned and the actual results should be used not only for control purpose, but also for policy revisions of the future.

Budgeting is an Effective Monitoring Tool

Budgeting is an important monitoring tool to carry out the following functions:

·               Conceiving business opportunities

·               Planning

·               Executing

·               Controlling, and

·               Coordinating the different functional activities of a construction programme

It not only enhances the grasp of the management over the project, but also helps to find out and correct the shortcomings that a programme might be proceeding to, endangering the profitability and/or timely completeness of a project. After all, which management does not want to complete a project on time, and with almost all financial as well as material targets being on course? A judgment easy to make even for a layman, isn’t it?

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Introduction

Often when a Greenfield project site is in the pipeline ready to hit the ground so as to take a physical shape, it takes enormous time for the managing and executing agencies to get the works rolling with the planned momentum. So, what does happen when even the plans are in place on papers, but still the progress isn’t taking off in the required direction? The blame-game starts in such a situation with one agency accusing the others for the delays; the delays in turn becoming compounded; and the project cash flow going negative.

The key to avoid such a gloomy picture at any stage of a project, perhaps more importantly in the beginning stage of the project, is effective planning and monitoring, together with an all-aligned site organization. Since opening the site marks the physical execution of the project, it becomes imperative to take notice of the key points beforehand so that the project site is organized well to perform efficiently and economically.

Keys to Remember

Like any important work, the early stage planning and orientation tools always help in chalking out the success path of the subsequent periods. The things to remember and implement are:

Making a clear picture

Knowing the contract, project requirements, plans, budgets, site organization, schedules and everything related to chalk out a clear picture of the project comes handy to get acquainted with the project. This helps in reducing the buffer time, which often gets wasted at the start of a project.

Earmarking an effective site organization

No matter if you are amongst the Client, the Consultant or the Contractor, it always helps to have an effective and balanced project as well as back-office teams created to suit the specific nature of the project and the project-site. A balanced and motivated team can do wonders in any sort of conditions.

Dividing the site into manageable sections

A site has different needs and functions from time to time. Creating functional and manageable core teams ensure that monitoring and aligning/realigning of the teams as well as the project activities are always under control. Such teams can be enhanced with or merged to garner more strength and skill as the project goes beyond initial embryonic stage.

Micro & Macro planning

Once the project has followed the macro plans, micro scheduling of activities should follow immediately by respective teams, but in concurrence with each and every correlated team. Such schedules and plans should be regularly monitored and updated vis-à-vis the actual progress and availability of resources. This helps in reflecting the bottlenecks and delays to the managers, who can thereafter take remedial measures without affecting the overall progress much.

Time management

It is unavoidable at any project to have automatic balance between the pressure of work and the remaining time in hand. But this bottleneck can be resolved stage by stage with effective time management. The art to learn and master is to prioritize the important activities first than the secondary ones, and planning to cater to the important ones foremost. All successful managers thrive on this very craft of time management on the first place beside of course other trade and/or personal qualities.

Authority and Responsibility

Delegation of suitable authority and responsibility to every functional member of the team is the last, but definitely not the least of the key requirements of a successful site organization. This helps in clear-cut roles that all the team members are required to perform in the organization.

Crux of this Post

As like they say, a successful and effect start predominantly leads to a remarkable and desired results. By doing better planning and following the same at site with necessary corrective measures, the projects can become more economical and financially viable. This not only helps the parent companies, but also helps every team member of the project team professionally, personally, financially and morally. The one member which the gains the most, however, is the Project itself.

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[Filed under "TechTalk, Tutorials, Planning" category(ies) by Team@Bricks-n-Mortar.com]

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